(4) Impairment of Assets

In 2013, after reviewing the full year product line sales associated with the goodwill asset and the fact that the sales were not meeting original projections, management engaged an independent third party to review the asset for impairment in accordance with and pursuant to ASC 350 and ASC 360-10. The implied fair value of the goodwill was determined in the same manner as the amount of goodwill recognized in a business combination, as determined under ASC 805. In 2013, the management concluded that the goodwill asset was in fact impaired and should be written down fully to $0 indicating a goodwill impairment amount of $728,618.

During the fourth quarter of 2014, management decided to dispose of a group of components because of a shift in strategy for the Company. The component groups are the inventory and fixed assets associated with the Device Coatings and Cranial Maxillofacial Fixation (CMF) lines of business.

Sales for these product lines represented 1.2% of total revenue in 2013 and 1.4% of total revenue in 2014. Gross profit associated with these product lines were less than 1% of total gross profit for both the years 2013 and 2014.

Management has committed to a plan to sell the component assets and the assets are available for immediate sale in their present condition. As of February 2015, management has identified a potential buyer for the device coatings product line and has entered into an agreement with another party for the inventory of the CMF product line.

Total assets associated with the two lines includes $80,042 of related fixed assets, net of depreciation, and related inventory of $832,507 for a total value of $912,549. These assets were transferred to Assets held for Sale and are classified on the balance sheet as part of “Prepaid and other current assets”. After the impairment provision, the net balance of the Assets held for Sale is $0.

Because the device coatings agreement is in the early stage of negotiations and the sale of the CMF inventory did not result in any tangible compensation, management has decided to reserve for the entire amount and has recorded a loss from impairment of assets of $912,549 on the 2014 Consolidated Statement of Operations.