Note 5 – Intangible Assets

Intangible assets consisted of the following at September 28, 2013 and December 29, 2012:

During the second quarter of 2013, the Company recognized impairment losses on product design intellectual property and certain domain and trade names for $838 and $407, respectively. The impairment charges were primarily the result of lower sales and gross margin. Given the indicators of impairment, the Company utilized the Royalty Savings method in determining the fair values using a discount rate of 14.5% and royalty rate of 1.0% and 0.1% for product design intellectual property, and domain and trade names, respectively. For the product design intellectual property, we utilized the Royalty Savings method rather than the Cost method in determining the fair value. The decrease in future cash flows resulted in these assets being impaired, as their carrying values exceeded the fair value. As of September 28, 2013, the Company’s intangible assets subject to amortization did not indicate a potential impairment under the provisions of ASC 360. The Company did not recognize impairment loss on intangible assets subject to amortization for the thirty-nine weeks ended September 29, 2012.

Intangible assets subject to amortization are expensed on a straight-line basis. Amortization expense relating to intangibles assets for the thirteen weeks ended September 28, 2013 and September 29, 2012 was $86 and $331, respectively. Amortization expense relating to intangibles assets for the thirty-nine weeks ended September 28, 2013 and September 29, 2012 was $299 and $1,012, respectively.

The following table summarizes the future estimated annual amortization expense for these assets over the next five years: