At any time prior to the end of a contract or contract renewal, if a managed care contract is not meeting its financial goals, we generally have the ability to cancel the contract with 60 to 90 days’ written notice. Prior to cancellation, we will usually submit a request for a rate increase accompanied by supporting utilization data. Although our clients have historically been generally receptive to such requests, no assurance can be given that such requests will be fulfilled in the future in our favor. If a rate increase is not granted, we have the ability, in most cases, to terminate the contract and limit our risk to a short-term period.
We have audited the accompanying consolidated balance sheets of Comprehensive Care Corporation and Subsidiaries (Company) as of December 31, 2009 and 2008 and the related consolidated statements of operations, changes in deficit and cash flows for the years ended December 31, 2009, 2008 and 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
In accordance with the provisions of ASC 350-10 “Intangibles - Goodwill and Other,” customer contracts with a carrying amount of $548,000 were written down to their implied fair value of $402,000, resulting in an impairment loss of $146,000 for the year ended December 31, 2009.
On January 20, 2009, CompCare acquired Core, a privately held company, through a merger and in exchange for CompCare common and convertible preferred stock. As a result of the merger, the former Core stockholders as a collective group obtained voting control of CompCare. Consequently, the transaction was accounted for as a reverse acquisition with Core designated as the accounting acquirer and CompCare as the predecessor.
NOTE 17 - PREFERRED STOCK, COMMON STOCK, AND STOCK OWNERSHIP PLANS
During the year ended December 31, 2009, we issued warrants to purchase an aggregate of 900,000 shares of our common stock to three key employees. Shares acquirable pursuant to the warrants vest at the warrant grant date and/or at specified dates throughout the 36 month or 60 month term of the warrants. A summary of warrant activity for the year ended December 31, 2009 is as follows:
We recognized approximately $45,000 of compensation costs related to warrants to purchase common stock during the year ended December 31, 2009. Total unrecognized compensation costs as of December 31, 2009 was approximately $329,000 which is expected to be recognized over a weighted-average period of 2.4 years.
(2) We have insurance for a broad range of risks as it relates to our business operations. We maintain managed care errors and omissions, professional and general liability coverage. These policies are written on a claims-made basis and are subject to a $10,000 per claim self-insured retention. The managed care errors and omissions and professional liability policies include limits of liability of $1 million per claim and $3 million in the aggregate. The general liability has a limit of liability of $5 million per claim and $5 million in the aggregate. We are responsible for claims within the self-insured retentions or if the policy limits are exceeded. Management is not aware of any claims that could have a material adverse impact on our consolidated financial statements.