Annual report pursuant to Section 13 and 15(d)

Goodwill and Intangible Assets

v3.22.1
Goodwill and Intangible Assets
12 Months Ended
Mar. 31, 2022
Goodwill and Intangible Assets  
Goodwill and Intangible Assets

3. Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed in a business combination. The Company does not amortize its goodwill, but instead tests for impairment annually in the fourth quarter and more frequently whenever events or changes in circumstances indicate that fair value of the asset may be less than the carrying value of the asset.

Due to the continued impact of the COVID-19 pandemic, the Company experienced a slowdown in business during the third quarter of the year ended March 31, 2022, and management determined there are events and changes in circumstances that indicate the goodwill and other intangible assets are impaired. Accordingly, during the third quarter of the year ended March 31, 2022, the Company evaluated the ongoing value of the goodwill and other intangible assets. Based on this evaluation, the Company determined that certain intangible assets were no longer recoverable and were in fact impaired and recorded an impairment charge of $0.9 million in the year ended March 31,2022. Further, the Company determined that the goodwill with the carrying value of $4.3 million was fully impaired and recorded an impairment charge of $4.3 million.

The income approach is based on the present value of future cash flows, which are derived from long term financial forecasts, and requires significant assumptions and judgement including among others, a discount rate and a terminal value. Fair values were based on expected future cash flows using Level 3 inputs under ASC 820. The cash flows are those expected to be generated by the market participants, discounted at the weighted average cost of capital. The present value of future cash flows was determined by discounting estimated future cash flows, which included long-term growth rate of 3%, at a weighted average cost of capital (discount rate) of 25%, which considered the risk of achieving the projected cash flows, including the risk applicable to the reporting unit, industry and market as a whole.

The present value of future cash flows was determined by discounting estimated future cash flows, which included long-term growth rate of 3%, at a weighted average cost of capital (discount rate) of 25%, which considered the risk of achieving the projected cash flows, including the risk applicable to the reporting unit, industry, and market as a whole.

Changes to goodwill during the year months ended March 31, 2022 were as follows:

    

Total

Balance—March 31, 2020

$

11,085,984

Impairment of goodwill in period

 

(6,803,000)

Balance—March 31, 2021

4,282,984

Impairment of goodwill in period

(4,282,984)

Balance—March 31, 2022

$

Intangible assets consist of the following at March 31, 2022 and March 31, 2021:

Patents &

Exclusive

License

Customer

Non-Compete

Assembled

    

Agreement

    

Trademark

    

Relationships

    

Agreement

    

Workforce

    

Useful Life

 

9.74 years

 

Indefinite

 

10 years

 

2 years

 

1 year

 

Total

Gross carrying amount

$

1,306,031

$

2,505,907

$

1,431,680

$

61,366

$

275,720

$

5,580,704

Impairment

 

(634,012)

 

(2,505,907)

 

(857,298)

 

 

 

(3,997,217)

Accumulated amortization

 

(672,019)

 

 

(574,382)

 

(61,366)

 

(275,720)

 

(1,583,487)

Balance—March 31, 2022

$

$

$

$

$

$

Patents &

Exclusive

License

Customer

Non-Compete

Assembled

    

Agreement

    

Trademark

    

Relationships

    

Agreement

    

Workforce

    

Useful Life

 

9.74 years

 

Indefinite

 

10 years

 

2 years

 

1 year

 

Total

Gross carrying amount

$

1,306,031

$

2,505,907

$

1,431,680

$

61,366

$

275,720

$

5,580,704

Impairment

 

(316,388)

 

(1,905,907)

 

(857,298)

 

 

 

(3,079,593)

Accumulated amortization

 

(613,092)

 

 

(574,382)

 

(61,366)

 

(275,720)

 

(1,524,560)

Balance—March 31, 2021

$

376,551

$

600,000

$

$

$

$

976,551

Amortization expense for the year ended March 31, 2022 and 2021 was $0.1 million for both periods. Amortization expense is classified as a component of general and administrative expenses in the accompanying condensed consolidated statements of operations. For the years ended March 31, 2022 and 2021, the Company impaired its intangible assets by $0.9 million and $0.4 million, respectively, to bring the value of the intangible assets down to its assumed fair value.