4. 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.

As part of the impairment analysis, we are first required to assess qualitatively if we can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, we are then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we consider relevant events or circumstances that affect the fair value or carrying amount of a reporting unit.

The evaluation of goodwill for the year ended March 31, 2023 did not result in any goodwill amounts that were deemed impaired.

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, 2023 were as follows:

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Intangible assets consist of the following at March 31, 2023 and March 31, 2022:

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Amortization expense for the year ended March 31, 2023 and 2022 was approximately $0.1 million for both periods. Amortization expense is classified as a component of general and administrative expenses in the accompanying consolidated statements of operations. For the year ended March 31, 2022 the Company impaired its intangible assets by $0.9 to bring the value of the intangible assets down to its assumed fair value. There was no impairment charge for the year ended March 31, 2023.