Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Other Intangible Assets

Note 4. Goodwill and Other Intangible Assets

Note 4: Goodwill and Other Intangible Assets

Goodwill and acquired intangible assets are initially recorded at fair value and measured periodically for impairment. The Company also evaluates its reporting units at least annually. During our annual review of reporting units, we determined Perfect Audience met the requirements of a separate reporting unit under ASC 280. The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The fair value of each reporting unit is estimated using a weighting of income and market approaches which require the use of estimates and assumptions related to cash flow forecasts, comparable public companies, discount rates, and terminal values.

In performing the Company’s annual impairment analysis during the fourth quarters of 2020 and 2019, the Company determined that the carrying amount of the Company’s goodwill was recoverable for the Company’s SharpSpring Marketing Automation reporting unit. However, during the Company’s annual impairment analysis during the fourth quarter of 2020, it was determined that carrying value of the Perfect Audience reporting unit exceeded its fair value by approximately $0.71 million. The goodwill acquired in the acquisition of the Perfect Audience Retargeting reporting unit of approximately $2.05 million was therefore impaired by $0.71 million, reducing its goodwill to approximately $1.34 million.

Goodwill decreased from $10.92 million as of December 31, 2019 to $10.25 million as of December 31, 2020. The decrease in goodwill is largely attributable to the impairment of goodwill of Perfect Audience recorded in the fourth quarter of 2020. This decrease in the carrying value of goodwill was slightly offset by an increase in the carrying value due to changes in foreign currency exchange rates. During the year ended December 31, 2020 and 2019, changes in foreign currency exchange rates increased goodwill by approximately $40,000 and approximately $7,000, respectively.

In addition to our annual goodwill impairment review, the Company also performs periodic reviews of the carrying value and amortization periods of other acquired intangible assets. If indicators of impairment are present, an estimate of the undiscounted cash flows that the specific asset is expected to generate must be made to ensure that the carrying value of the asset can be recovered. These estimates involve significant subjectivity.

During the years ended December 31, 2020 and 2019, the Company determined that no indicators of impairment were present for other acquired intangible assets. The Company performed an annual fair value impairment analysis for our indefinite lived trade name asset. The fair value was determined to exceed the carrying value and therefore no impairment was recorded for this asset.

The following tables set forth the information for intangible assets subject to amortization and for intangible assets not subject to amortization.

	As of December 31, 2020
	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Value
Amortized intangible assets:
Trade names	$	501,000		(120,000	)	$	381,000
Technology		3,109,000		(1,513,751	)		1,595,249
Customer relationships		1,320,000		(892,004	)		427,996
Vendor relationships		1,813,000		(201,394	)		1,611,606
Unamortized intangible assets:		6,743,000		(2,727,149	)		4,015,851
Goodwill							10,250,088
Total goodwill and intangible assets						$	14,265,939

	As of December 31, 2019
	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Value
Amortized intangible assets:
Trade names	$	501,000		(120,000	)	$	381,000
Technology		3,109,000		(1,192,000	)		1,917,000
Customer relationships		1,320,000		(773,000	)		547,000
Vendor relationships		1,813,000		-			1,813,000
Unamortized intangible assets:		6,743,000		(2,085,000	)		4,658,000
Goodwill							10,922,814
Total goodwill and intangible assets						$	15,580,814