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Intangible Assets and Goodwill
12 Months Ended
Sep. 30, 2020
Intangible Assets and Goodwill [Abstract]  
Intangible Assets and Goodwill

Note 8 –Intangible Assets and Goodwill



Intangible Assets



Intangible assets acquired in the APP Acquisition included IPR&D, developed technology consisting of PREBOOST®  medicated wipes for the treatment of premature ejaculation, and covenants not-to-compete.



The gross carrying amounts and net book value of intangible assets are as follows at September 30, 2020





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Gross Carrying

 

Accumulated

 

Net Book



Amount

 

Amortization

 

Value

Intangible assets with finite lives:

 

 

 

 

 

 

 

 

Developed technology - PREBOOST®

$

2,400,000 

 

$

768,111 

 

$

1,631,889 

Covenants not-to-compete

 

500,000 

 

 

279,762 

 

 

220,238 

Total intangible assets with finite lives

 

2,900,000 

 

 

1,047,873 

 

 

1,852,127 

Acquired in-process research and development assets

 

3,900,000 

 

 

 —

 

 

3,900,000 

Total intangible assets

$

6,800,000 

 

$

1,047,873 

 

$

5,752,127 



The gross carrying amounts and net book value of intangible assets are as follows at September 30, 2019:





 

 

 

 

 

 

 

 



Gross Carrying

 

Accumulated

 

Net Book



Amount

 

Amortization

 

Value

Intangible assets with finite lives:

 

 

 

 

 

 

 

 

Developed technology - PREBOOST®

$

2,400,000 

 

$

523,172 

 

$

1,876,828 

Covenants not-to-compete

 

500,000 

 

 

208,333 

 

 

291,667 

Total intangible assets with finite lives

 

2,900,000 

 

 

731,505 

 

 

2,168,495 

Acquired in-process research and development assets

 

18,000,000 

 

 

 —

 

 

18,000,000 

Total intangible assets

$

20,900,000 

 

$

731,505 

 

$

20,168,495 



During the fourth quarter of fiscal 2020, we performed quantitative impairment testing of our IPR&D intangible assets using a probability-weighted income approach that discounts expected future cash flows to present value. The estimated net cash flows were discounted using a discount rate of 41%, which is based on the estimated weighted-average cost of capital for companies with profiles similar to our profile and represents the rate that market participants would use to value the intangible assets. In response to management’s strategic decision during the fourth quarter of fiscal 2020 to prioritize the development of other research projects, we adjusted the development timelines for Tamsulosin DRS, VERU-722 (male infertility), and VERU-112 (gout) IPR&D assets that were recognized as part of the APP Acquisition. The Company has several other highly differentiated, unique, patent-protected drugs under development addressing larger and potentially more profitable markets. The delay in timing of expected future cash flows for Tamsulosin DRS, VERU-722, and VERU-112 reduced the fair value of these IPR&D intangible assets to zero, which is significantly below the carrying value, resulting in an impairment charge of $14.1 million, which is presented as a separate line item in the accompanying consolidated statement of operations. Further, the Company has decided to cease its development work on Tamsulosin DRS, VERU-722, and VERU-112 and met the criteria for abandonment under the accounting standards. This resulted in writing off the carrying amounts for these three IPR&D assets during the year ended September 30, 2020.



Amortization was recorded over the projected related revenue stream for the PREBOOST® developed technology over 10 years and on a straight-line basis over seven years for the covenants not-to-compete. The amortization expense is recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations.



Amortization expense was approximately $316,000 and $309,000, for the years ended September 30, 2020 and 2019, respectively. Based on finite-lived intangible assets recorded as of September 30, 2020, the estimated future amortization expense is as follows:





 

 



Estimated

Year Ending September 30,

Amortization Expense

2021

$

323,706 

2022

 

331,316 

2023

 

339,062 

2024

 

281,603 

2025

 

283,940 

Thereafter

 

292,500 

Total

$

1,852,127 

 

Goodwill



The carrying amount of goodwill at September 30, 2020 and 2019 was $6.9 million. There was no change in the balance during the years ended September 30, 2020 and 2019.