Note 6 - Goodwill and Intangibles Assets

6 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Text Block]

Note

: Goodwill and Intangible Assets

The Company

’s acquisition of Bytewise in

2011

and the private software company in

2017

resulted in the recognition of goodwill totaling

$4.67

million. Under ASU

2011

08,

the Company is required, on a set date, to annually assess its goodwill in order to determine whether or

not

it was more likely than

not

that the fair value of the reporting unit’s goodwill exceeded its carrying amount. For Bytewise, this date was

October 1, 2017.

The Company performed a quantitative analysis in accordance with ASU

2011

for its annual assessment (commonly referred to as “Step One”).

Determining the fair value of a reporting unit is subjective and requires the use of significant estimates and assumptions. With the assistance of an independent

third

-party valuation specialist, the Company estimates the fair value using an income approach based on the present value of future cash flows. The Company believes this approach yields the most appropriate evidence of fair value. The Company also utilizes the comparable company multiples method and market transaction fair value method to validate the fair value amount obtained using the income approach. The key assumptions utilized in the discounted cash flow model includes estimates of future cash flows from operating activities offset by estimated capital expenditures of the reporting unit, the estimated terminal value for the reporting unit, a discount rate based on a weighted average cost of capital, overall economic conditions, and an assessment of current market capitalization. Any unfavorable material changes to these key assumptions could potentially impact the Company’s fair value determinations.

Under the quantitative analysis, t

2017

fair value assessment of the Bytewise goodwill exceeded the carrying amount by approximately

81.1%.

Therefore

goodwill impairment was determined to exist. If future results significantly vary from current estimates, related projections, or business assumptions in the future due to changes in industry or market conditions, the Company

may

be required to record impairment charges.

The Company has

set the date at

February 1

2018,

to test the annual impairment of the reporting unit goodwill for the software company purchased in

February 2017;

however,

events or circumstances have occurred which would indicate that the unit’s goodwill

may

be impaired and needs to be tested other than annually.

Amortizable intangible assets consist of the following (in thousands):

	12 /31/2017			6/30/201 7
Non-compete agreement	$	600		$	600
Trademarks and trade names		2,070			2,070
Completed technology		2,358			2,358
Customer relationships		5,580			5,580
Software development		6,816			6,184
Other intangible assets		325			325
Total		17,749			17,117
Accumulated amortization		(8,186	)		(7,249	)
Total net balance	$	9,563		$	9,868

Amortizable intangible assets are being amortized on a straight-line basis over the period of expected economic benefit.

The estimated useful lives of the intangible assets subject to amortization range between

years for software development and

years for some trademark and trade name assets.

The estimated aggregate amortization expense for the remainder of fiscal

2018

and for each of the next

five

years and thereafter, is as follows (in thousands):

201 8 (Remainder of year)	$	1,093
201 9		2,134
20 20		1,611
202 1		1,207
202 2		975
202 3		609
Thereafter		1,934

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details