Note 11 - Goodwill and Intangible Assets, net

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

Note 11. Goodwill and Intangible Assets, net

Goodwill

During the nine months ended September 30, 2024, the Company concluded that the carrying amount of the Healthcare Operations reporting segment exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of approximately $0.7 million. An interim impairment assessment was considered necessary as a result of the sustained decline in the Healthcare Operations stock price and related market capitalization. The goodwill impairment charge is reflected in Impairment loss in the Condensed Consolidated Statements of Comprehensive (Loss) Income. With the assistance of a third-party valuation firm, the fair value of the Healthcare Operations reporting segment was determined using an income approach whereby the fair value was calculated utilizing discounted estimated future cash flows (level 3 nonrecurring fair value measurement). The income approach requires several assumptions including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for the business, estimation of the useful life over which cash flows will occur, and determination of the weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit. The long-term growth rate used in the impairment was 3.0% and the weighted average cost of capital used in the impairment was 13.5%.

The following table reflects changes in the carrying amount of goodwill during the periods presented by reportable segments (in thousands):

	e-Commerce Operations			Healthcare Operations			Total
Goodwill, net as of December 31, 2023	$	—		$	731		$	731
Changes in Goodwill during the period ended September 30, 2024:
Goodwill acquired - Outfitter acquisition		301			—			301
Deferred tax effect of intangible basis difference (1)		(145	)		—			(145	)
Impairment loss		—			(731	)		(731	)
Goodwill, net as of September 30, 2024	$	156		$	—		$	156

(1) Decrease related to book tax basis difference of intangible assets arising for the business acquisition of Outfitter.

Intangibles

During the nine months ended September 30, 2024, the Company performed an impairment assessment of long-lived assets as it relates to the Healthcare Operations reporting segment due to the decline in future projected revenues and cash flows. As a result, the Company completed a recoverability test and concluded that the asset groups were not fully recoverable as the undiscounted expected future cash flows did not exceed their carrying amounts. The Company, with the assistance of a third-party valuation firm, determined the fair value of the asset groups using an income approach utilizing undiscounted estimated future cash flows (level 3 nonrecurring fair value measurement). The income approach requires several assumptions including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, and estimation of the useful life over which cash flows will occur. The carrying amount of certain assets in the asset group exceeded the fair value, resulting in the recognition of a non-cash impairment charge to intangible assets of approximately $12.8 million for the nine months ended September 30, 2024 (reflected in Impairment loss in the Condensed Consolidated Statements of Comprehensive (Loss) Income).

Intangible assets, net consisted of the following (in thousands):

	September 30, 2024
	Gross amount		Accumulated amortization			Net amount
Trade names	$	185	$	(10	)	$	175
Customer contracts		665		(285	)		380
Total intangible assets	$	850	$	(295	)	$	555

	December 31, 2023
	Gross amount		Accumulated amortization			Net amount
Pharmacy records	$	8,130	$	(807	)	$	7,323
Trade names		4,700		(224	)		4,476
Developed technology		2,880		(281	)		2,599
Customer contracts		250		(225	)		25
Total intangible assets	$	15,960	$	(1,537	)	$	14,423

A summary of the changes to the gross carrying amount, accumulated amortization, and net book value of total intangible assets by reporting unit during the nine months ended September 30, 2024 were as follows (in thousands):

	e-Commerce Operations			Healthcare Operations			Total
Balances at December 31, 2023:
Gross amount	$	250		$	15,710		$	15,960
Accumulated amortization		(225	)		(1,312	)		(1,537	)
Net amount		25			14,398			14,423
Changes during the nine months ended September 30, 2024:
Outfitter acquisition		600			—			600
Accumulated amortization expense		(70	)		(1,608	)		(1,678	)
Impairment - gross amount		—			(15,710	)		(15,710	)
Impairment - accumulated amortization		—			2,920			2,920
Net amount		530			(14,398	)		(13,868	)
Balances at September 30, 2024:
Gross amount		850			—			850
Accumulated amortization		(295	)		—			(295	)
Net amount	$	555		$	—		$	555

For the nine months ended September 30, 2024 and 2023, the Company recognized amortization expense of approximately $1.7 million and $0.7 million, respectively. 

The following table represents the total estimated future amortization of intangible assets for the five succeeding years and thereafter as of September 30, 2024 (in thousands):

Year		Amount
2024 (remaining three months)	$	32
2025		102
2026		102
2027		102
2028		102
Thereafter		115
Total	$	555