Goodwill and In-process R&D

12 Months Ended

Dec. 31, 2021

Goodwill and In-process R&D

Goodwill and In-process R&D

7.        Goodwill and In-process R&D

Goodwill of $2.2 million and in-process R&D of $5.9 million were recorded in connection with the acquisition of Pelican, as described in Note 4 and have been allocated to the Pelican reporting unit. For goodwill, accumulated impairment amounted to $2.2 million and $0.7 million as of December 31, 2021 and 2020, respectively. For in-process R&D, accumulated impairment amounted to $2.4 million and $0.0 million as of December 31, 2021 and 2020, respectively. The Company performs an annual impairment test at the reporting unit level as of April 1st of each fiscal year. As of April 1, 2021, the Company qualitatively assessed whether it is more likely than not that the respective fair value of the Company’s Reporting Units (Heat, Pelican, and Scorpion) are less than its carrying amount, including goodwill. Based on that assessment, the Company determined that this condition did not exist. However, during the fourth quarter 2021, the Company experienced a sustained decline in the quoted market price of the Company’s common stock and as a result the Company determined that as of December 31, 2021 it was more likely than not that the carrying value of these acquired intangibles exceeded their estimated fair value. Accordingly, the Company performed an interim impairment analysis as of that date using the income approach. This analysis required significant judgments, including primarily the estimation of future development costs, the probability of success in various phases of its development programs, potential post-

launch cash flows and a risk-adjusted weighted average cost of capital. Pursuant to ASU 2017-04, the Company recorded a goodwill impairment charge for the excess of the reporting unit’s carrying value over its fair value. During the year ended December 31, 2021, goodwill with a total carrying value of $1.5 million was written down and an impairment charge of $1.5 million was recorded. During the same period, in-process R&D with a total carrying value of $5.9 million was written down to its estimated fair value of $3.5 million and an impairment charge of $2.4 million was recorded.

The following table provides the Company’s goodwill as of December 31, 2021 and 2020. There was no goodwill impairment during the year ended December 31, 2020.

	Goodwill
Balance at December 31, 2020	$	1,452,338
Goodwill impairment loss		(1,452,338)
Balance at December 31, 2021	$	—

The following table provides the Company’s in-process R&D as of December 31, 2021. There was no change in in-process R&D during the year ended December 31, 2020.

	In-process
	R&D
Balance at December 31, 2020	$	5,866,000
In-process R&D impairment loss		(2,366,000)
Balance at December 31, 2021	$	3,500,000

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