Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

10. Goodwill and Intangible Assets

Goodwill

The carrying amount of goodwill as of December 31, 2015, and 2014 relates to four acquisitions, including ARIGO Software GmbH (“ARIGO”) in 2001, BeAtHome in 2002, MTC in 2003, and Lumewave, Inc. in 2014. The goodwill acquired as part of the ARIGO transaction is valued in Euros, and is therefore subject to foreign currency translation gains and losses.

The changes in the carrying amount of goodwill, net, for the years ended December 31, 2015 and 2014 are as follows (in thousands):



	Amount
Balance as of December 31, 2013	$	8,390
Unrealized foreign currency translation loss	(323		)
Goodwill impairment - Grid division	(3,388		)
Goodwill associated with Lumewave acquisition	1,257
Balance as of December 31, 2014	5,936
Unrealized foreign currency translation loss	(238		)
Goodwill impairment	(5,698		)
Balance as of December 31, 2015	$	—

2014 Goodwill Impairment - Effective in the fourth quarter of 2013, the Company changed the way it managed the business and re-organized to focus the business on two operating segments - Grid and IIoT. As a result, the Company, with the assistance of an external service provider, reallocated goodwill of the Company to the Grid and IIoT operating segments using a relative fair value approach. Each operating segment's fair value was determined based on comparative market values and discounted cash flows. There was no indication of impairment when goodwill was reallocated to the new operating segments, as the respective fair values of each substantially exceed their carrying values (including goodwill) as of December 31, 2013.

For the quarter ended June 30, 2014, the Company concluded there were indicators of potential goodwill impairment for the Company’s Grid business, including continued weakness and increased uncertainty in the Grid market; changes in the extent and manner of use of the unit's long-lived assets; and changes in our long-term strategy for the Grid business. As a result of identifying indicators of impairment, the Company performed an impairment test of goodwill as of June 30, 2014.

In performing Step 1 of the impairment test, the Company estimated the fair value of the reporting unit using the income approach. The income approach is based on a discounted cash flow analysis and calculates the fair value of the reporting unit by estimating the after-tax cash flows attributable to the reporting unit and then discounting the after-tax cash flows to a present value, using a weighted average cost of capital (“WACC”). The cash flows used in the income approach were based on two scenarios, cash flows associated with a winding down of the business and cash flows associated with a sale of the business. Management's assumptions included forecasted revenues and operating income for the wind down scenario and estimated proceeds from the sale of the business based on known third-party interest. We calculated the fair value for the Grid business by using a probability weighted average of the estimated fair value from both scenarios, with significantly higher weight placed on the wind down scenario. Ultimately, in the third quarter of 2014, the Company was able to locate a buyer for the Grid business during the third quarter of 2014, which led to the disposition of the business on September 30, 2014.

Based on the above analysis, it was determined that the carrying value of the Grid business, including goodwill, exceeded the fair value of the reporting unit, requiring the Company to perform Step 2 of the goodwill impairment test to measure the amount of impairment loss, if any. In performing Step 2 of the goodwill impairment test, the Company compared the implied fair value of the reporting unit’s goodwill to its carrying value of goodwill. This test resulted in a non-cash, goodwill impairment charge of $3.4 million and a write-off of all goodwill associated with the Grid division, which was recognized during the three months ended June 30, 2014. This impairment has been reported as part of the discontinued operations results for the year ended December 31, 2014. As a result, the Company had no goodwill remaining related to the Grid business, with the entire remaining goodwill balance of $5.9 million at December 31, 2014, being attributable to the IIoT reporting unit.

2015 Goodwill Impairment - During the quarter ended December 31, 2015, the Company concluded there were indicators of a potential goodwill impairment, resulting primarily from a continued decline in the Company's stock price and other market indicators, as well as a change in the Company's forecast for certain revenue streams. As a result of these indicators of impairment, the Company performed an impairment test of goodwill as of December 31, 2015.

As a result of the sale of the Grid business, the Company operates as one reporting unit. In performing Step 1 of the impairment test, the Company estimated the fair value of the reporting unit using a combination of approaches, including, among others, the income approach and the market approach. We calculated the fair value for the Company by using a weighted average of the various approaches, with significantly higher weight placed on the market approach.

Based on this analysis, it was determined that the carrying value of the business, including goodwill, exceeded the fair value of the reporting unit, requiring the Company to perform Step 2 of the goodwill impairment test to measure the amount of impairment loss, if any. In performing Step 2 of the goodwill impairment test, the Company compared the implied fair value of the reporting unit’s goodwill to its carrying value of goodwill. This test resulted in a non-cash, goodwill impairment charge of $5.7 million, which was recognized during the three months ended December 31, 2015. As a result, the Company no longer has has any goodwill remaining on its balance sheet as of December 31, 2015.

Identifiable Intangible Assets

The Company's identifiable intangible assets as of December 31, 2016, relate to the acquisition of Lumewave, Inc. in August 2014 (see Note 4 for additional details). The identifiable intangible assets include $800,000 in developed technology, $500,000 in customer relationships, and $200,000 for trade names.

The changes in the carrying amount of identifiable intangible assets, net for the years ended December 31, 2016 and 2015 is as follows (in thousands):



	Amount
Balance as of December 31, 2014	$	1,413
Amortization	(230		)
Balance as of December 31, 2015	1,183
Amortization	(230		)
Balance as of December 31, 2016	$	953

Intangible assets other than goodwill are amortized on a straight-line basis over the following estimated remaining useful lives. The following table presents the details of the Company's finite-lived intangible assets as of December 31, 2016 (in thousands, except for weighted-average remaining useful life):



	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted-Average Remaining Useful Life (in years)

Developed technology	$	800	$	292	$	508	4.13
Customer relationships	500		182		318		4.13
Trade names	200		73		127		4.13
Total	$	1,500	$	547	$	953	4.13

The following table presents the amortization of finite-lived intangible assets included in the consolidated statements of operations for the years ended December 31, 2016, 2015, and 2014 (in thousands):



	Year ended December 31,
	2016		2015		2014
Cost of revenues	$	123	$	123	$	46
Operating expenses	107		107		41
Total	$	230	$	230	$	87

The following table presents the estimated future amortization of finite-lived intangible assets as of December 31, 2016 (in thousands):



	Estimated Future Amoritization
2017	$	229
2018	229
2019	229
2020	229
2021	37
Total	$	953

- 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.

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