Note

: Goodwill and Intangible Assets

The Company’s acquisition of Bytewise in

2011

and a private software company in

2017

resulted in the recognition of goodwill totaling

$4.7

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

not

it is more likely than

not

that the fair value of the reporting unit’s goodwill exceeded its carrying amount. Determining the fair value of a reporting unit is subjective and requires the use of significant estimates and assumptions.

The guidance in ASC

350

30,

Intangibles – Goodwill and Other, requires the Company to test goodwill for impairment whenever an event occurs or changes in circumstances “Triggering Event” indicate that “would more likely than

not

reduce the fair value of long-lived assets below its carrying amount. The Company has identified the COVID-

pandemic a triggering event.

The Company contracted with a professional valuation firm “the firm” to perform a quantitative analysis (commonly referred to as “Step One”) for its

February 1, 2020

annual assessment of goodwill associated with its purchase of a private software company. The firm assisted the Company in estimating 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.

Under the quantitative analysis, the

2020

fair value assessment of the software development company’s goodwill exceeded the carrying amount. The Company believes the COVID-

precise impact is

not

knowable and therefore performed a sensitivity analysis assuming a

25%

annualize reduction in Revenue in the

June

quarter of fiscal

2020

and

20%

reduction in Revenue for fiscal year

2021,

partially offset by known salary reductions and layoffs. Based on these adjustments, management determined that it is more likely than

not

that the fair value of goodwill continued to exceed its carrying value. 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 performed a qualitative analysis of its Bytewise reporting unit for its

October 1, 2019

annual assessment of goodwill (commonly referred to as “Step Zero”). From a qualitative perspective, in evaluating whether it is more likely than

not

that the fair value of a reporting unit exceeds its carrying amount, relevant events and circumstances are taken into account, with greater weight assigned to events and circumstances that most affect the fair value or the carrying amounts of its assets. Items that were considered included, but were

not

limited to, the following: macroeconomic conditions, industry and market conditions, cost factors, overall financial performance and changes in management or key personnel.

Because the Company has identified the COVID-

pandemic a triggering event and the Company believes the precise impact to the business is

not

knowable at this time, and therefore, performed a sensitivity analysis assuming an annualized percentage reduction of

25%

of the projected revenue in the

June

quarter fiscal year

2020

and fiscal year

2021

and calculated fair value over the book value of equity as of

10/1/19.

After assessing these and other factors the Company determined that it was more likely than

not

that the fair value of the Bytewise reporting unit exceeded its carrying amount as of

October 1, 2019.

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.

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

	03/31/2020			6/30/2019
Non-compete agreement	$	-		$	600
Trademarks and trade names		2,070			2,070
Completed technology		2,010			2,010
Customer relationships		630			5,580
Software development		8,968			8,317
Other intangible assets		325			325
Total		14,003			18,902
Accumulated amortization		(6,012	)		(10,442	)
Total net balance	$	7,991		$	8,460

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

2020

and for each of the next

five

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

2020 (Remainder of year)	$	493
2021		1,849
2022		1,616
2023		1,275
2024		985
2025		693
Thereafter		1,080
Total net balance	$	7,991