7. Goodwill and Intangible Assets

Intangible Assets Subject to Amortization

Amortization of intangible assets other than goodwill is recognized on a straight-line basis over the estimated useful life of the intangible assets, except for customer relationships which are recognized in proportion to the related projected revenue streams. Intangible assets with definite lives are reviewed for impairment if indicators of impairment arise. The Company does not have any intangible assets with indefinite useful lives, other than goodwill.

As discussed in Note 4, we recognized definite-lived intangible assets of $6.8 million upon acquisition of DP Engineering on February 15, 2019, including customer contracts and relationships, trademarks and non-compete agreements, with amortization periods of 5 to 15 years. Amortization of our definite-lived intangible assets is recognized on a straight-line basis over the estimate useful life of the associated assets.

Following the February 23, 2019 event occurring at a DP Engineering customer location and subsequent receipt of the Notice of Suspension on February 28, 2019, the Company concluded that DP Engineering’s relationship with its largest customer has been adversely impacted. The DP Engineering customer contracts and relationships were the major component of the definite-lived intangible assets recognized in connection with the acquisition of DP Engineering. Accordingly, the Company determined that a triggering event had occurred requiring an interim assessment of whether a potential impairment of definite-lived intangible asset impairment test was necessary.

Therefore, the impairment test of the definite-lived intangible assets recognized upon the acquisition of DP Engineering was also conducted according to ASC 350, Intangibles-Goodwill and other.

The interim impairment test was based on the present value of revised cash flow projected for 5 to 15 years. The result of the impairment test concluded no impairment of the definite-lived intangibles was necessary because the undiscounted cash flow of the asset group exceeds the adjusted carrying value. Due to the August 6, 2019 Notice of Termination of the Engineer of Choice agreement with DP Engineering, the Company performed an additional interim impairment test as of September 30, 2019 and determined no further impairment testing is needed.

As described in Note 3, a revision was made to prior periods regarding the impairment of DP Engineering.

The following table shows the gross carrying amount and accumulated amortization of definite-lived intangible assets:

(in thousands)	As of December 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net
Amortized intangible assets:
Customer relationships	$	11,730	$	(4,079	)	$	7,651
Trade names		2,467		(727	)		1,740
Developed technology		471		(471	)		-
Non-contractual customer relationships		433		(433	)		-
Noncompete agreement		949		(217	)		732
Alliance agreement		527		(171	)		356
Others		167		(167	)		-
Total	$	16,744	$	(6,265	)	$	10,479

(in thousands)	As of December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net
Amortized intangible assets:
Customer relationships	$	6,831	$	(2,375	)	$	4,456
Trade names		1,295		(318	)		977
Developed technology		471		(471	)		-
Non-contractual customer relationships		433		(433	)		-
Noncompete agreement		221		(35	)		186
Alliance agreement		527		(66	)		461
Noncompete agreement		167		(167	)		-
Total	$	9,945	$	(3,865	)	$	6,080

Amortization expense related to definite-lived intangible assets totaled $2.4 million and 1.6 million for the years ended December 31, 2019 and 2018, respectively. The following table shows the estimated amortization expense of the definite-lived intangible assets for the next five years:

(in thousands)
Years ended December 31:
2020	$	2,808
2021		2,143
2022		1,626
2023		1,199
Thereafter		2,703
	$	10,479

Goodwill

The Company reviews goodwill for impairment annually as of December 31 and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company tests goodwill at the reporting unit level. A reporting unit is an operating segment, or one level below an operating segment, as defined by U.S. GAAP. After the acquisition of Hyperspring on November 14, 2014, the Company determined that it had two reporting units, which are the same as our two operating segments: (i) Performance Improvement Solutions; and (ii) Nuclear Industry Training and Consulting (which includes Hyperspring and Absolute).

On February 15, 2019, we acquired DP Engineering (as described in Note 4) and preliminarily recorded goodwill and identified intangible assets as part of the acquisition. On February 23, 2019, an unexpected event occurred at one of DP Engineering’s significant customers and all pending work for that customer was suspended on February 28, 2019 pending a root cause analysis. While that analysis is now complete, and virtually all of the suspended projects have been restarted, the customer terminated the existing contract on August 6, 2019. The Company determined that the notice of suspension was a triggering event necessitating a goodwill impairment test.

On May 10, 2019, the Company determined that a triggering event had occurred, requiring an assessment for impairment to be completed. The impairment test used an income-based approach with discounted cash flow method, and market-based approach including both guideline public company method and merger and acquisition method.

The impairment test results indicated that the current estimated fair value of goodwill recorded from the acquisition of DP Engineering had declined below its initial estimated fair value at the acquisition date. As a result, the Company recognized an impairment charge of $5.6 million to write down the goodwill on DP Engineering. The Company determined that the impact of the suspension of obtaining new contracts from that customer resulted in a material downward revision to DP Engineering’s revenue and profitability forecasts when compared to the acquisition date valuation. The impairment charge on goodwill was recorded within “Loss on impairment” in our consolidated statements of operations. Due to the August 6, 2019 Notice of Termination of the Engineer of Choice agreement with DP Engineering, the Company performed, under ASC 350 guidance, additional impairment testing as of September 30, 2019 and at this time have determined no further impairment is needed. As described in Note 3, a revision was made to prior periods regarding the impairment of DP Engineering.

For the annual goodwill impairment test as of December 31, 2019, the Company performed a quantitative step 1 goodwill impairment analysis and have concluded that the estimated fair values of each of the reporting units exceeded their respective carrying values. No additional goodwill impairment was recorded at year end 2019.

As of December 31, 2019 and 2018, goodwill of $13.3 million and $13.2 million, respectively, related to the acquisitions of Hyperspring, Absolute, True North Consulting, and DP Engineering. $5.6 million impairment of goodwill was recorded in 2019.

The change in the net carrying amount of goodwill from January 1, 2018 through December 31, 2019 was comprised of the following items:

(in thousands)

	Performance Improvement Solutions			Nuclear Industry Training and Consulting		Total
Net book value at January 1, 2018	$	-		$	8,431	$	8,431

Acquisition		4,739			-		4,739
Dispositions		-			-		-
Goodwill impairment loss		-			-		-

Net book value at December 31, 2018	$	4,739		$	8,431	$	13,170

Acquisition		5,766			-		5,766
Dispositions		-			-		-
Goodwill impairment loss		(5,597	)		-		(5,597	)

Net book value at December 31, 2019	$	4,908		$	8,431	$	13,339