Quarterly report pursuant to Section 13 or 15(d)

Goodwill And Other Intangible Assets

v2.4.0.6
Goodwill And Other Intangible Assets
3 Months Ended
Mar. 31, 2012
Goodwill And Other Intangible Assets [Abstract]  
Goodwill And Other Intangible Assets

NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is required to be evaluated for impairment on an annual basis and between annual tests upon the occurrence of certain events or circumstances. A two-step process is performed to analyze whether or not goodwill has been impaired. Step one is to test for potential impairment, and requires that the fair value of the reporting unit be compared to its book value including goodwill. If the fair value is higher than the book value, no impairment is recognized. If the fair value is lower than the book value, a second step must be performed. The second step is to measure the amount of impairment loss, if any, and requires that a hypothetical purchase price allocation be done to determine the implied fair value of goodwill. This fair value is then compared to the carrying value of goodwill. If the implied fair value is lower than the carrying value, an impairment adjustment must be recorded.

During our fiscal quarter ended June 30, 2011, based on greater than expected decline in actual and forecasted profitability of legacy products in our Suttle business unit, as well as, significant project delays that occurred related to Suttle's new technologies, we concluded that that these events and circumstances were indicators to require us to perform an interim goodwill impairment analysis of our Suttle business unit. This analysis included the determination of the reporting unit's fair value primarily using discounted cash flows modeling. Based on the step one and step two analysis, considering Suttle's reduced earnings and cash flow forecasts, the Company determined that Suttle's goodwill was fully impaired and recorded a goodwill impairment for the Suttle segment of $1,272,000.

The changes in the carrying amount of goodwill for the three months ended March 31, 2012 by segment is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Suttle

 

Transition
Networks

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2011

 

$

1,271,986

 

$

3,288,231

 

$

4,560,217

 

 

 

 

 

 

 

 

 

 

 

 

Impairment loss

 

 

(1,271,986

)

 

 

 

 

(1,271,986

)

Acquisition

 

 

 

 

 

2,702,340

 

 

2,702,340

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

5,990,571

 

 

5,990,571

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2012

 

$

 

$

5,990,571

 

$

5,990,571

 

 

 

 

 

 

 

 

 

 

 

 

Gross goodwill

 

$

1,271,986

 

$

5,990,571

 

$

7,262,557

 

Accumulated impairment loss

 

$

(1,271,986

)

 

 

 

 

(1,271,986

)

Balance at March 31, 2012

 

$

 

$

5,990,571

 

$

5,990,571

 

The Company's identifiable intangible assets with finite lives are being amortized over their estimated useful lives and were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2012

 

 

 

Gross Carrying
Amount

 

Accumulated
Amortization

 

Foreign Currency
Translation

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks

 

 

81,785

 

 

(7,613

)

 

(1,848

)

 

72,324

 

Customer relationships

 

 

490,707

 

 

(31,975

)

 

(11,088

)

 

447,644

 

Technology

 

 

228,996

 

 

(29,843

)

 

(5,174

)

 

193,979

 

 

 

 

801,488

 

 

(69,431

)

 

(18,110

)

 

713,947

 

Amortization expense on these identifiable intangible assets was $26,000 in 2012. The amortization expense is included in selling, general and administrative expenses.