Intangible Assets (Notes) |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure | Intangible Assets: The Company has recorded intangible assets, such as trademark, developed technology, non-compete agreements, backlog, customer relationships, and licensing agreements, and accounts for these in accordance with ASC 350.
Intangible assets include finite-lived customer relationships, trade names, developed technology, licensing agreements and other intangibles. Intangible assets with determinable lives are amortized over the estimated useful lives of the assets. These intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value.
Product Licensing Rights
On July 31, 2019, the Company entered into a year License and Service Agreement (the “Agreement”) with a public safety manufacturing company pursuant to which the Company obtained worldwide product licensing rights for existing products to be manufactured at our contract manufacturer for our IBW segment. Under the terms of the Agreement, the Company made an up-front payment of $1.0 million, in connection with the execution of the Agreement and was required to pay an additional $1.0 million, upon the achievement of certain milestones, as well as royalties on future sales. As of March 31, 2020, $0.3 million for the last milestone was unpaid and is presented in Accounts Payable on the Consolidated Balance Sheet. This milestone was completed during May 2020 and paid during fiscal year 2021. In addition to the product licensing rights, the initial up-front payment includes training. The acquired product licensing rights will be amortized straight-line over the term of the Agreement. The amortization related to this intangible asset was $158,000 and $260,000 during fiscal years 2021 and 2020, respectively, and is presented in Cost of revenue on the Consolidated Statements of Operations.
During the quarter ended September 30, 2020, the Company determined there were indications of impairment on the IBW intangible asset primarily due to the duration of the COVID-19 pandemic, which delayed construction projects impacting the amount and timing of revenue. The Company performed the recoverability test described above and concluded the carrying amounts were recoverable. The Company concluded it was not necessary to perform a recoverability test for the IBW intangible asset during the quarter ended December 31, 2020. In February 2021, a small fire at a subcontractor destroyed inventory that was being used to produce product under the Agreement as previously defined above. Due to long lead times, increased costs and new minimum order quantities on replacement components, the Company made a decision to accelerate engineering efforts to develop a new replacement product and abandon the production of product under the Agreement. As a result, during the quarter ended March 31, 2021, the Company recorded a non-cash impairment loss of $525,000 to fully impair the product licensing right intangible asset.
During the quarter ended March 31, 2020, the Company determined there were indications of impairment on the product licensing rights as demand slowed for public safety products in part due to site access limitations and delayed project planning/approval as a result of COVID-19 during the quarter. The Company performed the recoverability test described above and concluded the carrying amount was not recoverable. The potential deferral of revenues within a fixed license period created an impaired value. During the quarter ended March 31, 2020, the Company recorded a $1,007,000 impairment loss to record the excess of the asset’s carrying amount over its fair value. The impairment losses are presented on the Statements of Operations as Long-lived assets impairment.
Acquisition-related Intangible Assets
As of March 31, 2021, the ISM reporting unit is the only remaining reporting unit that has unamortized acquisition-related intangible assets. There was no intangible asset impairment during fiscal years 2021 or 2020 for the ISM reporting unit for acquisition-related intangible assets.
During the quarter ended September 30, 2020, the Company determined there were indications of impairment on the ISM intangible assets primarily due to the duration of the COVID-19 pandemic, which have delayed construction projects impacting the amount and timing of revenue. The Company performed the recoverability test described above and concluded the carrying amounts were recoverable. The Company concluded it was not necessary to perform a recoverability test for the ISM intangible assets during the quarters ended December 31, 2020 and March 31, 2021.
During the quarter ended September 30, 2019, the Company determined there were indications of impairment on the ISM intangible assets primarily due to a significant decline in revenue. The decrease in revenue in the three months ended September 30, 2019, primarily was due to decreased sales of remote units driven by a slowdown in demand from two existing customers. The Company performed the recoverability test described above and concluded the carrying amount was recoverable. The Company concluded it was not necessary to perform a recoverability test during the quarter ended December 31, 2019. During the quarter ended March 31, 2020, the Company determined there were indications of impairment on the ISM intangible assets as late in the quarter travel to customer worksites, which is required for many of our ISM products, became restricted due to COVID-19. The Company performed the recoverability test described above and concluded the carrying amount was recoverable.
Originally, the finite-lived intangibles are being amortized over periods of 2 to 10 years using either a straight line method or the consumption period based on expected cash flows from the underlying intangible asset. Finite-lived intangible amortization expense from continuing operations for acquisition-related intangible assets was $903,000 and $1,233,000 in fiscal years 2021 and 2020.
Acquisition-related and Product Licensing Rights
The summary of amortization expense in the Consolidate Statement of Operations is as follows:
The following table presents details of the Company’s intangibles from historical acquisitions and the Agreement:
The following is the expected future amortization by fiscal year:
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