SCWorx, Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Goodwill and Purchased Identifiable Intangible Assets

Goodwill and Purchased Identifiable Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Note 5. Goodwill and Purchased Identifiable Intangible Assets

Impairment

During the year ended December 31, 2017, the Company recorded a goodwill impairment charge of $2.4 million within the promotion segment in relation to the GFL and Fight Time reporting units. The impairment was identified as part of management’s review of impairment indicators during the fourth quarter. Accordingly, it was determined that the recoverable value of the reporting units was less than the carrying value and therefore, an impairment loss was recorded.

Additionally, the Company recorded a $893,000 impairment expense related to the write down of all video library intangible assets acquired to date, mainly in relation to the GFL acquisition as well as the venue relationship and trade name intangible assets associated with the acquisition of Fight Time.

Goodwill

The change in the carrying amount of goodwill for the years ended December 31, 2017 and 2016 is as follows:

Balance as of December 31, 2015	$
Goodwill acquired		2,516,168
Deferred tax		755,647
Balance as of December 31, 2016	$	3,271,815
Goodwill acquired		3,490,552
Final purchase accounting - measurement period adjustments		1,636,468
Impairment		(2,435,298)
Balance as of December 31, 2017	$	5,963,537

Intangible Assets

The change in the carrying amount of intangible assets for the year ended December 31, 2017 and 2016 is as follows:

Balance as of December 31, 2015	$
Intangible assets acquired		6,164,700
Amortization		(384,487)
Balance as of December 31, 2016	$	5,780,213
Intangible assets acquired		2,827,951
Final purchase accounting measurement period adjustment		(4,147,052)
Impairment of intangible assets		(1,298,500)
Accumulated amortization related to impaired intangible assets		405,017
Amortization		(680,535)
Balance as of December 31,2017	$	2,887,094

Identified intangible assets consist of the following:

		December 31, 2017
Intangible assets	Useful Life	Gross Assets		Accumulated Amortization		Net
Video library	4 years	$		$		$
Venue relationships	7 years		2,410,000		(363,767)		2,046,233
Ticketing software	3 years		90,000		(37,500)		52,500
Trademark and brand	3 years		610,000		(208,056)		401,944
Fighter contracts	3 years		140,000		(14,000)		126,000
Promoter relationships	6 years		277,099		(31,682)		245,417
Sponsor relationships			20,000		(5,000)		15,000
Total intangible assets, gross		$	3,547,099	$	(660,005)	$	2,887,094

During the year ended December 31, 2017, the Company completed the final purchase accounting of all acquisitions, resulting in a reallocation of intangible assets and goodwill.

During the year ended December 31, 2017, the Company recorded impairment charges of approximately $800,000 related to all video library, and 93,000 related to the Fight Time venue relationship and trade name intangible assets.

		December 31, 2016
Intangible assets	Useful Life	Gross Assets		Accumulated Amortization		Net
Video library	4 years	$	3,512,741	$	(181,824)	$	3,330,917
Venue relationships	7 years		1,966,400		(163,867)		1,802,533
Ticketing software	3 years		360,559		(30,047)		330,512
Trademark and brand	3 years		325,000		(8,749)		316,251
Fighter contracts	3 years
Promoter relationships	6 years
Total intangible assets, gross		$	6,164,700	$	(384,487)	$	5,780,213

Amortization expense for the years ended December 31, 2017 and 2016, was $680,535 and $384,487, respectively.

As of December 31, 2017, estimated amortization expense for the unamortized acquired intangible assets over the next five years and thereafter is as follows:

2018	$	647,257
2019		609,119
2020		441,897
2021		409,952
2022		397,036
Thereafter		381,833
	$	2,887,094

- 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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