Annual report pursuant to Section 13 and 15(d)

Goodwill and Intangible Assets

v3.6.0.2
Goodwill and Intangible Assets
12 Months Ended
Dec. 31, 2016
Goodwill and Intangible Assets [Abstract]  
GOODWILL AND INTANGIBLE ASSETS
7. GOODWILL AND INTANGIBLE ASSETS

 

Goodwill

 

The following table sets forth the changes in the Company's goodwill during the years ended December 31, 2016 and 2015 resulting from the above-described acquisitions by the Company of its operating segments.

 

    Applications and Infrastructure     Professional Services     Managed Services     Total  
Balance December 31, 2014   $ 6,906     $ 9,257     $ 18,402     $ 34,565  
                                 
Impairment charge     -       -       (10,907 )     (10,907 )
                                 
Balance December 31, 2015   $ 6,906     $ 9,257     $ 7,495     $ 23,658  
                                 
Acquisitions     565       824       -       1,389  
                                 
Disposals     (565 )     -       -       (565 )
                                 
Impairment Charge     -       -       (1,114 )     (1,114 )
                                 
Balance December 31, 2016   $ 6,906     $ 10,081     $ 6,381     $ 23,368  

 

Intangible Assets

 

The following table summarizes the Company’s intangible assets as of December 31, 2016 and 2015:

 

        December 31, 2016     December 31, 2015  
    Estimated Useful Life   Gross Carrying Amount     Accumulated Amortization     Write-off of Accumulated Amortization     Impairment Charge     Net Book Value     Gross Carrying Amount     Accumulated Amortization     Reclassification     Impairment Charge     Net Book Value  
                                   
Customer relationship and lists   7-10 yrs   $ 14,698     $ (6,109 )   $ -     $ -     $ 8,589     $

14,451

    $

(4,707

)   $ -     $ -     $ 9,744  
Non-compete agreements   2-3 yrs     2,116       (1,868 )     -       -       248      

2,455

     

(1,602

)     -       (699 )    

154

 
Purchased software   16 years     4,000       -       (541 )     (3,459 )     -       -       (371 )     4,000       -       3,629  
In-process research and development         -       -       -       -       -       4,000       -       (4,000 )     -       -  
URL's   Indefinite     8       -       -       -       8       8       -       -       -       8  
Trade names   1 Year     59       (49 )     -       (10 )     -       59       (49 )     -       (10 )     -  
Trade names   Indefinite     3,178       -       -       -       3,178       3,178       -       -       -       3,178  
                                                                                     
Total intangible assets       $ 24,059     $ (8,026 )   $ (541 )   $ (3,469 )   $ 12,023     $

24,151

    $

(6,729

)   $ -     $ (709 )   $

16,713

 

 

During the third quarter of 2015, the Company noted a trend whereby actual revenues and margins were not in line with forecasted revenues and margins within the managed services segment. The Company updated the forecast for the managed services segment, of which IPC comprises a majority of the reporting unit, based on the most recent financial results and best estimates of future operations. The updated forecast reflects slower growth in revenues and lower margins for the managed services segment due to lower demand from customers.

 

As of October 1, 2015, the Company performed the two-step goodwill and intangible assets impairment process and determined that the managed services operating segment failed both tests. Based on the testing performed, the Company recorded a non-cash impairment charge of $11,582 related to the managed services reporting segment, of which $675 related to intangible assets and $10,907 related to goodwill. 

 

During the first quarter of 2016, the Company disposed of its VaultLogix, DPS and USDSA subsidiaries. As a result of this disposal, the Company performed a two-step goodwill and indefinite lived impairment process as of December 31, 2015 on its former cloud services segment. The Company determined that the remaining reporting unit within this segment, the Company’s Axim subsidiary, forecasted revenues and margins would change based on the sale of VaultLogix, DPS and USDSA. The Company updated the forecast for the cloud services segment based on the most recent financial results and best estimates of future operations. The updated forecast reflected slower growth in revenues and lower margins for the former cloud services segment due to lower demand from customers.

 

As of December 31, 2015, the Company performed the two-step goodwill and indefinite lived impairment process and determined that the former cloud services operating segment failed both tests. Based on the testing performed, the Company recorded a non-cash impairment charge of $2,039 related to the former cloud services reporting segment, of which $34 related to intangible assets and $2,005 related to goodwill.

 

As of October 1, 2016, the Company performed the two-step goodwill and indefinite lived impairment process and determined that the managed services operating segment failed both tests. Based on the testing performed, the Company recorded a non-cash impairment charge of $4,573 related to the managed services reporting segment, of which $3,459 related to intangible assets and $1,114 related to goodwill.

 

The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense related to the purchased intangible assets was $1,762 and $3,225 for the years ended December 31, 2016 and 2015, respectively. 

 

The estimated future amortization expense for the next five years and thereafter is as follows:

 

Year ending December 31,      
2017   $ 1,517  
2018     1,260  
2019     1,259  
2020     1,238  
2021     1,180  
Thereafter     2,383  
Total   $ 8,837