Insight Molecular Diagnostics Inc. Goodwill & Intangibles Disclosure

4. Goodwill and Intangible Assets, net

 

We account for our historical acquisitions in accordance with ASC 805, Business Combinations. We recorded the amount exceeding the fair value of net assets acquired and the date of acquisition as goodwill.

 

In accordance with ASC 350, Intangible-Goodwill and Other, we review and evaluate our long-lived assets, including intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that we may not recover their net book value. We test goodwill for impairment on an annual basis in the fourth quarter of each year, and between annual tests, if indicators of potential impairment exist, using a fair-value approach.

 

We typically use an income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows (including expected growth rates). Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion, Company business plans, the underlying product or technology life cycles, economic barriers to entry, and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

 

During 2022, and upon the eminent sale of Razor Genomics, the Company assessed its current environment and concluded that it was more likely than not that the fair value of the goodwill was less than the carrying value. As such, the Company performed a quantitative test to estimate the fair value of the enterprise. Using the discounted cash flow method and taking into consideration the loss of Razor’s future cash flows, the calculated enterprise fair value was lower than carrying value. As a result, the Company recorded a goodwill impairment of $18.7 million as part of its operating expenses; as of December 31, 2022. No impairment was noted for IPR&D assets.

 

We amortize intangible assets not considered to have an indefinite useful life using the straight-line method over their estimated period of benefit, which generally ranges from one to nine years. Each reporting period, we evaluate the estimated remaining useful life of intangible assets and assess whether events or changes in circumstances warrant a revision to the remaining period of amortization or indicate that impairment exists.

 

At December 31, 2022 and December 31, 2021, goodwill and intangible assets, net, consisted of the following (in thousands):

 Schedule of Goodwill and Intangible Assets

		December 31, 2022				December 31, 2021
Goodwill - Insight Merger(1)		$	-			$	9,194
Goodwill - Chronix Merger(1)			-				9,490
Total Goodwill			-				18,684
Intangible assets:
Acquired IPR&D - DetermaIO (2)		$	14,650			$	14,650
Acquired IPR&D - DetermaCNI and VitaGraft (3)			46,800				46,800
Intangible assets subject to amortization:
Acquired intangible assets - customer relationship			440				440
Total intangible assets			61,890				61,890
Accumulated amortization - customer relationship(4)			(257	)			(169	)
Intangible assets, net		$	61,633			$	61,721

 

(1)	Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in the Insight Merger and the Chronix Merger (see Note 3). The Company recorded an impairment loss as of December 31, 2022 for the entire goodwill balance.
(2)	See Note 3 for information on the Insight Merger.
(3)	See Note 3 for information on the Chronix Merger.
(4)	Amortization of intangible assets is included in “Cost of revenues – amortization of acquired intangibles” on the consolidated statements of operations in the current year because the intangible assets pertain directly to the revenues generated from the acquired intangibles.

 

 

ONCOCYTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Future amortization expense is expected to be the following (in thousands):

Schedule of Intangible Assets Future Amortization Expense

		Amortization
Year ending December 31,
2023			88
2024			88
2025			7
Total			183