TaoWeave, Inc.TWAV

TaoWeave, Inc. Goodwill & Intangibles Disclosure

10-KFiled Mar 30, 20212 min read
Goodwill
As of December 31, 2020 and 2019, goodwill was $7,367,000 and $7,908,000, respectively. As of December 31, 2020, goodwill was comprised of $7,367,000 recorded in connection with the October 1, 2019 acquisition of Oblong Industries.

We test goodwill for impairment on an annual basis on September 30 of each year, or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. Following the Acquisition of Oblong Industries, the Company operated two reporting units, Oblong (formerly Glowpoint) and Oblong Industries. During the year ended December 31, 2020, we considered the novel Coronavirus (COVID-19) pandemic and resulting declines in certain of the Company’s revenue to be a triggering event for an interim goodwill impairment test for both reporting units as of March 31, 2020. To determine the fair value of each reporting unit for the goodwill impairment tests, we used a weighted average of the discounted cash flow method and a market-based method (comparing the Company’s equity and analyzing multiples of revenue for comparable companies). For the Oblong Industries reporting unit, the fair value of the reporting unit exceeded its carrying amount, as of both testing dates, therefore no impairment charge was required for the year ended December 31, 2020. For the Oblong (formerly Glowpoint) reporting unit, we recorded an impairment charge on goodwill of $541,000 at March 31, 2020, as the carrying amount of the reporting unit exceeded its fair value on the test date. This charge is recognized as “Impairment Charges” on our consolidated Statements of Operations, and reduced goodwill for the Oblong. reporting unit to zero.
The activity in goodwill during the years ended December 31, 2020 and 2019 is shown in the following table ($ in thousands):
GoodwillOblongOblong IndustriesTotal
Balance January 1, 2019$2,795 $— $2,795 
Acquisition— 7,367 7,367 
Impairment(2,254)— (2,254)
Balance December 31, 2019541 7,367 7,908 
Impairment(541)— (541)
Balance December 31, 2020$— $7,367 $7,367 

In the event we experience future declines in our revenue, cash flows and/or stock price, this may give rise to a triggering event that may require the Company to record additional impairment charges on goodwill in the future.
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Historical Timeline

Fiscal YearFiled
2020Mar 30, 2021Showing above
2017Mar 7, 2018

About Goodwill & Intangibles Disclosures

Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.

Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.

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