Accounting Standard Codification (“ASC”) “Goodwill and Other Intangible Assets” requires that assets with indefinite lives longer be amortized, but instead be subject to annual impairment tests.

 

Following the guidelines contained in ASC the Company tests goodwill and intangible assets that are subject to amortization for impairment annually or more frequently if events or circumstances indicate that impairment is possible. The Company has elected to conduct its annual test during the quarter. During the quarter ended management qualitatively assessed goodwill to determine whether testing was necessary. Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy, and changes in the composition and carrying amounts of net assets. If this qualitative assessment indicates that it is more likely than that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is then performed. After reviewing the changes to the Company's operations and overall business environment since the quarter management believes that the decrease in sales is temporary and has determined that the carrying value of goodwill was impaired at and was considered necessary. In addition, the overall fair market value of the Company exceeds the book value of intangibles and goodwill as of

 

Due to the impact of the COVID- pandemic sales were affected from and of The pandemic affected sales for the quarter and continues to affect sales in the quarter, but we have seen sales recovery at store locations and it continues to move towards pre-COVID sales levels. With some degree of sales recovery occurring beginning in and the Payroll Protection Program Loan received in which will more than likely be forgiven, we believe that there will be material effect on the intangible and goodwill values. Management has reviewed goodwill and intangibles for the quarter and will continue to review goodwill and intangible assets for impairment in the future in combination with the results of the quarter as more information and results are seen for the economic recovery of the franchise systems related to the Coronavirus pandemic.