ENTERPRISE RESOURCE MANAGEMENT SYSTEM RECOVERABILITY
We have determined that the enterprise resource management system (the “ERP system”) implemented in November 2010 is not appropriate for long-term use based on certain functionalities not performing as promised. After discussions with the ERP system provider, we received a partial refund of $40,000 subsequent to April 30, 2011, that was applied to the carrying amount of the software. Subsequent to the change in carrying amount, we evaluated the asset for existence of impairment. After determining that impairment indicators exist (the discontinuation of the ERP system will more likely than not occur prior to the end of its useful life), we evaluated recoverability by comparing undiscounted cash flows provided by the ERP system to the carrying value of the asset. Since the ERP system is integral to the operations of our business, entity level cash flows were used in this test. We generated undiscounted cash flows in excess of the carrying amount of the software so no impairment loss adjustment was necessary. A new ERP system was implemented on November 1, 2012.
