Note 9. Intangible Assets and Goodwill

Intangible Assets, net:

Intangible assets consisted of the following as of September 30, 2022 and December 31, 2021:

The intangible assets are amortized over their respective original useful lives. The Company recorded amortization expense of $0.4 million and $4.9 million for the three months ended September 30, 2022 and 2021, respectively, and $1.1 million and $5.8 million for the nine months ended September 30, 2022 and 2021, respectively.

The estimated future amortization expense associated with intangible assets is as follows:

Goodwill:

The following table represents the changes in goodwill for the nine months ended September 30, 2022:

During the second quarter of 2022, adverse changes in business climate, including decreases in the price of Bitcoin and increased volatility of equity markets, as evidenced by declines in the market price of the Company’s securities, those of its peers, and major market indices, have reduced market multiples and increased weighted-average costs of capital, primarily driven by an increase in interest rates. Market concerns related to inflation, supply chain disruption issues and other macroeconomic factors have been some of the primary causes for these declines. Additionally, the price of Bitcoin has declined significantly, notably during the second quarter of 2022. Due primarily to these factors, the Company determined that a triggering event had occurred, and therefore, performed an interim goodwill impairment assessment as of June 30, 2022. The valuation of our reporting units was determined with the assistance of an independent valuation specialist firm using a market approach. The market approach was based on the Guideline Public Company Method, which is derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate, giving consideration to risk profiles, size, geography, and diversity of products and services. Under the market approach, the Company evaluated the fair value based on trailing and forward-looking earnings and revenue multiples derived from comparable publicly traded companies with similar market position and size as the Company’s reporting units. The unobservable inputs used to measure the fair value included projected revenue growth rates, the price of Bitcoin, the global Bitcoin network hash rate, the timing of miner shipments under currently executed contracts and their subsequent deployment, and the determination of appropriate market comparison companies. The trailing-twelve-month and next-twelve-month enterprise value-to-revenue multiples assumed in the analysis ranged from approximately 0.7x to approximately 3.9x. The resulting estimated fair values of the combined reporting units were reconciled to the Company’s market capitalization, including an estimated implied control premium of approximately 30%.

The results of the quantitative test indicated the fair value of the reporting units did not exceed their carrying amounts, including goodwill. The difference between the carrying amount and the fair value of $335.6 million was recognized as a non-cash impairment charge during the nine months ended September 30, 2022.