GOODWILL AND INTANGIBLE ASSETS

NOTE 7 —GOODWILL AND INTANGIBLE ASSETS

In March 2013, the Company determined to reduce its sales and marketing efforts on its wine brands, which do not provide a material contribution to the Company’s results of operations. The Company made this decision to optimize its resources and focus on its faster growing and more profitable spirits brands, and to reduce the levels of working capital required to maintain necessary inventory levels of bulk wine and finished goods. The Company intends to continue selling existing finished goods wine inventory through its current sales channels, but is actively seeking buyers for large lots and for its bulk wine. In connection with this decision, the Company recognized a loss of $1,715,728, consisting of $817,156 on the write-down of net intangible assets and $898,572 in goodwill, as well as $326,869 charged to the provision for obsolete inventory to adjust both bulk wine and finished goods to estimated net realizable value, for the year ended March 31, 2013.

The changes in the carrying amount of goodwill for the years ended March 31, 2013 and 2012 were as follows:

	Amount
Balance as of March 31, 2011	$	1,126,010

Payments under McLain and Kyne agreement		117,048
Balance as of March 31, 2012	$	1,243,058

Write-down of goodwill related to wine brands		(898,572)
Payments under McLain and Kyne agreement		145,800
Balance as of March 31, 2013	$	490,286

Intangible assets consist of the following:

	March 31,
	2013		2012
Definite life brands	$	170,000	$	170,000
Trademarks		535,947		557,947
Rights		8,271,555		8,271,555
Distributor relationships		—		664,000
Product development		96,959		43,395
Patents		994,000		994,000
Other		28,480		28,480

		10,096,941		10,729,377
Less: accumulated amortization		5,404,000		4,906,061

Net		4,692,941		5,823,316
Other identifiable intangible assets — indefinite lived*		4,112,972		4,478,972
	$	8,805,913	$	10,302,288

Accumulated amortization consists of the following:

	March 31,
	2013		2012
Definite life brands	$	169,999	$	160,552
Trademarks		230,379		197,197
Rights		4,409,221		3,857,271
Distributor relationships		—		166,978
Product development		16,280		12,210
Patents		578,121		511,853
Other		-		-

Accumulated amortization	$	5,404,000	$	4,906,061

* Other identifiable intangible assets — indefinite lived consists of product formulations.

Amortization expense for the years ended March 31, 2013 and 2012 totaled $732,783 and $734,179, respectively.

Estimated aggregate amortization expense for each of the next five fiscal years is as follows:

Years ending March 31,	Amount
2014	$	642,697
2015		636,236
2016		635,433
2017		635,433
2018		635,433

Total	$	3,185,232

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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