Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

The ongoing restrictions and closures experienced by retail stores in the U.S. as a result of the COVID-19 pandemic have negatively impacted sales and demand which has resulted in slower than expected revenue growth in the U.S. reporting unit. The Company expects the revenue growth and operating results in the U.S. reporting unit to continue to be negatively impacted as the decrease in customer demand and retail closures are expected to continue as a result of the pandemic. The Company performed an interim impairment test as of June 30, 2020 on the U.S. reporting unit, which holds the Redwood goodwill, as well as the indefinite-lived intangible asset (Lord Jones™ brand) to determine whether the carrying amount of the reporting unit and intangible asset exceeded their respective fair values. The Company reassessed its estimates and forecasts during the second quarter of 2020 to determine the fair values of the reporting unit and intangible asset. The fair values were determined using a discounted cash flow method on the reporting unit and the relief-from-royalty method on the Lord Jones™ brand. Significant inputs include discount rate, growth rates, and cash flow projections. Based on these valuations, the carrying value exceeded the fair value resulting in an impairment on both the reporting unit as well as the Lord Jones™ brand.

The Company recorded $35,000 of impairment charges on the U.S. reporting unit and $5,000 of impairment charges on the Lord Jones™ brand during year ended December 31, 2020.

(a)Intangible assets

Intangible assets are comprised of the following items:


	Weighted average amortization period (in years)	As of December 31, 2020
		Cost		Accumulated amortization		Impairment charges		Net
Software	5	$	610	$	(291)	$	—	$	319
ERP system	5	3,955		(274)		—		3,681
Health Canada licenses	17	7,526		(1,254)		—		6,272
Lord JonesTM brand	N/A	64,000		—		(5,000)		59,000
Trademarks	N/A	148		—		—		148
Israeli codes(i)	25	322		(22)		—		300
		$	76,561	$	(1,841)	$	(5,000)	$	69,720

(i)The Israeli codes were transferred by non-controlling interests to Cronos Israel in exchange for their equity interests in the Cronos Israel entities specified above.


	Weighted average amortization period (in years)	As of December 31, 2019
		Cost		Accumulated amortization		Net
Software	5	$	541	$	(202)	$	339
Health Canada licenses	17	7,387		(821)		6,566
Lord JonesTM brand	N/A	64,000		—		64,000
Trademarks	N/A	36		—		36
Israeli codes(i)	25	298		(4)		294
		$	72,262	$	(1,027)	$	71,235

(i)The Israeli codes were transferred by non-controlling interests to Cronos Israel in exchange for their equity interests in the Cronos Israel entities specified above.

The aggregate amortization was $814 for the year ended December 31, 2020 (December 31, 2019 – $646; 2018 – $546). Intangible asset additions in 2020 primarily relate to the implementation of a new ERP system. Intangible asset additions in the year ended December 31, 2019 included the Lord Jones™ brand for $64 million. There were no material disposals of intangible assets in 2020 or 2019. The amortization expense for the next five years on intangible assets in use is estimated to be as follows: 2021 – $1,047; 2022 – $998; 2023: $964; 2024 – $952; 2025 – $664.

(b)Goodwill


	As of December 31, 2019		Additions		Impairment charges		Effect of foreign exchange		As of December 31, 2020
Peace Naturals	$	1,078	$	—	$	—	$	30	$	1,108
Redwood	213,414		—		(35,000)		—		178,414
	$	214,492	$	—	$	(35,000)	$	30	$	179,522