Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2022

Goodwill And Intangible Assets Disclosure [Abstract]

10.

GOODWILL AND INTANGIBLE ASSETS

During the second quarter of 2022, the Company recognized macroeconomic challenges in the U.S. CBD market, including a decrease in market capitalization of CBD companies and transaction multiplies. Based on those qualitative factors, the Company concluded that its U.S. Cannabis segment more likely than not was impaired and tested that segment’s assets, including goodwill and intangible assets for impairment.

The U.S. Cannabis segment’s net working capital assets are readily monetized and therefore book value is deemed to represent its fair value. Its ROU asset and associated liability are primarily based on the lease arrangement and the incremental borrowing rate and deemed to represent fair value. Brand was tested using a relief from royalty method, using a pre-tax royalty rate of 4% and brand maintenance of 2.45%. In assessing goodwill, the Company used a market-based approach using a multiple of 1.6x revenue.

The tests resulted in the Company recognizing impairment charges to goodwill of ($25,169) and its brand intangible asset of ($4,630).

Goodwill

The following table presents the changes in the carrying value of goodwill by reportable segment for the nine months ended September 30, 2022:


	Cannabis - Canada			Cannabis - United States			Total
Balance as of December 31, 2021	$	57,525		$	60,008		$	117,533
Purchase price adjustment		3,175			—		$	3,175
Reclass to intangible assets		(14,170	)		—			(14,170	)
Foreign currency translation adjustment		(1,926	)		—			(1,926	)
Impairments		—			(25,169	)		(25,169	)
Balance as of September 30, 2022	$	44,604		$	34,839		$	79,443

Intangible Assets

Intangibles consisted of the following as of:


Classification	September 30, 2022			December 31, 2021
Licenses	$	16,762		$	12,835
Brand and trademarks*		12,670			12,951
Customer relationships		13,107			—
Computer software		1,942			2,014
Other*		144			144
Less: Accumulated amortization		(3,593	)		(1,550	)
Less: Impairments		(4,630	)		—
Intangibles, net	$	36,402		$	26,394

* Indefinite-lived intangible assets

The expected future amortization expense for definite-lived intangible assets as of September 30, 2022 was as follows:


Fiscal period
Remainder of 2022	$	603
2023		2,052
2024		1,918
2025		1,831
2026		1,740
Thereafter		15,444
Intangibles, net	$	23,588