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Intangible Assets
 12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets

8. Intangible Assets

 

The following table provides the components of intangible assets:

 

       As of December 31, 2020   As of December 31, 2019 
(in thousands,  Useful life   Gross   Accumulated   Net Carrying   Gross   Accumulated   Net Carrying 
except useful life)  (years)   Cost   Amortization   Value   Cost   Amortization   Value 
Indefinite-lived
non-amortizing:		                            
License agreement       $8,456   $
—
   $8,456   $
—
   $
—
   $
—
 
Trademarks       30  
—
   30   67   (67) 
—
 
Definite-lived amortizing:                                   
Patents   14-18    
—
    
—
    
—
    564    (564)   
—
 
Internet domain   15    900    (190)   710    900    (130)   770 
License agreement   1    2,220    (2,220)   
—
    
—
    
—
   
—
 
Internal-use software   3    921    (172)   749    366    (35)   331 
Intangible assets, net       $12,527   $(2,582)  $9,945   $1,897   $(796)  $1,101 

 

Prior to the Business Combination discussed in Note 3, Purple LLC entered into an agreement pursuant to which EdiZONE transferred tangible and intellectual property to Purple LLC that was then licensed back to EdiZONE to enable them to continue to meet certain preexisting license obligations it had with various third parties. On August 14, 2020, Purple LLC entered into a separate agreement whereby EdiZONE, for consideration of $8.5 million, assigned a license agreement with Advanced Comfort Technologies, Inc. dba Intellibed (“ACTI”), and related royalties payable thereunder, to Purple LLC, along with the trademarks GEL MATRIX and INTELLIPILLOW. The payment made to EdiZONE was recorded in the Company’s consolidated balance sheet at December 31, 2020 as an indefinite-lived non-amortizing license because the agreement with ACTI is perpetual.

 

On January 13, 2020, Purple LLC entered into a supply and services agreement with a third party whereby the Company acquired a license and made a prepayment for future products and services to be provided by the third party. The $4.0 million paid upon execution of the contract was allocated to a license for certain technologies ($2.2 million), inventory to be utilized by the third party in the production of goods ($0.8 million) and future professional services to be delivered by the third party ($1.0 million). On October 13, 2020, Purple LLC filed suit against the third party for alleged violations under the contract. In response, the third party filed a counter lawsuit against Purple LLC. These lawsuits effectively ended any future performance under the contract. As a result, during the third quarter of fiscal 2020, the Company recorded in its consolidated statement of operations an impairment charge of $0.6 million for unamortized license costs. The Company also recorded write-offs of $0.8 million, and $0.3 million for prepaid professional services and prepaid inventory, respectively. Refer to Note 13 —Commitments and Contingencies —Legal Proceedings for additional information.

 

Amortization expense for intangible assets was $2.4 million and $0.7 million for the years ended December 31, 2020 and 2019, respectively. There were no impairment charges related to intangible assets in 2019.

 

Estimated amortization expense for definite-lived intangible assets is expected to be as follows for the next five years:

 

(in thousands)    
Year ended December 31,    
2021  $359 
2022   325 
2023   245 
2024   60 
2025   60 
Thereafter   410 
Total future amortization for definite-lived intangible assets  $1,459