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INTANGIBLE ASSETS AND GOODWILL

6 Months Ended

Jun. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 5 – INTANGIBLE ASSETS AND GOODWILL

Goodwill

During the quarterly period ended June 30, 2023, our share price reduction was determined to be an indicator of impairment under ASC 350 of our two reporting units, United States and Latin America. We performed an ongoing assessment to consider whether events or circumstances had occurred that could more likely than not reduce the fair value of a reporting unit below its carrying value. The valuation limitation from our recent share price decline caused us to perform an interim goodwill impairment test as of June 30, 2023.

Based on the results of this testing, we recorded a $16,330,838 and $4,507,966 pre-tax, non-cash impairment charge related to the United States reporting unit and Latin America reporting unit, respectively, for the three-months ended June 30, 2023. For the six-months ended June 30, 2023, we recorded $31,776,819 and $9,261,353 of pre-tax, non-cash impairment charges related to the United States reporting unit and Latin America reporting units, respectively. This charge is recorded as Impairment of goodwill on the Consolidated Statements of Operations and Comprehensive Loss. The overall enterprise fair value was limited by the recent decline in our share price. The reduction in fair value for the reporting units, and corresponding impairment charge, was primarily driven by increase in the discount rate arising from higher equity premiums that reflect significant uncertainty surrounding our company and a decrease in forecasted near-term cashflows of our reporting units.

As part of our quantitative testing process for goodwill of the reporting units, we estimated fair values using a revenue multiple analysis, a form of the income approach, from the perspective of a market participant. Significant assumptions used in the revenue multiple approach are revenue growth rates and revenue multiples of key comparable companies within our industry.

The following table summarizes the changes in goodwill during the six months ended June 30, 2023:

SCHEDULE OF CHANGES IN GOODWILL

Balance December 31, 2022	$	76,664,017
Impairment		(41,038,172	)
Foreign currency translation adjustment		1,717,523
Ending balance, June 30, 2023	$	37,343,368

The remaining balance of goodwill for the reporting units continue to be at risk for future impairment. There continues to be uncertainty surrounding the factors impacting our business, and a sustained downturn, significantly extended recovery, or a change in long-term revenue growth or profitability for our reporting units could increase the likelihood of an additional future impairment. Additionally, changes in market participant assumptions or further share price reductions could increase the likelihood of further future impairment.

Intangible Assets

We performed an interim impairment test of our intangible assets based upon the conditions that precipitated the interim goodwill impairment test described above.

Based on the results of this testing, we recorded pre-tax, non-cash impairment charges totaling zero and $3,116,039 for the three and six-months ended June 30, 2023, respectively, related to our customer base, intellectual property, tradenames-trademarks and non-compete, which is included in the net carry amount of intangibles in the table below. These charges were recorded in Selling, general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss.

Fair values used in testing for potential impairment of our intangible assets are calculated using a discounted cash flows method by applying estimated cash flows from our forecasted revenue and expenses of the business that utilize those assets. The assumed cash flows from this calculation are discounted at a rate based on a market participant discount rate.

There is uncertainty surrounding the revenue growth factors for these assets and a change in the long-term revenue growth rate or increase in the discount rate assumption could increase the likelihood of a future impairment.

Following the recognition of the impairment losses, the affected assets had an aggregate carrying value of $540,192 as of June 30, 2023.

Intangible assets, net are summarized as follows:

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	June 30, 2023
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Tradenames – trademarks	$	4,056,997	$	(1,943,623	)	$	2,113,374
Customer base		1,198,533		(628,257	)		570,276
Non-compete agreements		704,157		(562,893	)		141,264
Intellectual property/technology		2,327,291		(851,481	)		1,475,810
Intangible Asset	$	8,286,978	$	(3,986,254	)	$	4,300,724

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Tradenames – trademarks	$	4,744,409	$	(1,167,476	)	$	3,576,933
Customer base		2,949,143		(449,565	)		2,499,578
Non-compete agreements		796,583		(436,611	)		359,972
Intellectual property/technology		2,659,391		(620,645	)		2,038,746
Intangible Asset	$	11,149,526	$	(2,674,297	)	$	8,475,229

The weighted average remaining useful life of identifiable amortizable intangible assets remaining is 3.50 years as of June 30, 2023.

Amortization of identifiable intangible assets for the three months ended June 30, 2023 and 2022 was $524,602 and $512,503, respectively, and was $1,271,774 and $817,467 for the six months ended June 30, 2023 and 2022, respectively.

Based on the balance of intangible assets at June 30, 2023, expected future amortization expense is as follows:

SCHEDULE OF FUTURE AMORTIZATION EXPENSE


2023 (remainder of)	$	753,416
2024		1,235,989
2025		1,047,053
2026		971,298
2027		292,968
Future Amortization Expense	$	4,300,724