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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS, NET | INTANGIBLE ASSETS, NETThe Company had acquired cannabis-related licenses as part of a business combination in 2018, with a gross value of approximately $19,000, which have indefinite useful lives as they are expected to generate economic benefit to the Company in perpetuity. In addition, as part of the Herbal Brand acquisition in 2019, the Company acquired finite-lived intangible assets with a gross value of approximately $7,075. During the three months ended September 30, 2022 and 2021 the Company recorded approximately $191 and $191, respectively, of amortization related to its finite-lived intangible assets. During the nine months ended September 30, 2022 and 2021 the Company recorded approximately $573 and $972, respectively, of amortization related to its finite-lived intangible assets. The following tables present details of the Company’s total intangible assets as of September 30, 2022 and December 31, 2021. The value of product formulation intangible asset is included in the value of Brand:
Impairment Testing - Finite-Lived Intangibles
In accordance with ASC Topic 350, “Intangibles – Goodwill and Other,” the Company performs its annual impairment test as
of December 31 of each year. As part of the review, the Company will perform a qualitative assessment to determine whether indicators of impairment existed, along with considering, among other factors, the financial performance, industry conditions, as well as microeconomic developments. The Company also reviews intangibles for impairment whenever events or changes in circumstances indicate that the carrying value of its intangibles may not be recoverable. After the close of each interim quarter,
management assesses whether any indicators of impairment exist requiring the Company to perform an interim goodwill and other intangible assets impairment analysis.
Impairment Testing - Indefinite-Lived Intangibles
Due to the continued decline in the Company’s stock price and the current year’s projected revenues falling behind target, the Company performed an interim impairment assessment on its indefinite-lived intangible assets, consisting of cannabis related licenses for its Colombian operations. Utilizing a discounted cash flow model with a weighted average cost of capital (“WACC”) of 22%, the Company performed the assessment and recognized an impairment charge of $19,000, offset with the related deferred tax liability write-off of $6,650 for the three and nine months ended September 30, 2022.
2021 Impairment Testing
In conjunction with the 2021 annual impairment testing, the Company reviewed finite-lived intangible assets for impairment. In performing such review, the Company makes judgments about the recoverability of purchased finite lived intangible assets whenever events or changes in circumstances indicate that an impairment may exist. The Company recognizes an impairment if the carrying amount of the long-lived asset group exceeds the Company’s estimate of the asset group’s undiscounted future cash flows.
Significant assumptions used in the impairment analysis include financial projections of free cash flow (including assumptions about revenue projections, regulations, operating margins, capital requirements and income taxes), long-term growth rates for determining terminal value beyond the discretely forecasted periods and discount rates. For our intangible assets related to the Cannabinoid segment, our estimated revenue projections reflect that Decree 811 that was followed by the passing of the Regulation 227 in February 2022, which was further resolved in April 2022, to allow us to export cannabis flower from Colombia starting 2023. The Colombian government signed Resolution 539, which outlines the regulation and the technical guidelines for commercializing dried flower and medicinal-grade cannabis extracts.
For the three and nine months ended September 30, 2021, no impairment was recognized related to the carrying value of any of the Company’s finite or indefinite-lived intangible assets.
Amortization Expense
The following table reflects the estimated future amortization expense for each period presented for the Company’s finite-lived intangible assets as of September 30, 2022:
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