Clever Leaves Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

INTANGIBLE ASSETS, NET

INTANGIBLE ASSETS, NET

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS, NETAs part of the Herbal Brand acquisition in 2019, the Company acquired finite-lived intangible assets with a gross value of approximately $7,091. During the three months ended March 31, 2023 and 2022 the Company recorded $191 and $191, respectively, of amortization related to its finite-lived intangible assets.

The following tables present details of the Company’s total intangible assets as of March 31, 2023 and December 31, 2022. The value of product formulation intangible asset is included in the value of Brand:


	March 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted- Average Useful Life (in Years)
Finite-lived intangible assets:
Customer contracts	$	925	$	925	$	—	0.0
Customer relationships	1,000		715		285		2.9
Customer list	650		509		141		1.0
Trade name	4,516		1,778		2,738		6.0
Total finite-lived intangible assets	$	7,091	$	3,927	$	3,164


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted- Average Useful Life (in Years)
Finite-lived intangible assets:
Customer contracts	$	925	$	925	$	—	0.0
Customer relationships	1,000		669		331		3.0
Customer list	650		478		172		1.3
Brand	4,516		1,665		2,851		6.3
Total finite-lived intangible assets	$	7,091	$	3,737	$	3,354

Indefinite-lived intangible assets:
Licenses	$	19,000	N/A		$	19,000
Impairment Charge	$	(19,000)	N/A		$	(19,000)
Total indefinite-lived intangible assets	$	—			$	—

Total intangible assets	$	7,091	$	3,737	$	3,354

Annual Impairment Testing

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 has performed 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 - Finite-Lived Intangibles

In conjunction with the 2022 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. For the three months ended March 31 2023, no impairment was recognized related to the carrying value of any of the Company's finite lived intangible assets.

Impairment Testing - Indefinite-Lived Intangibles

In 2022, due to the continued decline in the Company’s stock price and the 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. 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. Utilizing a discounted cash flow model with a weighted average cost of capital (“WACC”) of 24%, the Company performed the assessment and recognized an impairment charge of $19,000 along with the related deferred tax liability write-off of $6,650 for the year ended December 31, 2022. As a result of this recognition in 2022, no indefinite-lived intangible assets exist as of March 31, 2023.

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 March 31, 2023:


	Estimated Amortization Expense
Remainder of 2023	$	624
2024	585
2025	542
2026	482
2027	452
Thereafter	479
Total	$	3,164