Annual report pursuant to Section 13 and 15(d)

Supplemental Financial Statement Information

v3.20.1
Supplemental Financial Statement Information
 12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Supplemental Financial Statement Information SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
Property and Equipment, Net
The following is a summary of our property and equipment, at costs less accumulated depreciation and amortization:
As of December 31, Estimated useful life
2019 2018
(in thousands)
Furniture, equipment and software (includes $0.5 million and $0.4 million under finance leases and capital leases, respectively)
 $ 3,130    $ 2,095    3 - 7 years
Personal property 1,105    1,090    5 years
Leasehold improvements 1,077    342    Lesser of lease term or 5 years
Land improvements 601    601    15 years
Building 8,064    7,773    39 years
Land 691    691   
Work in process 712    —   
15,380    12,592   
Less: accumulated depreciation (includes $0.2 million and $0.1 million under finance leases and capital leases, respectively)
 2,215    951   
Property and equipment, net $ 13,165    $ 11,641   
Depreciation expense for property and equipment (excluding assets recorded under finance leases and capital leases) for the years ended December 31, 2019 and 2018 was approximately $1.2 million and $0.4 million, respectively.
Intangible Assets, Net
Identified intangible assets consisted of the following at the dates indicated below:
December 31, 2019
Gross carrying
amount		 Accumulated
amortization		 Carrying value Estimated useful life
(in thousands)
Design libraries $ 1,677    $ (103)   $ 1,574    15 years
Trademarks and tradenames 3,388    (962)   2,426    1-15 years
Customer relationships 2,446    (473)   1,973    5-15 years
Other intangibles 2,089    (1,761)   328    2-15 years
$ 9,600    $ (3,299)   $ 6,301   

December 31, 2018
Gross carrying
amount		 Accumulated
amortization		 Carrying value Estimated useful life
(in thousands)
Trademarks and tradenames $ 2,285    $ (459)   $ 1,826    5-10 years
Customer relationships 1,196    (199)   997    5 years
Other intangibles 2,061    (1,222)   839    2-15 years
$ 5,542    $ (1,880)   $ 3,662   
The changes in the gross carrying amount of our trademarks and tradenames, customer relationships, and design libraries are primarily due to the acquisition of Pollen Gear and Conscious Wholesale (see "Note 3—Business Combinations"). The weighted-average amortization period for intangible assets we acquired during the year ended December 31, 2019 was approximately 14 years. The weighted-average amortization period for trademarks and tradenames, customer relationships, and design libraries we acquired during the year ended December 31, 2019 was approximately 13 years, 15 years, and 15 years, respectively.
Amortization expense for intangible assets was approximately $1.4 million and $1.1 million during the years ended December 31, 2019 and 2018, respectively. Total estimated amortization expense for our intangible assets for the years 2020 through 2024 are as follows:
Amortization Expense (in thousands)
2020 $ 1,240   
2021 $ 916   
2022 $ 915   
2023 $ 417   
2024 $ 319   

Goodwill
For the year ended December 31, 2019, we recognized approximately $6.5 million in goodwill related to business acquisitions. The goodwill generated from the business acquisitions is primarily related to the value we placed on expected business synergies. See “Note 3—Business Acquisitions.” The amount of goodwill deductible for tax purposes from the Pollen Gear acquisition is expected to be approximately $3.6 million. The amount of goodwill from the Conscious Wholesale acquisition is not tax deductible for income tax purposes in any jurisdiction in which we operate.
During the fourth quarter of 2019, we performed a qualitative assessment for our Europe reporting unit and a quantitative assessment for our U.S. reporting unit. Based on these assessments, we concluded that the fair values of our reporting units exceeded their book values and no impairment charges were required. The estimated fair value of our reporting units is highly sensitive to changes in the underlying projections and assumptions; therefore, in some instances, changes in these assumptions could potentially lead to impairment. Specifically, the decrease in the share price of our Class A common stock since December 31, 2019 and the recent outbreak COVID-19 may have material impacts on the assumptions used in determining the fair value
of our reporting units. Should these factors persist unabated, the fair value of our reporting units may decrease below their carrying values and result in an impairment charge to goodwill in future periods.
Changes in the carrying amount of our goodwill by reporting unit for the year ended December 31, 2019 were as follows:
(in thousands) U.S. Canada Europe Total
Balance at December 31, 2018 $ 5,446    $ —    $ —    $ 5,446   
Acquisitions (see Note 3—Business Acquisitions) 3,550    —    2,921    6,471   
Impairment expense —    —    —    —   
Foreign currency translation adjustment —    —    65    65   
Balance at December 31, 2019 $ 8,996    $ —    $ 2,986    $ 11,982   

Accrued Expenses and Other Current Liabilities
The following table summarizes the composition of accrued expenses and other current liabilities as of the dates indicated:
December 31, 2019 December 31, 2018
(in thousands)
Accrued expenses and other current liabilities:
Accrued purchase price consideration for business acquisition $ 3,029    $ —   
Contingent consideration payable 1,568    —   
Accrued taxes, state and income 1,423    665   
Payroll related including bonus 1,314    1,314   
Accrued offering costs —    1,500   
Other 3,088    3,490   
$ 10,422    $ 6,969   
Customer Deposits
We established a supply chain for premium, patented, child-resistant packaging, closed-system vaporization solutions and custom-branded retail products. For these product offerings, we generally receive a deposit from the customer (generally 50% of the total order cost, but the amount can vary by customer contract), when an order is placed by a customer. Changes in our customer deposits during the year ended December 31, 2019 are as follows:
(in thousands) Customer Deposits
Balance as of December 31, 2018 $ 3,071   
Increases due to deposits received, net of other adjustments 10,770   
Revenue recognized (10,689)  
Balance as of December 31, 2019 $ 3,152   

We typically complete orders related to customer deposits within six weeks to three months from the date of order, depending on the complexity of the customization and the size of the order.
Accumulated Other Comprehensive Loss
For the years ended December 31, 2019 and 2018, changes in accumulated other comprehensive loss were as follows:
(in thousands) Foreign Currency Translation Unrealized Loss on Derivative Instrument Total
Balance at December 31, 2017 $ (209)   $ —    $ (209)  
Other comprehensive loss (77)   —    (77)  
Balance at December 31, 2018 (286)   —    (286)  
Other comprehensive income (loss) 193    (206)   (13)  
Effects of the reorganization transactions 203    —    203   
Other comprehensive (income) loss attributable to noncontrolling interest (132)   156    24   
Balance at December 31, 2019 $ (22)   $ (50)   $ (72)