Annual report pursuant to Section 13 and 15(d)

Supplemental Financial Statement Information

v3.21.1
Supplemental Financial Statement Information
 12 Months Ended
Dec. 31, 2020
Property, Plant and Equipment [Abstract]  
Supplemental Financial Statement Information SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
Assets Held for Sale

During the year ended December 31, 2020, we performed a review of our property and equipment held at our distribution centers, corporate headquarters, and retail locations for disposal or sale in connection with our transformation plan. As a result of this review, we made the decision to commit to a formal plan to sell machinery that was used by our United States operating segment. Accordingly, we determined that this machinery met the criteria to be reclassified as held for sale as of December 31, 2020.

An asset group classified as held for sale is reflected at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the assets exceeds its estimated fair value, a loss is recognized. Due to the reclassification as held-for-sale of this machinery, we recognized impairment charges of approximately $0.3 million for the year ended December 31, 2020, which was included within "general and administrative expenses" in our consolidated statement of operations and comprehensive loss. We recorded approximately $0.9 million of machinery held for sale within "Assets Held for Sale" in our consolidated balance sheet as of December 31, 2020. We are actively seeking a buyer and expect to complete the sale of the machinery by the third quarter of 2021.

Other Current Assets
The following table summarizes the composition of other current assets as of the dates indicated:
(in thousands) December 31, 2020 December 31, 2019
Other current assets:
VAT refund receivable $ 4,391  $ — 
Prepaid expenses 1,542  2,850 
Other 4,959  2,074 
$ 10,892  $ 4,924 
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
(in thousands) 2020 2019
Furniture, equipment and software (includes $0.6 million and $0.5 million under finance leases as of December 31, 2020 and 2019, respectively)
 $ 2,978  $ 3,130 
3 - 7 years
Personal property 1,130  1,105  5 years
Leasehold improvements 844  1,077 
Lesser of lease term or 5 years
Land improvements 601  601  15 years
Building 8,088  8,064  39 years
Land 691  691 
Work in process 633  712 
14,965  15,380 
Less: accumulated depreciation (includes $0.2 million under finance leases as of December 31, 2020 and 2019)
 2,764  2,215 
Property and equipment, net $ 12,201  $ 13,165 
Depreciation expense for property and equipment (excluding assets recorded under finance leases) for the years ended December 31, 2020 and 2019 was approximately $1.1 million and $1.2 million, respectively.
Intangible Assets, Net
Identified intangible assets consisted of the following at the dates indicated below:
December 31, 2020
(in thousands) Gross carrying
amount		 Accumulated
amortization		 Carrying value Estimated useful life
Design libraries $ 1,677  $ (214) $ 1,463  15 years
Trademarks and tradenames 3,617  (1,572) 2,045 
1 - 15 years
Customer relationships 2,565  (796) 1,769 
5 - 15 years
Other intangibles $ 2,045  (1,377) 668 
2 - 15 years
$ 9,904  $ (3,959) $ 5,945 

December 31, 2019
(in thousands) Gross carrying
amount		 Accumulated
amortization		 Carrying value Estimated useful life
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 
The changes in the gross carrying amounts of our trademarks and tradenames, customer relationships, and other intangibles is primarily driven by the acquisition of certain trademarks and domain names during the year ended December 31, 2020, accompanied by fluctuations in foreign currency exchange rates. The weighted-average amortization period for intangible assets
we acquired during the year ended December 31, 2020 was approximately 12.3 years. The weighted-average amortization period for trademarks and tradenames and other intangibles we acquired during the year ended December 31, 2020 was approximately 5 years and 15 years, respectively.
Amortization expense for intangible assets was approximately $1.3 million and $1.4 million during the years ended December 31, 2020 and 2019, respectively. Total estimated amortization expense for our intangible assets for the years 2021 through 2025 are as follows:
Amortization Expense (in thousands)
2021 $ 1,004 
2022 $ 1,003 
2023 $ 505 
2024 $ 410 
2025 $ 394 

Goodwill
Due to recent market conditions and estimated adverse impacts from the COVID-19 pandemic, management concluded that a triggering event occurred in the first quarter of 2020, requiring a quantitative impairment test of our goodwill for our United States and Europe reporting units. Based on this assessment, we concluded that the fair value of our Europe reporting unit exceeded its carrying value and no impairment charge was required. However, the estimated fair value of the United States reporting unit was determined to be below its carrying value, which resulted in a $9.0 million goodwill impairment charge. The impairment charge resulted from the impacts of COVID-19 on our current and forecasted wholesale revenues and the restrictions on certain products we sell imposed by the Federal Drug Administration's Enforcement Priorities for Electronic Nicotine Delivery Systems and Other Deemed products on the Market Without Premarket Authorization, which resulted in changes to our estimates and assumptions of the expected future cash flows of the United States reporting unit.
During the fourth quarter of 2020, we performed a quantitative assessment for our Europe reporting unit. Based on this assessment, we concluded that the fair value of our Europe reporting unit exceeded its carrying value and no impairment charge was required. The estimated fair value of our reporting unit 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, conditions brought on by the COVID-19 pandemic may have material impacts on the assumptions used in determining the fair value of our reporting unit. Should the business environment worsen from impacts of the COVID-19 pandemic, the fair value of our reporting unit may decrease below its carrying value 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, 2020 were as follows:
(in thousands) U.S. Canada Europe Total
Balance at December 31, 2019 $ 8,996  $ —  $ 2,986  $ 11,982 
Impairment expense (8,996) —  —  (8,996)
Foreign currency translation adjustment —  —  294  294 
Balance at December 31, 2020 $ —  $ —  $ 3,280  $ 3,280 

Accrued Expenses and Other Current Liabilities
The following table summarizes the composition of accrued expenses and other current liabilities as of the dates indicated:
(in thousands) December 31, 2020 December 31, 2019
Accrued expenses and other current liabilities:
VAT payable $ 9,882  $ — 
Payroll-related including bonus 2,361  1,314 
Accrued professional fees 1,750  305 
Accrued third-party logistics fees 1,295  — 
Liabilities held for sale 226  — 
Accrued taxes, state and income 211  1,423 
Accrued purchase price consideration for business acquisition —  3,029 
Contingent consideration payable —  1,568 
Other 3,665  2,783 
$ 19,390  $ 10,422 
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, 2020 were as follows:
(in thousands) Customer Deposits
Balance as of December 31, 2019 $ 3,152 
Increases due to deposits received, net of other adjustments 9,164 
Revenue recognized (9,587)
Balance as of December 31, 2020 $ 2,729 

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, 2020 and 2019, changes in accumulated other comprehensive loss were as follows:
(in thousands) Foreign Currency Translation Unrealized Loss on Derivative Instrument Total
Balance at December 31, 2018 $ (286) $ —  $ (286)
Other comprehensive income (loss) 193  (206) (13)
Effects of the reorganization transactions 203  —  203 
Less: Other comprehensive (income) loss attributable to non-controlling interest (132) 156  24 
Balance at December 31, 2019 (22) (50) (72)
Other comprehensive income (loss) 654  (459) 195 
Less: Other comprehensive (income) loss attributable to non-controlling interest (449) 355  (94)
Balance at December 31, 2020 $ 183  $ (154) $ 29 
Supplier Concentration
We have four major vendors whose products accounted for an aggregate of approximately 49.5% of our total net sales and 41.6% of our total purchases for the year ended December 31, 2020, and an aggregate of approximately 63.4% of our total net sales and 52.9% of our total purchases for the year ended December 31, 2019. We expect to maintain our existing relationships with these vendors.