Laird Superfood, Inc. Goodwill & Intangibles Disclosure
Goodwill
Goodwill represents the excess of purchase price over the assigned fair values of the assets acquired and liabilities assumed in connection with the acquisition of Picky Bars. The carrying amount of goodwill attributed to the acquisition of Picky Bars was $0 and $6,486,000 as of December 31, 2022 and December 31, 2021, respectively.
In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. The Company considered the current and expected future economic and market conditions and their impact on the Company, as well as the current market capitalization.
In the last month of the first quarter of 2022, management determined the sustained decline in stock price, coupled with changes in market conditions, was a triggering event. The Company performed a qualitative and quantitative analysis on the Company's goodwill for impairment, concluding that the fair value of goodwill as calculated using a discounted cash flow model exceeds the carrying value, indicating that goodwill was impaired. As such, the Company recorded a goodwill impairment of $6,486,000 for the year ended December 31, 2022.
Intangible Assets, Net
Intangible Assets, net is comprised of the following:
|
|
December 31, |
|
|
December 31, |
|
||
Trade names (10 years) |
|
$ |
890,827 |
|
|
$ |
2,530,000 |
|
Customer relationships (10 years) |
|
|
|
|
|
1,990,000 |
|
|
Recipes (10 years) |
|
|
330,000 |
|
|
|
330,000 |
|
Social media agreements (3 years) |
|
|
80,000 |
|
|
|
80,000 |
|
Software (3-15 years) |
|
|
131,710 |
|
|
|
188,662 |
|
Amortizable intangible assets |
|
|
1,432,537 |
|
|
|
5,118,662 |
|
Accumulated amortization |
|
|
(140,419 |
) |
|
|
(411,908 |
) |
Amortizable intangible assets, net |
|
|
1,292,118 |
|
|
|
4,706,754 |
|
Licensing agreements (indefinite) |
|
|
132,100 |
|
|
|
132,100 |
|
Total Intangible assets, net |
|
$ |
1,424,218 |
|
|
$ |
4,838,854 |
|
The weighted-average useful life of all the Company’s intangible assets is 7.7 years.
For the years ended December 31, 2022 and 2021, amortization expense was $448,460 and $385,093, respectively.
Definite life intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Examples include a significant adverse change in the extent or manner in which we use the asset, or an unexpected change in financial performance. When evaluating definite life intangible assets for impairment, we compare the carrying value of the asset to the asset’s estimated undiscounted future cash flows. An impairment is indicated if the estimated future cash flows are less than the carrying value of the asset. The Company considered the above factors when assessing whether the Company’s long-lived assets will be recoverable.
Based on the analysis of the qualitative factors above, management determined that with changes in market conditions and recent developments in the forecasts for e-commerce and retail sales of legacy Picky Bars products were triggering events.
The Company performed a qualitative and quantitative analysis on the Company's estimates of the fair values of acquired customer relationships utilizing the Multiperiod Excess Earnings Method variation of discounted cash-flow model, which exceeded the carrying value, indicating that these assets are impaired. In the twelve months ended December 31, 2022, the Company recorded of $1,776,006, net of accumulated amortization.
The Company performed a qualitative and quantitative analysis on the Company's estimates of the fair values of acquired trade names utilizing the Relief From Royalty Method variation discounted cash-flow model, which exceeded the carrying value, indicating that these assets are impaired. In the twelve months ended December 31, 2022, the Company recorded impairment charges of $1,243,000, net of accumulated amortization.
In addition, the Company recorded impairment charges of $103,574 on internal use production software, for which the Company realized no operational benefits following the final in-house production run in December 2022 upon the transition to a co-manufacturing business model.
Intangible assets are amortized using the straight-line method over estimated useful lives ranging from to fifteen years. The estimated amortization expense for each of the next five years and thereafter is as follows:
2023 |
|
$ |
206,886 |
|
2024 |
|
|
189,108 |
|
2025 |
|
|
149,994 |
|
2026 |
|
|
139,899 |
|
2027 |
|
|
139,899 |
|
Thereafter |
|
|
466,332 |
|
|
|
$ |
1,292,118 |
|
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About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.