Annual report pursuant to Section 13 and 15(d)

INTANGIBLE ASSETS, NET

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INTANGIBLE ASSETS, NET
12 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
NOTE 9. INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

 

          December 31, 2017     December 31, 2016  
    Estimated Useful Life in Years    

Gross

Carrying Amount

    Accumulated Amortization    

Net

Carrying Value

   

Gross

Carrying Amount

    Accumulated Amortization    

Net

Carrying

Value

 
                                           
Amortizing Intangible Assets:                                          
Customer Relationships   5 to 12     $ 8,072,400     $ (1,345,191 )   $ 6,727,209     $ 8,960,700     $ (780,960 )   $ 8,179,740  
Trademarks and Patent   2 to 8       195,520       (77,448 )     118,072       498,598       (91,061 )     407,537  
Dispensary Licenses   14       10,270,000       (1,283,751 )     8,986,249       10,270,000       (550,179 )     9,719,821  
Management Service Agreement   15       6,621,580       -       6,621,580       -       -       -  
                                                         
Total Amortizing Intangible Assets             25,159,500       (2,706,390 )     22,453,110       19,729,298       (1,422,200 )     18,307,098  
                                                         
Non-Amortizing Intangible Assets:                                                        
Trade Name   Indefinite       5,320,000       -       5,320,000       5,320,000       -       5,320,000  
                                                         
Total Non-Amortizing Intangible Assets             5,320,000       -       5,320,000       5,320,000       -       5,320,000  
                                                         
Total Intangible Assets, Net           $ 30,479,500     $ (2,706,390 )   $ 27,773,110     $ 25,049,298     $ (1,422,200 )   $ 23,627,098  

 

During the fourth quarter of 2017, the Company recorded an impairment charge for intangible assets related to customer relationships and trademarks and patents held by Edible Garden Corp. In accordance with the guidance for the impairment of long-lived assets, the Company evaluated the assets for recovery and concluded an impairment of certain intangibles was more likely than not. Accordingly, the Company removed $888,300 and $310,905 of the gross carrying amount and accumulated amortization, respectively, of the customer relationships intangibles. The Company also removed $303,078 and $123,006 of gross carrying amount and accumulated amortization, respectively, of the trade name and patents. The Company recorded a net impairment charge of $757,467. The impairment charge was recorded in other expense in our consolidated statement of operations.

 

The Company recorded amortization expense of $1,718,101, $1,308,212 and $42,480 for the years ended December 31, 2017, 2016 and 2015, respectively.

 

Based solely on the amortizable intangible assets recorded at December 31, 2017, the Company estimates amortization expense for the next five years to be as follows:

  

    Year Ending December 31,  
    2018     2019     2020     2021     2022
and thereafter
    Total  
Amortization expense   $ 1,882,563     $ 1,869,111     $ 1,869,111     $ 1,830,767     $ 15,001,558     $ 22,453,110  
                                                 

 

Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, changes in useful lives or other relevant factors or changes.