Quarterly report pursuant to Section 13 or 15(d)

Intangible assets, royalties and goodwill

v3.20.2
Intangible assets, royalties and goodwill
9 Months Ended
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible assets, royalties and goodwill Intangible assets, royalties, and goodwill
Intangible assets and royalties
The Company’s intangible assets as of September 30, 2020 and December 31, 2019 consist of customer relationships and trade name acquired in the Halo Acquisition. The customer relationships and trade name are amortized over their estimated useful lives of 7 and 15 years respectively, using the straight-line method.
In May 2019, the Company acquired a licensing agreement with Authentic Brands and Elvis Presley Enterprises (“ABG”) whereby Better Choice Company was to sell newly developed hemp-derived CBD products that were to be marketed under the Elvis Presley Houndog name. The license agreement required an upfront equity payment of $1.0 million worth of common stock and the license was recorded at its amortized cost which approximated fair value. The Company did not plan to use the license in the future and therefore terminated the agreement on January 13, 2020. The Company recognized an impairment charge for the net book value of the licensing agreement as of and for the year ended December 31, 2019.
As part of the termination, the Company: (1) paid ABG $0.1 million in cash upon the signing of the termination agreement on January 13, 2020, (2) issued ABG 72,720 shares of the Company’s common stock on January 13, 2020, (3) agreed to pay ABG $0.1 million in cash in four equal installments each month from July 31, 2020 through October 31, 2020, (4) issued ABG $0.6 million aggregate principal amount of Subordinated Promissory Notes (the “ABG Notes”) effective January 20, 2020, and (5) issued ABG a common stock purchase warrant (the “ABG Warrants”) equal to a fair value of $150,000 on January 20, 2020. The terms of the ABG Notes match those of the Seller Notes, including convertible features exercisable any time after the date of issuance, a 10% interest rate and maturity date of June 30, 2023. The ABG Warrants are exercisable for 24 months from the date of the consummation of an IPO (as defined in the ABG Warrants) and carried an initial exercise price equal to the greater of (i) $5.00 per share or (ii) the price at which the common stock was sold in the IPO. The fair values of the ABG Notes and ABG Warrants on their issuance dates were $0.6 million and less than $0.1 million, respectively. On June 24, 2020, the exercise price of the ABG Warrants was amended in connection with the issuance of the June 2020 Notes (defined below) to lower the maximum exercise price from $5.00 to $4.25 per share.
The total cost of the contract termination noted above is measured at its fair value of $1.1 million and is included in general and administrative expense.
The Company’s intangible assets are as follows:

Dollars in thousands Estimated Useful Life September 30, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Customer relationships 7 $ 7,500  $ (848) $ 6,652 
Trade name 15 7,190  (346) 6,844 
Total intangible assets $ 14,690  $ (1,194) $ 13,496 

Dollars in thousands Estimated Useful Life December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Customer relationships 7 $ 7,500  $ (35) $ 7,465 
Trade name 15 7,190  (14) 7,176 
Total intangible assets $ 14,690  $ (49) $ 14,641 
The Company did not have intangible assets or amortization expense during the three and nine months ended September 30, 2019.
The estimated future amortization of intangible assets over the weighted average remaining useful life of 10.3 is as follows:
Dollars in thousands
Remainder of 2020 $ 357 
2021 1,551 
2022 1,551 
2023 1,551 
2024 1,551 
Thereafter 6,935 
$ 13,496