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Note 7 - Intangible Assets
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Intangible Assets Disclosure [Text Block]

7. Intangible Assets

 

Intangible assets are comprised of the following:

 

  

September 30, 2024

  

December 31, 2023

 
  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Amount

  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Amount

 

Trade names (10 years)

 $890,827  $(187,074) $703,753  $890,827  $(106,899) $783,928 

Recipes (10 years)

  330,000   (112,750)  217,250   330,000   (88,000)  242,000 

Social media agreements (3 years)

  80,000   (80,000)     80,000   (71,111)  8,889 

Software (3 years)

  131,708   (111,534)  20,174   131,708   (81,294)  50,414 

Definite-lived intangible assets

  1,432,535   (491,358)  941,177   1,432,535   (347,304)  1,085,231 

Licensing agreements (indefinite)

  132,100      132,100   132,100      132,100 

Total intangible assets

 $1,564,635  $(491,358) $1,073,277  $1,564,635  $(347,304) $1,217,331 

 

The weighted-average remaining useful life of all the Company’s intangible assets is 6.4 years.

 

For the three and nine months ended September 30, 2024, amortization expense was $45,055 and $144,054, respectively. For the three and nine months ended September 30, 2023, amortization expense was $51,721 and $155,165, respectively. 

 

Definite-lived intangible assets

 

Definite-lived 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 the Company uses the asset, or an unexpected change in financial performance. When evaluating definite-lived intangible assets for impairment, the Company compares 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 its' long-lived assets will be recoverable.

 

Based on the analysis of the qualitative factors above, management determined that there were no triggering events or impairment charges for the Company's definite-lived intangible assets in the three and nine months ended September 30, 2024 and 2023

 

Intangible assets are amortized using the straight-line method over estimated useful lives ranging from three to ten years. The estimated amortization expense for each of the next five years and thereafter is as follows:

 

2024 (excluding the nine months ended September 30, 2024)

 $45,055 

2025

  149,994 

2026

  139,899 

2027

  139,899 

2028

  139,899 

Thereafter

  326,431 
  $941,177 

 

Indefinite-lived intangible assets

 

On  August 3, 2015, the Company entered into a license agreement with the Company’s co-founder Laird Hamilton (the “LH License”). The LH License stated Mr. Hamilton’s contribution to the Company was in the form of intellectual property, granting the Company the right to use Mr. Hamilton’s name and likeness. This contribution, which was reported on the balance sheets as of  September 30, 2024 and December 31, 2023, was valued at $132,000 and satisfied with the issuance of 660,000 shares of common stock. The Company has determined that the intangible asset associated with the LH License has an indefinite life, as there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company.

 

On  May 2, 2018, the Company entered into a license agreement with Gabrielle Reece, who is married to Mr. Hamilton (the “GR License”). Pursuant to the GR License, Ms. Reece granted the Company rights to her name, signature, voice, picture, image, likeness, and biographical information. This contribution, which is reported on the consolidated balance sheets as of  September 30, 2024 and December 31, 2023, was valued at $100 based on the consideration exchanged. The Company has determined that the intangible asset associated with the GR License has an indefinite life, as there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company.

 

On  November 19, 2018, the Company executed a License and Preservation Agreement (the "2018 License") with Mr. Hamilton and Ms. Reece which superseded the LH License and GR License. The agreement added specific terms related to non-competition and allowable usage of the property under the license. No additional monetary consideration was exchanged in connection with the agreement and the life of the agreement was set at 100 years.

 

On  May 26, 2020, the Company executed a License and Preservation Agreement with Mr. Hamilton, and Ms. Reece (the “2020 License”), which superseded the 2018 License. Among other modifications, the agreement (i) modified certain approval rights of Mr. Hamilton and Ms. Reece for use of their respective images, signatures, voices, and names (other than those owned by the Company), rights of publicity and common law and statutory rights to the foregoing in the Company’s products, (ii) modified certain assignment, change of control and indemnification provisions, and (iii) granted the Company the right to extend the term of the agreement for additional ten-year terms upon the expiration of the initial one-hundred year term. No additional monetary consideration was exchanged in connection with the agreement.