Intangible Assets And Goodwill

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

4.	INTANGIBLE ASSETS AND GOODWILL

Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization of definite life intangibles is provided on a straight-line basis over their estimated useful lives. The estimated useful lives, residual values, and amortization methods are reviewed at each year end, and any changes in estimates are accounted for prospectively.

At September 30, 2020 intangible assets consisted of the following:


	Licenses and Permits			Tradenames		Customer Relationships		Non-Competition Agreements		Total
Cost
As at January 1, 2020	$	336,954,213		$	97,455,590	$	25,258,000	$	2,585,480	$	462,253,283
Adjustments to Purchase Price Allocation		(145,000	)		1,840,009		—		—		1,695,009

As at September 30, 2020	$	336,809,213		$	99,295,599	$	25,258,000	$	2,585,480	$	463,948,292

Accumulated Amortization
As at January 1, 2020	$	18,477,500		$	4,121,800	$	3,932,416	$	474,669	$	27,006,385
Amortization		17,701,556			6,412,282		2,777,802		394,750		27,286,390

As at September 30, 2020	$	36,179,056		$	10,534,082	$	6,710,218	$	869,419	$	54,292,775

Net book value
As at January 1, 2020	$	318,476,713		$	93,333,790	$	21,325,584	$	2,110,811	$	435,246,898
As at September 30, 2020	$	300,630,157		$	88,761,517	$	18,547,782	$	1,716,061	$	409,655,517

At December 31, 2019 intangible assets consisted of the following:


	Licenses and Permits		Tradenames		Customer Relationships		Non-Competition Agreements		Total
Cost
As at January 1, 2019	$	89,705,213	$	360,000	$	820,000	$	20,480	$	90,905,693
Additions from acquisitions		247,249,000		97,095,590		24,438,000		2,565,000		371,347,590

As at December 31, 2019	$	336,954,213	$	97,455,590	$	25,258,000	$	2,585,480	$	462,253,283

Accumulated Amortization
As at January 1, 2019	$	2,322,715	$	—	$	204,500	$	12,800	$	2,540,015
Amortization		16,154,785		4,121,800		3,727,916		461,869		24,466,370

As at December 31, 2019	$	18,477,500	$	4,121,800	$	3,932,416	$	474,669	$	27,006,385

Net book value
As at January 1, 2019	$	87,382,498	$	360,000	$	615,500	$	7,680	$	88,365,678
As at December 31, 2019	$	318,476,713	$	93,333,790	$	21,325,584	$	2,110,811	$	435,246,898

The Company recorded amortization expense for the three and nine months ended September 30, 2020 of $9,531,290 and $27,286,390, respectively, and for the three and nine months ended September 30, 2019 of $5,419,212, and $12,415,696, respectively. During the second quarter of 2020, the Company recorded a measurement period adjustment in connection with its June 27, 2019 acquisition of MC Brands, LLC of $1,840,009 which increased intangible assets and share capital. The remainder of the adjustments to purchase price allocations relate to the finalization of several 2019 acquisitions.

In addition, the Company reviewed the estimated useful lives of its intangible assets as part of the Company’s plans to rebrand one of its retail stores. Based on that review, the Company determined that certain intangible assets associated with the Company’s retail tradenames have a useful life shorter than initially estimated.

Beginning July 1, 2020, the Company adjusted the useful life of its retail tradename associated with the acquisition of Essence from 15 years to 7 years. The change in useful life was made as a prospective adjustment and resulted in an increase in amortization expense of $1,266,880 for the remainder of 2020, $5,067,520 annually for years 2021 through 2024, and a net reduction in amortization expense of $21,536,960 thereafter.

The following table outlines the estimated annual amortization expense related to intangible assets as of September 30, 2020 and illustrates the effect of the change in useful life of the Essence tradename discussed above:


Year Ending December 31,	Estimated Amortization (Prior to Change in Useful Life)		Increase (Decrease) from Change in Useful Life			Estimated Amortization (After Change in Useful Life)
Remainder of 2020	$	8,426,261	$	1,266,880		$	9,693,141
2021		33,705,044		5,067,520			38,772,564
2022		33,274,305		5,067,520			38,341,825
2023		33,191,489		5,067,520			38,259,009
2024		32,610,156		5,067,520			37,677,676
Thereafter		268,448,262		(21,536,960	)		246,911,302

	$	409,655,517	$	—		$	409,655,517

Goodwill

At September 30, 2020, Goodwill consisted of the following:


	Retail		Consumer Packaged Goods			Total
As at January 1, 2020	$	119,873,759	$	255,211,232		$	375,084,991
Adjustments to Purchase Price Allocations		1,191,425		(3,194,700	)		(2,003,275	)

As at September 30, 2020	$	121,065,184	$	252,016,532		$	373,081,716

At December 31, 2019, Goodwill consisted of the following:


	Retail		Consumer Packaged Goods			Total
As at January 1, 2019	$	15,286,360	$	23,918,000		$	39,204,360
Acquisition of Advanced Grow Labs, LLC		16,756,250		44,572,349			61,328,599
Acquisition of Integral Associates, LLC		46,655,753		69,323,570			115,979,323
Other Acquisitions		32,936,590		120,963,598			153,900,188
Adjustments to Purchase Price Allocations		8,238,808		(3,566,285	)		4,672,523

As at December 31, 2019	$	119,873,759	$	255,211,232		$	375,084,991

During the nine months ended September 30, 2020, the Company recorded measurement period adjustments resulting in a net decrease in goodwill of $2,003,275 associated

with

various acquisitions. In regard to the Consumer Packaged Goods segment, the Company recorded measurement period adjustments associated with its acquisition of For Success Holdings Company and Advanced Grow Labs, LLC of $1,687,700 and $1,507,000, respectively, which represented a reduction in the value of goodwill and deferred tax liabilities. Regarding the Retail segment, the Company recorded measurement period adjustments associated with its acquisition of Fiorello Pharmaceuticals, Inc. of $1,000,000 which represented an increase in the value of goodwill and corresponding adjustment to current liabilities. The remainder of the adjustments to the Retail segment represent the finalization of purchase price allocations related to other 2019 acquisitions.