Quarterly report pursuant to Section 13 or 15(d)

GOODWILL AND INTANGIBLE ASSETS

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GOODWILL AND INTANGIBLE ASSETS
9 Months Ended
Sep. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE ASSETS GOODWILL AND INTANGIBLE ASSETS
 
The Company performs its goodwill impairment testing annually during the fourth quarter, or more frequently if events or if circumstances were to occur that would more likely than not reduce the fair value of our reporting unit below its carrying amount. The Company would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill. The adjusted carrying amount of goodwill shall be its new accounting basis.

During the second quarter of 2022, the Company’s market capitalization fell below total net assets. In addition, financial performance continued to weaken during the quarter, which is contrary to prior experience. Management reassessed business performance expectations, following persistent adverse developments in equity markets, deterioration in the environment in which we operate, inflation, lower than expected sales, and an increase in operating expenses. These indicators, in the aggregate, required impairment testing for finite-lived intangible assets at the asset group level and goodwill at the reporting unit level.

Under ASC 360, we performed a cash recoverability test on the following intangible assets: customer relationships, trade name, and non-compete. The carrying amounts of any assets that are not within the scope of ASC 360-10, other than goodwill, were adjusted for impairment, as necessary, prior to testing long-lived assets and goodwill. The Company recognized impairment losses as disclosed in the table below.

For goodwill impairment testing purposes, the Company determined four reporting units, three of which were subject to a quantitative assessment. We determined fair value using the income approach, where estimated future returns are discounted to present value at an appropriate rate of return. The Company completed its interim goodwill impairment test as of June 30, 2022 and recognized impairment losses as disclosed in the table below.

The changes in goodwill are as follows:
 
  September 30, 2022 December 31,
2021
Balance, beginning of period $ 125,401  $ 62,951 
Goodwill additions and measurement period adjustments 7,099  62,450 
Impairment (116,657) — 
Balance, end of period $ 15,843  $ 125,401 
 
The goodwill balance and impairment by segment are as follows:

Retail E-commerce Distribution Total
Gross carrying value December 31, 2020 $ 55,180  $ 2,911  $ 4,860  $ 62,951 
Acquisitions & measurement period adjustments 47,583  8,748  6,119  62,450 
Gross carrying value December 31, 2021 102,763  11,659  10,979  125,401 
Acquisitions & measurement period adjustments 331  (341) 7,109  7,099 
Gross carrying value, September 30, 2022 $ 103,094  $ 11,318  $ 18,088  $ 132,500 
Accumulated impairment losses December 31, 2020 $ —  $ —  $ —  $ — 
Impairment —  —  —  — 
Accumulated impairment losses December 31, 2021 —  —  —  — 
Impairment (103,094) (9,848) (3,715) (116,657)
Accumulated impairment losses September 30, 2022 $ (103,094) $ (9,848) $ (3,715) $ (116,657)
Net carrying value at December 31, 2021 $ 102,763  $ 11,659  $ 10,979  $ 125,401 
Net carrying value at September 30, 2022 $ —  $ 1,470  $ 14,373  $ 15,843 
A summary of intangible assets is as follows:
Weighted-Average
Amortization Period
of Intangible Assets
as of September 30, 2022
(in years)
Trade names 3.43
Patents 3.34
Customer relationships 4.75
Non-competes 2.11
Intellectual property 3.42
Total 3.64

Intangible assets consist of the following:
 
  September 30, 2022
  Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Trade names $ 28,774  $ (9,254) $ 19,520 
Patents 100  (52) 48 
Customer relationships 17,102  (5,909) 11,193 
Non-competes 932  (493) 439 
Intellectual property 2,065  (654) 1,411 
Total $ 48,973  $ (16,362) $ 32,611 

  December 31, 2021
  Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Trade names $ 28,300  $ (4,948) $ 23,352 
Patents 100  (42) 58 
Customer relationships 25,175  (3,055) 22,120 
Non-competes 1,384  (233) 1,151 
Intellectual property 2,065  (344) 1,721 
Total $ 57,024  $ (8,622) $ 48,402 
Intangibles and impairment by segment are as follows:

Retail E-commerce Distribution Total
Gross carrying value December 31, 2020 17,635  —  3,481  21,116 
Acquisitions & measurement period adjustments 20,190  2,501  13,217  35,908 
Gross carrying value December 31, 2021 37,825  2,501  16,698  57,024 
Acquisitions & measurement period adjustments (58) —  3,181  3,123 
Gross carrying value, September 30, 2022 37,767  2,501  19,879  60,147 
Accumulated amortization December 31, 2020 (540) —  (27) (567)
Amortization (5,745) (354) (1,956) (8,055)
Accumulated amortization December 31, 2021 (6,285) (354) (1,983) (8,622)
Amortization (4,720) (348) (2,672) (7,740)
Accumulated amortization September 30, 2022 (11,005) (702) (4,655) (16,362)
Accumulated impairment losses December 31, 2020 —  —  —  — 
Impairments —  —  —  — 
Accumulated impairment losses December 31, 2021 —  —  —  — 
Impairments (11,079) (95) —  (11,174)
Accumulated impairment losses September 30, 2022 (11,079) (95) —  (11,174)
Net carrying value at December 31, 2021 31,540  2,147  14,715  48,402 
Net carrying value at September 30, 2022 15,683  1,704  15,224  32,611 

Amortization expense for the three and nine months ended September 30, 2022 was $2.2 million and $7.7 million. Amortization expense for the three and nine months ended September 30, 2021 was $2.6 million and $6.1 million.
Future amortization expense is as follows:  
2022, remainder $ 2,196 
2023 8,785 
2024 8,668 
2025 8,295 
2026 3,532 
Thereafter 1,135 
Total $ 32,611