Jushi Holdings Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]


7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill


Goodwill, carrying amount, as of January 1, 2022	$	45,828
Additions from acquisitions, including reclassification of $254	35,480
Impairment	(39,643)
Measurement period adjustment	(3,426)
Goodwill, carrying amount, as of December 31, 2022	38,239
Impairment	(7,329)
Goodwill, carrying amount, as of December 31, 2023	$	30,910

Other Intangible Assets

The components of other intangible assets are as follows:


	As of December 31,				Estimated Useful Life
	2023		2022
Licenses	$	82,401	$	82,401	Indefinite
Intellectual Property	9,580		9,580		10 years
Tradenames	12,209		12,800		5 - 10 years
Patient/Customer database	3,195		3,195		5 - 10 years
Non-compete	155		155		3 years
Website development	61		61		3 years
Formulations	50		50		Indefinite
Total gross amount	107,651		108,242
Less: Accumulated Amortization	(11,684)		(8,160)
Other Intangible Assets, net	$	95,967	$	100,082

Amortization expense for the years ended December 31, 2023, 2022 and 2021 was $3,269, $3,123 and $1,977, respectively, and is included in operating expenses in the consolidated statements of operations and comprehensive income (loss). For the year ended December 31, 2023, there were no additions to intangible assets. For the year ended December 31, 2022, all additions to intangible assets were from acquisitions.

The estimated future annual amortization expense related to intangible assets as of December 31, 2023 are as follows:


2024	$	2,950
2025	2,919
2026	2,648
2027	1,844
2028	1,779
Thereafter	1,376
Total estimated future amortization expense	$	13,516

Impairment of Goodwill and Other intangible assets

2023 Impairments

During the year ended December 31, 2023, management determined that the Company’s goodwill in Nevada was impaired due to the Company’s lower than expected operating results, driven in part by the overall decline in the retail market within the state. The Company utilized a combination of the income approach (discounted cash flow method) and market approach (guideline company method) for its impairment test for each state, resulting in a goodwill impairment charge of $7,329. The key inputs and assumptions used in the fair valuation of Nevada include: (i) a five-year cash flow forecast, which is based on the Company’s actual operating results and business plans; (ii) a perpetual growth rate; (iii) an estimated discount rate and (iv) a weighted average cost of capital. The goodwill impairment is recorded within operating expenses in the consolidated statements of operations and comprehensive income (loss).

Additionally, for the year ended December 31, 2023, management determined that certain intangible assets associated with the NuLeaf acquisition were impaired due to the Company rebranding certain NuLeaf skus sold to retail and wholesale customers, and as a result, recorded an impairment charge of $845. The intangible asset impairment is recorded within operating expenses in the consolidated statements of operations and comprehensive income (loss).

2022 Impairments

During the year ended December 31, 2022, management determined that the Company’s goodwill and certain intangible assets in California, Massachusetts, Nevada, Ohio, and Pennsylvania were impaired due to the Company’s lower than expected operating results, driven in part by significant price compression and the overall economy in the respective state. The Company utilized a combination of the income approach (discounted cash flow method) and market approach (a combination of the guideline transactions method and guideline company method) for its impairment test for each state, resulting in goodwill and intangible impairment charges reflected below. The goodwill and intangible asset impairment is recorded within operating expenses in the consolidated statements of operations and comprehensive income (loss).


	Year Ended December 31, 2022				Key Assumptions
State	Goodwill Impairment		Intangible Asset Impairment		Perpetual Growth Rate	Discount Rate	Weighted Average Cost of Capital	Cash Flow Forecast
California	$	2,432	$	10,142	2%	22.5%	21.5%	5 years
Massachusetts	12,231		37,954		2%	21.0%	20.0%	5 years
Nevada	24,980		22,150		2%	21.0%	20.0%	5 years
Ohio	—		5,317		2%	24.5%	23.5%	5 years
Pennsylvania	—		35,952		2%	22.0%	21.0%	5 years
	$	39,643	$	111,515

2021 Impairments

Nevada

During the year ended December 31, 2021, management determined that the lower than expected operating results of the Company’s Nevada operations was an indicator of impairment. The Company utilized the discounted cash flow method for its impairment test, and as a result, recorded a goodwill impairment charge of $1,783. The key inputs and assumptions used in the fair valuation of Nevada include: (i) a five-year cash flow forecast, which is based on the Company’s actual operating results and business plans; (ii) a perpetual growth rate of 3%; and (iii) an estimated discount rate of 16.5%. The goodwill impairment is recorded within operating expenses in the consolidated statements of operations and comprehensive income (loss).