INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS |
7. INTANGIBLE ASSETS
Intangible assets include $7,076,879 (December 31, 2024 - $7,209,118) for intellectual property (“Manna IP”) acquired under an asset purchase agreement with Manna Nutritional Group, LLC (“Manna”) dated September 10, 2021. The Manna IP encompasses patented technologies to naturally process and convert grains, pulses, and root vegetables, into low-starch, low-sugar, high-protein, fiber-rich baking flour products, as well as a wide range of breakfast cereals, juices, natural sweeteners, and baking enhancers. The Company paid $1,475,000 in cash and issued prefunded warrants valued at $12,106,677 (the “Purchase Price”). Subject to a 9.99% blocker and SEC Rule 144 restrictions, the prefunded warrants vested in tranches up until March 10, 2024, at which time all tranches were fully vested. When vested the tranches of prefunded warrants became convertible into an equal number of common shares.
The asset was available for use on January 3, 2023. The asset has a useful life of 20 years. The Company recorded $138,762 in amortization expense related to the Manna IP for the three months ended March 31, 2025 (March 31, 2024 - $164,295).
As at September 30, 2024, the Company determined that there was an indicator of impairment for the intangible assets due to the significant decline in the Company’s stock price as at September 30, 2024. As a result, the Company performed an interim intangible impairment test and determined that the fair value of the intangible asset was $7,832,200 based on an income approach using the Company’s estimated discounted royalty payments. For valuing the Manna IP, the Company made estimates regarding future revenues of a market participant, royalty rate, tax rate, and discount rate. The resulting fair value estimate was considered a level 3 fair value estimate given the significant uncertainty involved in estimating future revenues and other inputs. For purposes of estimating the fair value of the patent, the Company assumed that a market participant would capture between 0.008% and 0.115% of the estimated $52.9 billion flour market between the valuation date and the expiration of the patent in 2038, with an average of 0.073%.The Company recorded an asset impairment loss of $4,137,271 in operating expenses. There were no indicators for impairment as of March 31, 2025.
The Company acquired intangible assets from RCS as part of the business combination (Note 3). The following intangible assets were acquired from RCS:
The Company recorded $15,274 (March 31, 2024 - $ ) in amortization expense, and a foreign exchange loss of $477 (March 31, 2024 - $) related to the RCS assets for the three months ended March 31, 2025.
The Company acquired an intangible asset from the acquisition of Redwater, as part of the asset acquisition (note 3). The Power Purchase Agreement between the Company and Rivogenix, allows the Company to obtain natural gas for its Natural Gas Power Plant. The Power Purchase Agreement was determined to be a favourable contract asset, and as such was recorded as an intangible asset at the present value of the contractual benefit. The period of the contract has been determined to be 3 years. As at March 31, 2025, 2.75 years remain on the contract. The fair value of the Power Purchase Agreement Contract as of March 31, 2025 is $625,736 (December 31, 2024 - $625,736). The Company recognized $61,612 in amortization expense (reflected in cost of sales) during the three months ended March 31, 2025 (March 31, 2024 - $) in relation to the Power Purchase Agreement.
The estimated annual amortization expense for the next five years are as follows:
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