7. Intangible Assets

Intangible assets are summarized as follows:


		Gross
	Useful Lives	Carrying		Accumulated		Net Carrying
March 31, 2020	(Years)	Amount		Amortization		Amount
		(in thousands)
Finite-lived intangible assets:
Trademarks	5 - 15	$	95,613	$	(8,435)	$	87,178
Customer agreements	4		2,200		(2,199)		1
Patents	10		95		(66)		29
		$	97,908	$	(10,700)		87,208
Indefinite-lived intangible assets:
Trademarks							411,950
Intangible assets, net						$	499,158


		Gross
	Useful Lives	Carrying		Accumulated		Net Carrying
December 31, 2019	(Years)	Amount		Amortization		Amount
		(in thousands)
Finite-lived intangible assets:
Trademarks	5 - 15	$	12,491	$	(4,515)	$	7,976
Customer agreements	4		2,200		(2,198)		2
Patents	10		95		(64)		31
		$	14,786	$	(6,777)		8,009
Indefinite-lived intangible assets:
Trademarks							591,958
Intangible assets, net						$	599,967

Estimated future annual amortization expense for intangible assets in service as of March 31, 2020 is summarized as follows:


Years Ended December 31,	(in thousands)
Remainder of 2020	$	11,769
2021		15,690
2022		15,668
2023		15,243
2024		14,178
Thereafter		14,660
	$	87,208

Amortization expense from continuing operations was approximately $3.9 million and $0.5 million for the three months ended March 31, 2020 and 2019, respectively.

Finite-lived intangible assets represent trademarks, customer agreements and patents related to the Company’s brands. Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. The carrying value of finite-lived intangible assets and other long-lived assets is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Indefinite-lived intangible assets are not amortized, but instead are subject to impairment evaluation. As of March 31, 2020, the trademarks of Jessica Simpson, AND1, Joe’s, GAIAM, Caribbean Joe, and Ellen Tracy have been determined to have indefinite useful lives, and accordingly, consistent with ASC Topic 350, no amortization has been recorded in the Company’s unaudited condensed consolidated statements of operations. Instead, each of these intangible assets are tested for impairment annually and as needed on an individual basis as separate single units of accounting, with any related impairment charge recorded to the statement of operations at the time of determining such impairment. The annual evaluation of the Company’s indefinite-lived trademarks is performed as of October 1, the beginning of the Company’s fourth fiscal quarter. The Company determined that the Avia trademark should no longer be classified as an indefinite-lived intangible asset and was reclassified in the first quarter of 2020 as a finite-lived intangible asset and amortized on a straight-line basis over the remaining estimated useful life of the trademark of six years. The Company amortized $3.5 million related to this trademark during the three months ended March 31, 2020.

On October 24, 2019, a licensee for Avia exercised a purchase option in their existing license agreement to acquire ownership of the Avia trademark registered in China for $12.3 million, effective as of January 15, 2020. The $12.3 million is payable in installments over a period of three years as follows: $3.3 million on June 30, 2020, $5.0 million on June 30, 2021 and $4.0 million on June 30, 2022. In the event the licensee fails to pay the purchase price in full, the trademark reverts to the Company. The present value of the proceeds from the sale of $11.3 million are applied against the cost basis of the intangible asset on the Company’s condensed consolidated balance sheet as of March 31, 2020.

When conducting its impairment assessment of indefinite-lived intangible assets, the Company initially performs a qualitative evaluation of whether it is more likely than not that the asset is impaired. If it is determined by a qualitative evaluation that it is more likely than not that the asset is impaired, the Company then tests the asset for recoverability. The Company tests its indefinite-lived intangible assets for recovery in accordance with ASC‑820‑10‑55‑3D. When the income approach is used, fair value measurement reflects current market expectations about those future amounts. The income approach is based on the present value of future earnings expected to be generated by a business or asset. Income projections for a future period are discounted at a rate commensurate with the degree of risk associated with future proceeds. A residual or terminal value is also added to the present value of the income to quantify the value of the business beyond the projection period. As such, recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to its expected future discounted net cash flows. If the carrying amount of such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the recoverability of the assets. Assumptions used in our estimates are as follows: (i) discount rates; (ii) projected annual revenue growth rates; and (iii) projected long-term growth rates. Our estimates also factor in economic conditions and expectations of management which may change in the future based on period-specific facts and circumstances. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

During the three months ended March 31, 2020, the Company recorded non-cash impairment charges of $85.6 million consisting of $33.2 million related to the Jessica Simpson trademark, $29.8 million related to the Gaiam trademark, $12.0 million related to the Joe’s trademark and $10.6 million related to the Ellen Tracy trademark. The impairments arose due to reduced sales forecasts and higher discount rates for these brands driven by the financial impacts of COVID-19 and the current economic environment. Fair value for each trademark was determined based on the income approach using estimates of future discounted cash flows.

In June 2019, the Company completed the sale of MSLO. During the first quarter of 2019, the Company recorded non-cash impairment charges of $161.2 million for indefinite-lived intangible assets related to the Martha Stewart and Emeril Lagasse trademarks reflected in discontinued operations on the unaudited condensed consolidated statements of operations. The impairments arose during the sale process for the Martha Stewart and Emeril Lagasse brands (as discussed in Note 3) due to the difference in the fair value as indicated by the sales price as compared to the carrying values of the intangible assets included in the transaction. The sale of the Martha Stewart and Emeril Lagasse brands was approved by the Board of Directors during the second quarter of 2019, to allow the Company to achieve one of its top priorities in significantly reducing its debt.