Annual report pursuant to Section 13 and 15(d)

Acquisitions (Tables)

v3.22.0.1
Acquisitions (Tables)
12 Months Ended
Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract]  
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed
The fair values of assets acquired, liabilities assumed and noncontrolling interest as of the date of the acquisition, are as follows:
Trade receivables
$
Inventory
630 
Prepaid expenses and other current assets
78 
Property and equipment, net
93 
Operating lease right-of-use assets
430 
Intangible assets
7,695 
Trade and other payables
(1,218)
Deferred tax liability
(2,272)
Current tax liabilities
(407)
Operating lease liabilities
(430)
Total net assets acquired
4,605 
Fair value of noncontrolling interest
(8,314)
Goodwill
24,214 
Total purchase price, net of cash acquired of $2,109
$ 20,505 
The following table sets forth the allocation of the total consideration to the identifiable tangible and intangible assets acquired and liabilities assumed, as of the date of the acquisition, with the excess recorded to goodwill:
Purchase consideration:
Total purchase price, net of cash acquired of $8,831
$ 227,053 
Fair value of noncontrolling interest
142,717 
Total consideration
$ 369,770 
Identifiable net assets acquired:
Account receivable, net
$ 625 
Inventory (1)
62,937 
Prepaid expenses and other current assets
4,800 
Property and equipment, net
8,048 
Intangible assets, net (2)
73,209 
Operating lease right-of-use assets
24,299 
Accounts payable
(13,449)
Deferred revenue
(141)
Income taxes payable
(1,778)
Other current liabilities
(2,533)
Operating lease liabilities
(24,299)
Deferred income taxes, net
(25,439)
Accrued liabilities, non-current
(1,058)
Net assets acquired
105,221 
Goodwill
$ 264,549 
The purchase price allocation includes significant judgments, assumptions and estimates to determine the fair value of assets acquired and liabilities assumed. The valuations involving the most significant assumptions, estimates and judgment are:
(1)Inventory was adjusted by $15.1 million to step-up inventory cost to estimated fair value. The fair value of the inventory was determined utilizing the net realizable value method, which was based on the expected selling price of the inventory to customers adjusted for related disposal costs and a profit allowance for the post-acquisition selling effort.
(2)The fair value of the acquired intangible assets was determined with the assistance of a valuation specialist and include:
Estimated Fair Value
Annual Amortization Expense
Estimated Useful
Life in Years
Brand names
$ 68,354  $ 6,835  10 years
Customer relationships
4,855  1,214  4 years
Total $ 73,209 
The estimated fair values of assets acquired and liabilities assumed as of the date of the acquisition, are as follows:
Accounts receivable, net
$ 68 
Inventory (1)
7,321 
Prepaid expenses and other current assets
2,178 
Other assets
15 
Intangible assets (2)
14,300 
Accounts payable
(504)
Deferred income
(164)
Accrued liabilities
(1,794)
Assumed loan
(1,312)
Sales and use tax liability
(1,100)
Deferred income taxes, net
(3,159)
Total net assets acquired
15,849 
Goodwill
29,650 
Total purchase price, net of cash acquired of $605
$ 45,499 
The cash purchase consideration is subject to working capital adjustments that will be concluded before the one-year anniversary of the close of the transaction. The preliminary purchase price allocation includes significant judgments, assumptions and estimates to determine the fair value of assets acquired and liabilities assumed. The valuations involving the most significant assumptions, estimates and judgment are:
(1)Inventory was adjusted by $1.9 million to step-up inventory cost to estimated fair value. The fair value of the inventory was determined utilizing the net realizable value method, which was based on the expected selling price of the inventory to customers adjusted for related disposal costs and a profit allowance for the post-acquisition selling effort.
(2)The fair value of the acquired intangible assets was determined with the assistance of a valuation specialist and include:

Fair Value at Acquisition Date
Amortization Period
Brand $ 11,800  10 years
Customer relationships 2,500  3 years
Total intangible assets $ 14,300 
Schedule of Acquired Finite-Lived Intangible Assets The following table summarizes the identifiable intangible assets acquired as of the date of the acquisition:

Fair Value at Acquisition Date
Amortization Period
Brand $ 5,112  10 years
Customer relationships 2,583  4 years
Total intangible assets $ 7,695 
The fair value of the acquired intangible assets was determined with the assistance of a valuation specialist and include:
Estimated Fair Value
Annual Amortization Expense
Estimated Useful
Life in Years
Brand names
$ 68,354  $ 6,835  10 years
Customer relationships
4,855  1,214  4 years
Total $ 73,209 
The fair value of the acquired intangible assets was determined with the assistance of a valuation specialist and include:

Fair Value at Acquisition Date
Amortization Period
Brand $ 11,800  10 years
Customer relationships 2,500  3 years
Total intangible assets $ 14,300 
The gross amounts and accumulated amortization of acquired identifiable intangible assets with finite useful lives as of December 31, 2021 and 2020, included in intangible assets, net in the accompanying consolidated balance sheets, are as follows:
December 31,
Useful life
Weighted
Average
Amortization
Period 2021
2021
Weighted
Average
Amortization
Period 2020
2020
Customer relationships
4 years 2.5 years $ 24,516  1.8 years $ 17,100 
Brands
10 years 8.9 years 100,315  7.8 years 26,680 
Website design and software system
3 years 2.2 years 1,883  2.4 years 903 
Trademarks
5 years 3.3 years 114  4.5 years 103 
Total intangible assets
126,828  44,786 
Less accumulated amortization
(28,541) (15,684)
Total intangible assets, net
$ 98,287  $ 29,102 
Condensed Income Statement The following amounts are included in the accompanying consolidated statement of income for the year ended December 31, 2021:
Year Ended December 31, 2021
Net sales
$ 196,471 
Net loss
$ (5,899)
Business Acquisition, Pro Forma Information
The unaudited pro forma financial information below is presented to illustrate the estimated effects of the acquisition of Culture Kings and the associated financing as if they had occurred on January 1, 2020:
Year Ended December 31,
2021 2020
Net sales
$ 613,390  $ 385,048 
Net income attributable to a.k.a. Brands Holding Corp.
$ 16,781  $ 9,238 
Net income per share, basic and diluted:
$ 0.17  $ 0.11