a.k.a. Brands Holding Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Acquisitions (Tables)

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	$	6
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