On April 1, 2022, the Mergers were completed via all-stock merger transactions. Pursuant to the Merger Agreements, DSG issued an aggregate of 10.3 million shares of its common stock to the former owners of TestEquity and Gexpro Services. An additional 1.7 million shares of DSG common stock remain potentially issuable upon meeting the conditions of certain earnout provisions. Refer to Note 1 - Nature of Operations and Basis of Presentation for further information regarding the Mergers.

The business combination of Lawson, TestEquity and Gexpro Services brings together three value added complementary distribution businesses. Lawson is a distributor of products and services to the industrial, commercial, institutional, and governmental MRO marketplace. TestEquity is a distributor of parts and services to the industrial, commercial, institutional and governmental electronics manufacturing and test and measurement market. Gexpro Services is a provider of supply chain solutions, specializing in developing and implementing VMI and kitting programs to high-specification manufacturing customers. Gexpro Services provides critical products and services to customers throughout the lifecycle of highly technical Original Equipment Manufacturer ("OEM") products. Refer to Note 1- Nature of Operations and Basis of Presentation for more information on the nature of operations for these businesses.

The Mergers were accounted for as a reverse merger under the acquisition method of accounting for business combinations, whereby TestEquity and Gexpro Services were identified as the accounting acquirers and were treated as a combined entity for financial reporting purposes, and DSG was identified as the accounting acquiree. Accordingly, under the acquisition method of accounting, the purchase price was allocated to DSG's tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated acquisition-date fair values. These estimates were determined through established and generally accepted valuation techniques.



(in thousands, except share data)	April 1, 2022
Number of DSG common shares exchanged	9,120,167
DSG closing price per common stock on March 31, 2022	$	38.54
Fair value of shares exchanged	$	351,491

Other consideration(1)	1,910

Total consideration exchanged	$	353,401

Due to the publicly traded nature of shares of DSG common stock, the equity issuance of shares of DSG common stock based on this value was considered to be a more reliable measurement of the fair market value of the transaction compared to the equity interests of the accounting acquirer.

The allocation of consideration exchanged to the tangible and identifiable intangible assets acquired and liabilities assumed was based on estimated fair values as of the Merger Date. The fair values were determined based upon a preliminary valuation and the estimates and assumptions used in such valuation are pending completion and subject to change. Certain estimated

values for the acquisition, including the valuation of intangibles and income taxes (including deferred taxes and associated valuation allowances), are not yet finalized, and the preliminary purchase price allocations are subject to change as the Company completes its analysis of the fair value at the date of acquisition. Goodwill generated from the acquisition is not deductible for tax purposes. The Company will continue to obtain information necessary to finalize the fair values, which may differ materially from these preliminary estimates. The final valuation will be completed within the one-year measurement period ending March 31, 2023, and any measurement period adjustments will be applied in the reporting period in which the adjustments are determined.


(in thousands)	Total
Current assets	$	148,308
Property, plant and equipment	57,053
Right of use assets	17,571
Other intangible assets	119,060
Deferred tax liability, net of deferred tax asset	(26,237)
Other assets	18,373
Current liabilities	(71,097)
Long-term obligations	(25,722)
Lease and financing obligations	(29,474)
Derivative earnout liability	(43,900)

Goodwill	189,466
Total consideration exchanged	$	353,401

The Company incurred transaction costs related to the Mergers of $5.8 million and $7.2 million for the three and six months ended June 30, 2022, respectively and $0.4 million and $0.5 million for the three and six months ended June 30, 2021, respectively.

The following table presents estimated unaudited pro forma consolidated financial information for DSG as if the Mergers and other acquisitions disclosed below occurred on January 1, 2021 for the 2022 acquisitions and January 1, 2020 for the 2021 acquisitions. The unaudited pro forma information reflects adjustments including amortization on acquired intangible assets, interest expense, and the related tax effects. This information is presented for informational purposes only and is not necessarily indicative of future results or the results that would have occurred had the Mergers been completed on the date indicated.

TestEquity and Gexpro Services acquired other businesses during the first six months of 2022 and year ended December 31, 2021. The consideration exchanged for the acquired businesses included various combinations of cash, sellers notes, and forms of share based payments. The acquisitions were accounted for under ASC 805, the acquisition method of accounting. For each acquisition, the allocation of consideration exchanged to the assets acquired and liabilities assumed was based on

estimated acquisition-date fair values. Certain estimated values for the acquisitions, including the valuation of intangibles, contingent consideration, and income taxes (including deferred taxes and associated valuation allowances), are not yet finalized, and the preliminary purchase price allocations are subject to change as the Company completes its analysis of the fair value at the date of acquisition. The final valuations will be completed within the one-year measurement periods following the respective acquisition dates, and any adjustments will be recorded in the period in which the adjustments are determined.

During the first six months of 2022, TestEquity acquired Interworld Highway, LLC and National Test Equipment, and Gexpro Services acquired Resolux ApS ("Resolux") and Frontier Technologies Brewton, LLC and Frontier Engineering and Manufacturing Technologies, Inc. ("Frontier"). The purchase consideration for each business acquired and the preliminary allocation of the consideration exchanged to the estimated fair values of assets acquired and liabilities assumed is summarized below:


(in thousands)	Interworld Highway LLC		Resolux		Frontier		National Test Equipment
Acquisition date	April 29, 2022		January 3, 2022		March 31, 2022		June 1, 2022		Total
Current assets	$	15,018	$	8,551	$	3,299	$	2,186	$	29,054
Property, plant and equipment	313		459		1,065		642		2,479
Right of use assets	—		1,125		9,218		—		10,343
Other intangible assets:
Customer relationships	6,369		11,400		10,000		1,830		29,599
Trade names	4,600		6,100		3,300		—		14,000

Other assets	10		1,745		—		—		1,755
Accounts payable	(8,856)		(3,058)		(1,359)		(2,268)		(15,541)

Accrued expenses and other liabilities	—		(939)		(1,067)		(1,169)		(3,175)
Lease obligation	—		(1,125)		(9,218)		—		(10,343)



Goodwill	37,236		6,498		10,439		5,971		60,144
Total purchase consideration exchanged, net of cash acquired	$	54,690	$	30,756	$	25,677	$	7,192	$	118,315

The consideration for the Frontier acquisition includes a potential earn-out payment up to $3.0 million based upon the achievement of certain milestones and relative thresholds during the earn out measurement period which ends on December 31, 2024. The fair value of the contingent consideration arrangement was classified within Level 3 and was determined using a probability-based scenario analysis approach. As of March 31, 2022 and June 30, 2022, the fair value of the earn-out was $0.9 million and $0.9 million, respectively, with amounts recorded in Accrued expenses and other current liabilities and Other liabilities in the Unaudited Condensed Consolidated Balance Sheets.

During the year ended December 31, 2021, TestEquity acquired MCS Test Group Limited ("MCS"), and Gexpro Services acquired Omni Fasteners Inc. ("Omni"), National Engineered Fasteners ("NEF") and State Industrial Supply ("SIS"). The accounting for the Omni and MCS acquisitions was complete as of June 30, 2022. Certain estimated values for the NEF and SIS acquisitions are preliminary, including goodwill, contingent consideration, and income taxes (including deferred taxes and associated valuation allowances). These values are subject to change as the Company completes its analysis of the fair value at the date of acquisition. The final valuations will be completed within the one-year measurement periods following the respective acquisition dates, and any adjustments will be recorded in the period in which the adjustments are determined.

The purchase consideration for each business acquired during 2021 and the preliminary allocation of the consideration exchanged to the estimated fair values of assets acquired and liabilities assumed is summarized below:


(in thousands)	Omni		NEF(1)		SIS		MCS
Acquisition date	June 8, 2021		November 1, 2021		December 31, 2021		July 31, 2021		Total
Current assets	$	2,259	$	17,882	$	3,541	$	6,521	$	30,203
Property, plant and equipment	600		589		125		—		1,314
Right of use assets	—		1,774		799		—		2,573
Other intangible assets:
Customer relationships	2,530		5,007		4,800		2,621		14,958
Trade names	200		2,503		1,500		41		4,244
Other intangible assets	9		—		380		—		389
Other assets	—		1,236		10		—		1,246
Accounts payable	(50)		(3,506)		(1,464)		(2,523)		(7,543)

Accrued expenses and other liabilities	—		(3,332)		—		(685)		(4,017)
Lease obligation	—		(1,774)		(799)				(2,573)



Goodwill	953		—		3,010		7,245		11,208
Gain on bargain purchase	—		(1,363)		—		—		(1,363)
Total purchase consideration exchanged, net of cash acquired	$	6,501	$	19,016	$	11,902	$	13,220	$	50,639

A gain on bargain purchase related to the acquisition of NEF was recognized within Other income (expense), net in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income in the fourth quarter of 2021. The gain of $1.4 million was calculated as the excess of net assets recognized over the consideration transferred. The bargain purchase was primarily attributable to owners that were highly motivated to sell.

The Company incurred transaction costs related to the other acquisitions of $0.3 million and $1.3 million for the three and six months ended June 30, 2022, respectively and $0.8 million and $1.0 million for the three and six months ended June 30, 2021, respectively.

Other Acquisitions Pro Forma Information - The pro forma information for other acquisitions was included in the estimated unaudited pro forma consolidated financial information for DSG, which is presented above under Pro Forma Information.

The following table presents actual results attributable to our business combinations that were included in the unaudited condensed consolidated financial statements for the second quarter and first six months of 2022 and 2021. The results of DSG's legacy Lawson business are included only subsequent to the April 1, 2022 Merger Date, and the results for other acquisitions are only included subsequent to their respective acquisition dates provided above.


(in thousands)	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
	Lawson		Other Acquisitions		Total		Lawson		Other Acquisitions		Total
Revenue	$	123,670	$	52,739	$	176,409	$	—	$	468	$	468
Net Income	$	3,084	$	5,316	$	8,400	$	—	$	(335)	$	(335)

	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
	Lawson		Other Acquisitions		Total		Lawson		Other Acquisitions		Total
Revenue	$	123,670	$	75,522	$	199,192	$	—	$	468	$	468
Net Income	$	3,084	$	8,285	$	11,369	$	—	$	(335)	$	(335)