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Acquisitions
 6 Months Ended
Jun. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
Acquisitions

2. Acquisitions

 

2022 Acquisitions

 

Athlon Holdings, Inc. – On April 1, 2022, the Company acquired 100% of the issued and outstanding capital stock of Athlon Holdings, Inc., a Tennessee corporation (“Athlon”), for a preliminary purchase price of $17,115, as adjusted for the estimated working capital adjustment as of the closing date of the transaction. The purchase price is pending finalization of a working capital adjustment and deferred taxes and could be subject to further revision if additional information related to the fair value of the identifiable net assets become available. As a part of the closing consideration, the Company also acquired cash of $1,840, that was further adjusted post-closing for the working capital adjustment. The preliminary purchase price of $17,115, as discounted, is comprised of (i) a cash portion of $14,181, with $11,840 paid at closing and $2,341 estimated to be paid post-closing (as further described below) and (ii) the issuance of 314,103 shares of the Company’s common stock with a fair market value of $3,141. The number of shares of the Company’s common stock issued was determined based on a $3,000 value using the common stock trading price for the 10 trading days preceding the April 1, 2022 closing date. Certain of Athlon’s key employees entered into either advisory agreements or employment agreements with the Company. Athlon operates in the United States.

 

The amount estimated to be paid post-closing of $2,341 will be paid as follows: (i) $2,096 will be paid on the nine-month anniversary of the closing date, or January 1, 2023 (consisting of $3,000 for the deferred cash payments, as discounted, less a $904 cash adjustment); and (ii) $245 will be paid within two business days from the date the Company receives proceeds from the sale of all or a portion of the equity interest in Just Like Falling Off a Bike, LLC that was held by Athlon as of the closing date (this was paid on April 7, 2022).

 

 

The composition of the preliminary purchase price is as follows:

 

      
Cash  $12,085 
Common stock   3,141 
Deferred cash payments, as discounted   1,889 
Total purchase consideration  $17,115 

 

The Company incurred $200 in transaction costs related to the acquisition, which primarily consisted of legal and accounting expenses. The acquisition related expenses were recorded within general and administrative expense on the consolidated statements of operations.

 

The preliminary purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the closing date of the acquisition based upon their respective fair values as summarized below:

 

      
Cash  $2,604 
Accounts receivable   13,033 
Other current assets   379 
Equity investment   2,450 
Fixed assets   62 
Advertiser relationships   6,630 
Trade names   2,611 
Goodwill   3,797 
Accounts payable   (7,416)
Accrued expenses and other   (1,483)
Unearned revenue   (3,200)
Other long-term liabilities   (543)
Deferred tax liabilities   (1,809)
Net assets acquired  $17,115 

 

The Company utilized an independent appraisal firm to assist in the determination of the fair values of the assets acquired and liabilities assumed, which required certain significant management assumptions and estimates. The fair values of the advertiser relationships were determined by projecting the acquired entity’s cash flows, deducting notional contributory asset charges on supporting assets (working capital, tangible assets, trade names, and the assembled workforce) to compute the excess cash flows associated with the advertiser relationships. The fair values of the trade names were determined by projecting revenue associated with each trade name and applying a royalty rate to compute the amount of the royalty payments the company is relieved from paying due to its ownership of the trade names. The estimated weighted average useful lives of the advertiser relationships are eight point seventy-five years (8.75 years) and trade names are fourteen point six years (14.60 years).

 

The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents goodwill from the acquisition. Goodwill is recorded as a non-current asset that is not amortized but is subject to an annual review for impairment. No portion of the goodwill will be deductible for tax purposes.

 

2021 Acquisitions

 

College Spun Media Incorporated – On June 4, 2021, the Company acquired all of the issued and outstanding shares of capital stock of College Spun Media Incorporated, a New Jersey corporation (“The Spun”), for an aggregate of $11,830 in cash and the issuance of an aggregate of 194,806 restricted shares of the Company’s common stock, with one-half of the shares vesting on the first anniversary of the closing date and the remaining one-half of the shares vesting on the second anniversary of the closing date, subject to a customary working capital adjustment based on cash and accounts receivable as of the closing date. The cash payment consists of: (i) $10,830 paid at closing (of the cash paid at closing, $830 represents adjusted cash pursuant to the working capital adjustments), and (ii) $500 to be paid on the first anniversary of the closing and $500 to be paid on the second anniversary date of the closing. The vesting of shares of the Company’s common stock is subject to the continued employment of certain selling employees. The Spun operates in the United States.

 

 

The composition of the purchase price is as follows:

 

      
Cash  $10,830 
Deferred cash payments, as discounted   905 
Total purchase consideration  $11,735 

 

The Company incurred $128 in transaction costs related to the acquisition, which primarily consisted of legal and accounting expenses. The acquisition related expenses were recorded in general and administrative expense in the condensed consolidated statements of operations.

 

After the June 30, 2021 condensed consolidated financial statements were issued, the Company received a final valuation report from a third-party valuation firm. After considering the results of that valuation report, the Company estimated the fair values for the brand name of $5,175, along with a decrease for working capital accounts of $1,932 (consisting of adjusted amounts for cash, accounts receivable, accrued expenses and deferred tax liabilities) resulting in a corresponding decrease to goodwill of $3,977.

 

The purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the closing date of the acquisition based upon their respective fair values as summarized below:

 

      
Cash  $3,214 
Accounts receivable   1,772 
Other current assets   5 
Brand name   5,175 
Goodwill   3,479 
Accrued expenses and other   (85)
Deferred tax liabilities   (1,825)
Net assets acquired  $11,735 

 

The Company utilized an independent appraisal firm to assist in the determination of the fair values of the assets acquired and liabilities assumed, which required certain significant management assumptions and estimates. The fair value of the brand name was determined by projecting the acquired entity’s cash flows, deducting notional contributory asset charges on supporting assets (working capital and the assembled workforce) to compute the excess cash flows associated with the brand with a useful life of ten years (10.0 years).

 

The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents goodwill from the acquisition. Goodwill is recorded as a non-current asset that is not amortized but is subject to an annual review for impairment. No portion of the goodwill will be deductible for tax purposes.