XML 25 R11.htm IDEA: XBRL DOCUMENT v3.23.1
Acquisitions
 12 Months Ended
Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract]  
Acquisitions

4. Acquisitions

 

The Company uses the acquisition method of accounting, which is based on ASC, Business Combinations (Topic 805), and uses the fair value concepts which requires, among other things, that most assets acquired, and liabilities assumed be recognized at their fair values as of the acquisition date.

 

2022 Acquisitions

 

Athlon Holdings, Inc. - On April 1, 2022, the Company acquired 100% of the issued and outstanding capital stock of Athlon Holdings, Inc. (or Parade), a Tennessee corporation, for a purchase price of $15,854, as adjusted for the working capital adjustment as of the closing date of the transaction. The working capital adjustment is pending acceptance by the sellers (further details are provided in Note 28). 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 purchase price of $15,854, as discounted, is comprised of (i) a cash portion of $12,827, with $11,840 paid at closing and $987 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 Parade’s key employees entered into either advisory agreements or employment agreements with the Company. Parade operates in the United States.

 

The amount estimated to be paid post-closing of $987 will be or was paid as follows: (i) $742 is expected to be paid upon receipts of certain tax refunds due to the sellers (consisting of $3,000 for the deferred cash payments, as discounted, less a $2,258 cash adjustment); and (ii) $245 was paid within two business days from the date the Company received proceeds from the sale of the equity interest in Just Like Falling Off a Bike, LLC that was held by Parade as of the closing date (paid on April 7, 2022).

 

The Company received a final valuation report from a third-party valuation firm after the preliminary purchase price was adjusted during the quarterly period ended September 30, 2022. After considering the results of the final valuation report, the Company estimated that the purchase consideration decreased by $321. The decrease in the purchase price was related to an increase in identifiable assets of $54, an increase in deferred tax liabilities of $27, with a decrease in the working capital adjustment of $321, resulting in a decrease in goodwill of $348.

 

The composition of the purchase price is as follows:

 

      
Cash  $12,085 
Common stock   3,141 
Deferred cash payments, as discounted   628 
Total purchase consideration  $15,854 

 

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 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   10,855 
Other current assets   1,337 
Equity investment   2,450 
Fixed assets   108 
Digital content   355 
Advertiser relationships   6,202 
Trade names   2,261 
Goodwill   2,587 
Accounts payable   (7,416)
Accrued expenses and other   (2,440)
Unearned revenue   (1,203)
Other long-term liabilities   (543)
Deferred tax liabilities   (1,303)
Net assets acquired  $15,854 

 

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 digital content was determined using a cost approach. 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 life is two years (2.00 years) for digital content, eight point seventy-five years (8.75 years) for advertiser relationships, and fourteen point five years (14.50 years) for trade names.

 

The excess 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 related to the acquisition will be deductible for tax purposes.

 

 

Supplemental Pro forma Information

 

The following table summarizes the results of continuing operations of the Parade acquisition from the acquisition date included in the consolidated results of continuing operations and the unaudited pro forma results of continuing operations of the combined entity had the date of the acquisition been January 1, 2021:

 

   2022   2021 
   Years Ended December 31, 
   2022   2021 
Parade continuing operations from acquisition date of April 1, 2022 (unaudited):          
Revenue  $13,253   $- 
Net loss   1,086    - 
Combined entity continuing operations supplemental pro forma information had the acquisition date been January 1, 2021 (unaudited):          
Revenue:          
Parade  $17,522   $19,522 
Arena   207,682    189,140 
Total continuing operations supplemental pro forma revenue  $225,204   $208,662 
Net income (loss):          
Parade  $1,222   $2,872 
Arena   (68,474)   (89,940)
Adjustments   (1,967)   (49)
Total continuing operations supplemental pro forma net loss  $(69,219)  $(87,117)

 

The information presented above is for illustrative purposes only and is not necessarily indicative of results that would have been achieved if the acquisition had occurred as of the beginning of the Company’s reporting period.

 

The adjustments for the years ended December 31, 2022 and 2021 of ($1,967) and ($49), respectively, represents adjustments: (1) to record depreciation and amortization expense related to the fixed and intangible assets acquired from the acquisition of ($864) and ($1,152); (2) to record (reverse) the nonrecurring transaction cost related to the acquisition of $200 and ($200); and (3) to record the deferred tax (benefit) provision related to the acquisition of ($1,303) and $1,303, respectively.

 

Buffalo Groupe, LLC – On September 27, 2022, the Company entered into an asset purchase agreement with Buffalo Groupe, LLC, doing business as Morning Read, where it purchased certain intellectual properties, certain assumed contracts, and other certain rights related to the intellectual properties (collectively, the “Morning Read Purchased Assets”) and assumed certain liabilities related to the Morning Read Purchased Assets. The purchase consideration consisted of a cash payment of $850 at closing.

 

The Company accounted for the acquisition as an asset acquisition in accordance with ASC 805-50, as substantially all of the fair value of the gross assets acquired by the Company is concentrated in a group of similar identifiable assets.

 

The purchase consideration totaled $850, which was assigned to the brand name acquired on the closing date of the acquisition. The useful life for the brand name is ten years (10.0 years).

 

A360 Media, LLC – On December 15, 2022 (the closing date), pursuant to an asset purchase agreement entered into December 7, 2022, the Company acquired certain assets and liabilities from Weider Publications, a subsidiary of A360 Media, LLC (or Men’s Journal) related to the digital media operations of Men’s Journal and other men’s active lifestyle brands. The Company paid $25,000 in cash for the acquisition consisting of: (i) $23,000 paid at closing; (ii) $1,000 deposited into an escrow account to be released in accordance with the terms of the agreement, subject to adjustments for any indemnification payments; and (iii) $1,000 paid in November 2022. The Company also assumed certain liabilities consisting of: (i) $1,430 an assumed lease obligation, as discounted (representing $3,189 in deferred payments over twenty-seven months (27) for the assumption of a lease obligation); and (ii) $4,078 in deferred revenue obligations to deliver certain publications to the subscribers of Men’s Journal ($3,941 in unearned revenue after consideration of an estimated subscription refund liability of $137). In accordance with the practical expedients under ASU 2021-08, the Company has elected to apply (i) the practical expedient to the modification of the subscriber contracts at the acquisition date to determine the performance obligations and transaction price; and (ii) to use the estimated selling price of a subscriber contract as the standalone selling price of the replacement magazine based on the number of magazines expected to be delivered to the Men’s Journal subscribers to satisfy the performance obligations. The agreement contains customary representations, warranties and covenants. Men’s Journal operates in the United States.

 

 

The Company accounted for the asset acquisition as a business combination in accordance with ASC 805 since the acquisition met the definition of a business under the applicable guidance.

 

The Company incurred $283 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:

 

      
Lease deposit receivable  $420 
Advertiser relationships   6,860 
Brand names   6,090 
Goodwill   17,138 
Unearned revenue   (3,941)
Subscription refund liability   (137)
Assumed lease obligation   (1,430)
Net assets acquired  $25,000 

 

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 advertiser relationships were determined by applying the multi-period earnings method of the income approach and the fair values of the brand names were determined by applying the relief-from-royalty method. The estimated weighted average useful life is twelve and one-half years (12.5 years) for the advertiser relationships and eleven years (11.0 years) for the brand names.

 

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. A portion of the goodwill will be deductible for tax purposes.

 

Supplemental Pro forma Information

 

The pro forma disclosures have been deemed impracticable for this acquisition since after making reasonable efforts the Company is unable to accept assumptions made by Men’s Journal. The Company has determined, based on the information provided by Men’s Journal and made available to the Company, that the earnings from the prior periods could not be verified since the acquisition only included certain activities of Men’s Journal and financial statements were not available. In this regard, the Company: (1) made reasonable effort to obtain certain financial results of the certain activities but Men’s Journal was unable to apply the requirement; and (2) the presentation of the pro forma results and the assumptions made by management were unable be independently substantiated.

 

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 (or 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 (vested on June 4, 2022) and the remaining one-half of the shares vesting on the second anniversary of the closing. The cash payment consists of: (i) $10,830 paid at closing (of the cash paid at closing, $830 represents adjusted cash pursuant to working capital adjustments), and (ii) $500 to be paid on the first anniversary of the closing ($500 paid on June 4, 2022 consisted of principal of $453 and imputed interest of $47) and $500 to be paid on the second anniversary date of the closing. The vesting of one-half of the shares of the Company’s common stock remain 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:

 Schedule of Preliminary Purchase Price

      
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. The acquisition-related expenses were recorded within general and administrative expense on the consolidated statements of operations.

 

The Company received a final valuation report from a third-party valuation firm after the preliminary purchase price was recorded for the quarterly period ended June 30, 2021. After considering the results of that valuation report, the Company estimated the fair value 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   (85)
Deferred tax liabilities   (1,825)
Net assets acquired  $11,735 

 

The Company utilized an independent appraisal 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.

 

Fulltime Fantasy Sports, LLC – On July 15, 2021, the Company entered into an asset purchase agreement with Fulltime Fantasy Sports, LLC, where it purchased certain intellectual property, subscriber and customer records, and other certain rights related to the intellectual property (collectively the “Fulltime Fantasy Purchased Assets”) and assumed certain liabilities related to the Fulltime Fantasy Purchased Assets. The purchase price consisted of: (i) a cash payment of $335 (paid in advance), including transaction related costs of $35, (ii) the issuance of 34,092 shares the Company’s restricted common stock (subject to certain vesting earn-out provisions and certain buy-back rights), with 11,364 shares of restricted common stock vested at closing, and (iii) a cash earn-out payment of $450 ($225 paid in January 2022 and $225 paid June 2022) and 22,728 shares of restricted common stock (11,364 vested on December 31, 2021 and 11,364 vested on June 30, 2022).

 

The Company accounted for the acquisition as an asset acquisition in accordance with ASC 805-50, as substantially all of the fair value of the gross assets acquired by the Company is concentrated in a group of similar identifiable assets. All direct acquisition-related costs of $35 are assigned to the assets in relation to the relative fair value of the acquired assets and recorded as part of the consideration transferred.

 

 

The composition of the purchase price is as follows:

 

      
Cash (including $35 of transaction related costs)  $335 
Restricted stock   168 
Deferred cash payments   419 
Deferred restricted stock   335 
Total purchase consideration  $1,257 

 

The purchase price resulted in $1,257 (including $35 of transaction related costs) being assigned to a database acquired at the closing date of the acquisition. The useful life for the database is three years (3.0 years).