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Acquisitions and Dispositions

9 Months Ended

Jun. 30, 2017

4. Acquisitions and Dispositions

Acquisitions

On April 26, 2017, subsidiaries of the Company acquired the assets of the Hollywood Showclub in the Greater St. Louis area, as well as the club’s building and land, adjacent land, and a nearby building and land that can be used for another gentlemen’s club. The total purchase price for all the acquired assets and real properties was $4.2 million, paid in cash at closing.

The following information summarizes the allocation of fair values assigned to the assets at acquisition date (in thousands):

Land and building	$	3,200
Furniture and equipment		141
Noncompete		200
Other assets		77
Goodwill		656
Accrued liability		(75	)
Net assets acquired	$	4,199

Management believes that the recorded goodwill represents the Company’s expansion into the Greater St. Louis area. Goodwill will not be amortized, but will be tested at least annually for impairment. The goodwill balance of $656,000, which was recognized in the Nightclubs segment, will be deductible for tax purposes.

On May 8, 2017, a subsidiary of the Company acquired the company that owns Scarlett’s Cabaret Miami in Pembroke Park, Florida along with certain related intellectual property for total consideration of $26.0 million, payable $5.4 million at closing, $5.0 million after six months through a short-term 5% note, and $15.6 million through a 12-year amortizing 8% note. See Note 7.

The following information summarizes the allocation of fair values assigned to the assets at acquisition date (in thousands):

Furniture and equipment	$	633
Leasehold improvement		1,222
Definite-lived intangibles		500
SOB license		23,488
Inventory		109
Net assets acquired	$	25,952

For the two preceding acquisitions, the Company has not finalized its valuation analysis and calculations in sufficient detail necessary to arrive at the fair value of assets acquired from the previous owners, along with the determination of any goodwill or gain on the transactions. Since the initial accounting has not been completed for the acquisitions, the Company has not yet allocated any amount to goodwill for the Scarlett’s acquisition.

The Company’s pro forma results of operations for the acquisitions have not been presented because the effect of the acquisitions was not material to our consolidated financial statements. Since the acquisition dates, the two acquisitions generated combined revenues of $2.2 million that are included in the Company’s consolidated statements of income for the three and nine months ended June 30, 2017.

Dispositions

On January 13, 2017, we closed the sale on one of our non-income producing properties, included in assets held for sale on our condensed consolidated balance sheet as of September 30, 2016, for $2.2 million in cash, recognizing approximately $116,000 loss on the sale. Proceeds were used to pay off the remaining $1.5 million of a related 11% balloon note, which was due in 2018. The Company paid a $75,000 prepayment penalty to pay off the debt.

On June 6, 2017, the Company closed on the on another non-income producing property, included in assets held for sale on the Company’s condensed consolidated balance sheet as of September 30, 2016, for $1.5 million, recognizing approximately $0.9 million gain on the sale. The buyer owned one of the Company’s note payable, hence, the Company exchanged the property for a $1.5 million reduction in its note payable.