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Acquisitions | 6 Months Ended
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Mar. 31, 2023
Business Combinations [Abstract] |
Acquisitions | Note 3: Acquisitions Acquisition of Flooring Liquidators On January 18, 2023, Live Ventures acquired 100% of the issued and outstanding equity interests of Flooring Liquidators, Inc., Elite Builder Services, Inc., 7 Day Stone, Inc., Floorable, LLC, K2L Leasing, LLC, and SJ & K Equipment, Inc. (collectively, the “Acquired Companies”). The Acquired Companies are leading retailers and installers of floors, carpets, and countertops to consumers, builders and contractors in California and Nevada. The acquisition was pursuant to a Securities Purchase Agreement with an effective date of January 18, 2023 by and among the Company, Buyer, Stephen J. Kellogg, as the seller representative of the equity holders of the Acquired Companies and individually in his capacity as an equity holder of the Acquired Companies, and the other equity holders of the Acquired Companies. The purchase price for the Equity Interests was $83.8 million before any fair value considerations, and is comprised of the following: • $41.8 million in cash to the Seller; • $34.0 million (the “Note Amount”) to certain trusts for the benefit of Kellogg and members of his family (the “Kellogg Trusts”) pursuant to the issuance by Buyer of a subordinated promissory note (the “Note”) in favor of the Kellogg Trusts; • $4.0 million to the Kellogg 2022 Family Irrevocable Nevada Trust by issuance of 116,441 shares of Parent Common Stock (as defined in the Purchase Agreement) (the “Share Amount”), calculated in the manner described in the Purchase Agreement; • $2.0 million holdback; and • $2.0 million of contingent consideration, comprised of $1.0 million in cash and $1.0 million in restricted stock units. The fair value the purchase price components outlined above was $78.7 million due to fair value adjustments for the seller note, restricted stock, and contingent consideration. Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $28.7 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of January 18, 2023, as calculated by an independent third-party firm. The Company anticipates approximately $13.4 million of the goodwill arising from the acquisition to be fully deductible for tax purposes. The table below outlines the purchase price allocation of the purchase for Flooring Liquidators to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s):
Total purchase price |  |  |  | $ | 78,700 |
Less fair value of the holdback option |  |  |  |  | — |
Net purchase price |  |  |  | $ | 78,700 |
Accounts payable |  |  |  |  | 5,189 |
Accrued liabilities |  |  |  |  | 9,182 |
Debt |  |  |  |  | 60 |
Total liabilities assumed |  |  |  |  | 14,431 |
Total consideration |  |  |  |  | 93,131 |
Cash |  |  |  |  | 7,871 |
Accounts receivable |  |  |  |  | 4,824 |
Inventory |  |  |  |  | 19,944 |
Property, plant and equipment |  |  |  |  | 4,678 |
Intangible assets |  |  |  |  |
Trade names |  | $ | 13,275 |  |  |
Customer relationships |  |  | 7,700 |  |  |
Non-compete agreements |  |  | 1,625 |  |  |
Other |  |  | 49 |  |  |
Subtotal intangible assets |  |  |  |  | 22,649 |
Other |  |  |  |  | 4,440 |
Total assets acquired |  |  |  |  | 64,406 |
Total goodwill |  |  |  | $ | 28,725 |
Pro Forma Information The table below presents selected proforma information for the Company for the three- and six-month periods ended March 31, 2023, assuming that the acquisition had occurred on October 1, 2021 (the beginning of the Company’s 2022 fiscal year), pursuant to ASC 805-10-50 (in $000's). This proforma information does not purport to represent what the actual results of operations of the Company would have been had the acquisition occurred on that date, nor does it purport to predict the results of operations for future periods.
|  | As Reported |  |  | Adjustments |  |  | Proforma |
|  | Live Unaudited Three Months Ended March 31, 2023 |  | Flooring Liquidators Unaudited Three Months Ended March 31, 2023 |  |  | Adjustments(1) |  |  | LIVE for the Three Months Ended March 31, 2023 |
Net revenue |  | $ | 91,122 |  | $ | 4,222 |  |  |  |  |  | $ | 95,344 |
Net income |  | $ | 1,558 |  | $ | (2,188 | ) |  | $ | (300 | ) |  | $ | (930 | )
Earnings per basic common share |  | $ | 0.50 |  |  |  |  |  |  |  | $ | (0.30 | )
Earnings per basic diluted share |  | $ | 0.49 |  |  |  |  |  |  |  | $ | (0.29 | )
|  | As Reported |  |  | Adjustments |  |  | Proforma |
|  | Live Unaudited Three Months Ended March 31, 2022 |  | Flooring Liquidators Unaudited Three Months Ended March 31, 2022 |  |  | Adjustments(1) |  |  | LIVE for the Three Months Ended March 31, 2022 |
Net revenue |  | $ | 69,706 |  | $ | 29,205 |  |  |  |  |  | $ | 98,911 |
Net income |  | $ | 15,358 |  | $ | 1,886 |  |  | $ | (1,946 | ) |  | $ | 15,298 |
Earnings per basic common share |  | $ | 4.90 |  |  |  |  |  |  |  | $ | 4.88 |
Earnings per basic diluted share |  | $ | 4.84 |  |  |  |  |  |  |  | $ | 4.82 |
|  | As Reported |  |  | Adjustments |  |  | Proforma |
|  | Live Unaudited Six Months Ended March 31, 2023 |  | Flooring Liquidators Unaudited Six Months Ended March 31, 2023 |  |  | Adjustments(1) |  |  | LIVE for the Six Months Ended March 31, 2023 |
Net revenue |  | $ | 160,108 |  | $ | 37,702 |  |  |  |  |  | $ | 197,810 |
Net income |  |  | 3,402 |  | $ | (1,033 | ) |  | $ | (2,226 | ) |  | $ | 143 |
Earnings per basic common share |  | $ | 1.10 |  |  |  |  |  |  |  | $ | 0.05 |
Earnings per basic diluted share |  | $ | 1.08 |  |  |  |  |  |  |  | $ | 0.05 |
|  | As Reported |  |  | Adjustments |  |  | Proforma |
|  | Live Unaudited Six Months Ended March 31, 2022 |  | Flooring Liquidators Unaudited Six Months Ended March 31, 2022 |  |  | Adjustments(1) |  |  | LIVE for the Six Months Ended March 31, 2022 |
Net revenue |  | $ | 144,864 |  | $ | 59,850 |  |  |  |  |  | $ | 204,714 |
Net income |  | $ | 21,904 |  | $ | 5,221 |  |  | $ | (3,818 | ) |  | $ | 23,307 |
Earnings per basic common share |  | $ | 6.96 |  |  |  |  |  |  |  | $ | 7.40 |
Earnings per basic diluted share |  | $ | 6.87 |  |  |  |  |  |  |  | $ | 7.31 |
(1) Adjustments are related to adjustments made for the following: • Amortization expense of definite-lived intangible assets has been adjusted based on the preliminary fair value at the acquisition date. • Interest expense has been adjusted to include proforma interest expense that would have been incurred as a result of the acquisition financing obtained by the Company. • Elimination of revenues and costs of revenues associated with sales between Flooring Liquidators and the Company prior to acquisition. Acquisition of Kinetic On June 28, 2022, Precision Marshall (“Precision”) acquired 100% of the issued and outstanding shares of common stock of The Kinetic Co., Inc. (“Kinetic”), a Wisconsin corporation, which was accomplished through a Purchase Agreement (the “Purchase Agreement”). In connection with the Purchase Agreement, Precision also entered into a Real Estate Purchase Agreement with Plant B-6, LLC, an affiliate of Kinetic, pursuant to which Precision received all of Kinetic's right, title, and interest in and to the land and improvements (collectively, the “Real Estate”) that Kinetic uses in its operations. The combined purchase price for the Kinetic shares and Real Estate was approximately $24.7 million, which was funded with approximately $11.0 million in borrowings under the company’s credit facility, approximately $8.3 million in proceeds from sale and leaseback of the Real Estate, a subordinated promissory note in the amount of $3.0 million to the Seller of Kinetic, $1.7 million of cash on-hand, a contingent earn-out liability valued at $997,000, a working capital adjustment of approximately $400,000, which was paid in cash, and a final fair value adjustment of approximately $312,000, which was noncash. As of the date of acquisition, Precision entered into a sale and leaseback agreement with a third-party, independent of the Kinetic sellers, for the Real Estate. The sale price of the Real Estate was approximately $8.9 million, subject to closing fees of approximately $547,000. The provisions of the lease agreement include a 20-year lease term with two five-year renewal options. The base rent under the lease agreement is $600,000 for the first year of the term and a 2% per annum escalator. The Lease Agreement is a “net lease,” such that the lessees are also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the Real Property incurred by the lessor. Due to the highly specialized nature of the leased assets, the Company currently believes that it is more likely than not that each of the two five-year options will be exercised. The proceeds, net of closing fees, from the sale-leaseback were used to assist in funding the acquisition of Kinetic. Under the purchase price allocation, the Company recognized goodwill of approximately $3.0 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of June 28, 2022, as calculated by an independent third-party firm. Goodwill arising from the acquisition is expected to be fully deductible for tax purposes. The table below outlines the purchase price allocation of the purchase for Kinetic to the acquired identifiable assets, liabilities assumed and goodwill as of March 31, 2023 (in $000’s):
Total purchase price |  | $ | 24,732 |
Accounts payable |  |  | 571 |
Accrued liabilities |  |  | 1,848 |
Total liabilities assumed |  |  | 2,419 |
Total consideration |  |  | 27,151 |
Cash |  |  | 287 |
Accounts receivable |  |  | 3,073 |
Inventory |  |  | 6,429 |
Property, plant and equipment |  |  | 12,855 |
Intangible assets |  |  | 1,000 |
Other assets |  |  | 480 |
Total assets acquired |  |  | 24,124 |
Total goodwill |  | $ | 3,027 |
Acquisition of Better Backers On July 1, 2022, Live acquired certain assets and intellectual property of Better Backers, a Georgia corporation, which was accomplished through an Asset Purchase Agreement (the “Asset Purchase Agreement”). No liabilities were assumed as part of the acquisition. The purchase price, which is subject to certain post-closing adjustments, was approximately $3.2 million, which is comprised of $1.8 million that was paid upon closing, and the $1.4 million present value of $1.5 million of non-compete payments to be made over a 24-month period. In order to expedite the transaction, the acquisition was originally made by Live, and the $1.8 million paid upon closing was funded with borrowings under Live’s credit line with Isaac Capital Group (“ICG”). On August 18, 2022, Marquis repaid the $1.8 million to ICG and assumed ownership of Better Backers. In connection with the acquisition, Marquis entered into two 20-year building leases with Spyglass Estate Planning, LLC, a related party (see Note 15), with two options to renew for an additional five years each. The fair value of the buildings and improvement is approximately $9.3 million. The provisions of the lease agreements include an initial 24-month month-to-month rental period, during which the lessee may cancel with 90-day notice, followed by a 20-year lease term with two five-year renewal options. Due to the highly specialized nature of the leased assets, the Company currently believes that it is more likely than not that it will not cancel during the initial 24-month term, and that each of the two five-year options will be exercised. The base rent under the lease agreements is approximately $73,000 and $32,000 per month, respectively, for the first year of the term, and a 2.5% per annum escalator. The lease agreements are each “net leases”, such that the lessee is also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the property. The Company has evaluated each lease and determined the rent amounts to be at market rates. These leases are being treated as finance leases for accounting purposes, as described in ASC 842 “Leases”. Under the purchase price allocation, no goodwill was recognized. The values assigned to the assets acquired are based on their estimates of fair value available as of July 1, 2022, as calculated by management. The table below outlines the purchase price allocation of the purchase for Better Backers to the acquired identifiable assets (in $000’s):
Total purchase price |  | $ | 3,166 |
Inventory |  |  | 748 |
Property, plant and equipment |  |  | 2,118 |
Intangible assets |  |  | 300 |
Total assets acquired |  |  | 3,166 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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