Business Combinations

12 Months Ended

Dec. 31, 2021

Business Combinations [Abstract]

BUSINESS COMBINATIONS

NOTE 10—BUSINESS COMBINATIONS

Appliances Connection

On October 20, 2020, the Company entered into a securities purchase agreement, which was amended on December 8, 2020 and April 6, 2021 (as amended, the “AC Purchase Agreement”), with ACI, Appliances Connection and the sellers (the “Sellers”), pursuant to which ACI agreed to acquire all of the issued and outstanding capital stock or other equity securities of Appliances Connection from the Sellers (the “AC Acquisition”). The AC Acquisition was completed on June 2, 2021.

The aggregate purchase price was $224.7 million, consisting of (i) $180.0 million in cash, (ii) 5,895,973 shares of the Company’s common stock valued at $12.3 million, and (iii) $32.4 million as a result of the post-closing net working capital adjustment provision. The Company recorded $0.9 million in acquisition related expenses.

The Company accounted for the AC Acquisition using the acquisition method of accounting in accordance with ASC Topic 805, “Business Combinations”. In accordance with ASC 805, the Company assigned fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date.

The purchase price was allocated as follows (in thousands):

	Initial Allocation (1)			Adjustments			Updated Allocation
Purchase consideration at fair value:
Cash consideration	$	180,000		$	-		$	180,000
Common stock		12,264			-			12,264
Working capital adjustment		32,597			(186	)		32,411
Total consideration	$	224,861		$	(186	)	$	224,675
Assets acquired and liabilities assumed at fair value:
Cash	$	5,897		$	-		$	5,897
Receivables		19,403			(2,262	)		17,141
Vendor deposits		15,000			-			15,000
Merchandise inventory		20,484			1,150			21,634
Prepaid expenses and other current assets		2,194			-			2,194
Property and equipment		1,891			-			1,891
Right-of-use operating lease assets		1,834			-			1,834
Customer relationships		25,800			(2,401	)		23,399
Tradenames		24,336			1,231			25,567
Goodwill		177,875			7,845			185,720
Accounts payable and accrued expenses		(43,633	)		(2,082	)		(45,715	)
Customer deposits		(13,138	)		(4,398	)		(17,536	)
Notes payable		(1,527	)		-			(1,527	)
Finance lease liabilities		(215	)		-			(215	)
Right-of-use operating lease liabilities		(1,834	)		-			(1,834	)
Net deferred tax liabilities		(9,506	)		731			(8,775	)
Net assets acquired	$	224,861		$	(186	)	$	224,675

(1) As reported in our September 30, 2021 Form 10-Q, filed on November 15, 2021.

The adjustments to the initial allocation are based on more detailed information obtained about the specific assets acquired and liabilities assumed. The adjustments made to the initial allocation did not result in material changes to the amortization expense recorded in the previous quarters.

We are amortizing the customer relationship and tradename intangible assets acquired over 5 years. Goodwill and intangibles recognized for this transaction are not deductible for tax purposes.

From the date of acquisition until December 31, 2021, Appliances Connection contributed net sales of $314.5 million and net income from continuing operations of $30.6 million, which are included in our consolidated statements of operations.

Appliance Gallery

On July 6, 2021, AC Gallery entered into an asset purchase agreement, which was amended on July 21, 2021 and July 29, 2021 (as amended, the “AG Purchase Agreement”), with Appliance Gallery, pursuant to which AC Gallery agreed to acquire substantially all the assets and assumed substantially all the liabilities of Appliance Gallery (the “AG Acquisition”). The AG Acquisition was completed on July 29, 2021.

Pursuant to the AG Purchase Agreement, the purchase price paid at closing was $1.4 million.

The Company accounted for the Gallery Acquisition using the acquisition method of accounting in accordance with ASC Topic 805, “Business Combinations”. In accordance with ASC 805, the Company assigned fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date.

The purchase price was allocated as follows (in thousands):

Purchase consideration at fair value:
Cash consideration	$	1,420
Total consideration	$	1,420
Assets acquired and liabilities assumed at fair value:
Merchandise inventory	$	483
Prepaid expenses and other current assets		6
Property and equipment		19
Goodwill		1,168
Customer deposits		(256	)
Net assets acquired	$	1,420

Goodwill recognized for this transaction is deductible for tax purposes.

From the date of acquisition until December 31, 2021, Appliance Gallery contributed net sales of $0.2 million and net income from continuing operations of $0.2 million, which are included in our consolidated statements of operations.

Pro Forma Information

The following unaudited pro forma results presented below (in thousands) include the effects of the AC and AG Acquisitions as if they had been consummated as of January 1, 2020, with adjustments to give effect to pro forma events that are directly attributable to the acquisitions.

	December 31,		December 31,
	2021		2020
Net sales	$	541,742	$	370,144
Net income		27,910		(11,188	)
Earnings (loss) per share:
Basic	$	0.26	$	(0.11	)
Diluted		0.17		(0.11	)

These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been if the acquisitions had occurred at the beginning of the period presented, nor are they indicative of future results of operations.