Business Combinations

6 Months Ended

Jun. 30, 2024

(3)

Business Combinations

On February 18, 2024, we acquired the remaining 50% interest in GKBH, which was previously accounted for under the equity method. GKBH has been consolidated in our consolidated financial statements commencing February 18, 2024, the date of acquisition. The purchase price for the acquisition was allocated based on estimates of the fair value of the net assets acquired at the acquisition date, with the excess allocated to goodwill. The total consideration for the acquisition consisted of $6.0 million, payable in cash. During the three months ended March 31, 2024, we recognized approximately $370 thousand in acquisition-related costs, which were included within “Gain on remeasurement of previously held interest” in our condensed consolidated income statements.

The following table summarizes the fair value of GKBH’s assets and liabilities at the acquisition date, and the resulting goodwill.


(in thousands)
Purchase price of 50% interest in GKBH	$	6,000
Acquisition-date fair value of previously held interest (Level 2)		4,286
Fair value of GKBH at acquisition date		10,286


(in thousands)
Cash	$	24
Accounts Receivable		96
Inventories		22
Prepaid and Other assets		118
Deposits		67
Property and equipment		745
Operating lease right-of use assets		3,851
Liabilities assumed		(4,135	)
Total identifiable net assets	$	788

Goodwill		9,498
	$	10,286

Goodwill is calculated as the excess of the purchase price over the net assets acquired. The Company expects that a portion of the goodwill balance to be deductible for tax purposes over a period of 15 years. Goodwill is primarily attributed to growth and efficiency opportunities, expected synergies from combining the operations with the Company, and the assembled workforce.

The following table presents unaudited consolidated pro forma results as if the acquisition of GKBH had occurred on January 1, 2023.


	Three months ended June 30,				For the six months ended June 30,
(in thousands, except per share data)	2024		2023		2024		2023

Revenue	$	53,860	$	48,413	$	106,449	$	94,104
Net income before taxes		2,075		7,678		2,828		12,590

Earnings per common share:
Basic	$	0.06	$	-	$	0.08	$	-
Diluted	$	0.06	$	-	$	0.08	$	-

The unaudited pro forma financial information reflects the acquisition of GKBH by the application of pro forma adjustments to the Company’s historical financial statements as if the acquisition had occurred on January 1, 2023. The unaudited pro forma financial information should not be considered indicative of actual results that would have been achieved had the acquisition of GKBH actually been consummated on the date indicated and does not purport to be indicative of the Company’s future financial position or results of operations. There were no material nonrecurring pro forma adjustments directly attributable to the acquisition included within the unaudited pro forma financial information.

The fair value of the previously held noncontrolling interest was determined based on the fair value of total consideration transferred and application of a discount for lack of control, which was determined using historical market data on control premiums and other industry data.