Quarterly report pursuant to Section 13 or 15(d)

Business Acquisitions

v3.21.2
Business Acquisitions
9 Months Ended
Oct. 30, 2021
Business Combinations [Abstract]  
Business Acquisitions

(16)  Business Acquisitions

Synacor’s Portal and Advertising Business Acquisition

On July 30, 2021, the Company closed on the acquisition of Synacor’s Portal and Advertising business segment. This acquisition allows the Company to leverage its interactive video expertise and national television promotional power, as well as its merchandising, customer solutions and fulfillment capabilities, to offer advertisers and consumer brands differentiated digital services that the Company believes will accelerate its timeline to become the leading single-source partner to advertisers seeking to use interactive video to drive growth. Synacor Portal and Advertising, which iMedia has combined with its business Float Left, has been renamed to iMedia Digital Services (“iMDS). iMDS is a leading video advertising platform monetizing 200+ million monthly users for its publishers by utilizing its proprietary technologies, first-party customer shopping data and interactive video services to drive engagement, traffic and conversion.  

The acquisition of the Portal and Advertising business was accounted for in accordance with ASC 805-10 “Business Combinations”. The total consideration transferred on the date of the transaction consisted of $20 million cash, the issuance of a $10 million seller note and assumed liabilities with a fair value of $7.3 million. The seller note is payable in $1 million quarterly installments over the next ten calendar quarters beginning with September 30, 2021. The seller note bears interest at rates between 6% and 11% depending upon the period outstanding. The allocation of the purchase price was based upon a preliminary valuation, and the Company’s estimates and assumptions of the assets acquired, and liabilities assumed are subject to change within the measurement period pending the finalization of a valuation.

Based on the preliminary valuation, the total consideration of $30.0 million has been allocated to assets acquired and liabilities assumed based on their respective fair values as follows:

    

Fair Value

Accounts Receivable and Prepaid

$

8,019,000

Fixed assets

 

805,000

Goodwill and Intangible assets

 

28,429,000

Liabilities assumed

 

(7,253,000)

Total consideration

$

30,000,000

Goodwill and intangible assets have been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed in the amount of $28.4 million, which was primarily related to the acquisition of customer relationships, technology platforms, and goodwill.

The preliminary purchase price allocation may be adjusted, as necessary, up to one year after the acquisition closing date if management obtains additional information regarding asset valuations and liabilities assumed.

Christopher & Banks Transaction

Christopher & Banks is a specialty brand of privately branded women's apparel and accessories. The Christopher & Banks brand was previously owned by Christopher & Banks Corporation, which filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in January 2021. On March 1, 2021, the Company entered into a licensing agreement with ReStore Capital, a Hilco Global company, whereby the Company will operate the Christopher & Banks business throughout all sales channels, including digital, television, catalog, and brick and mortar retail, effective March 1, 2021. The Company also purchased certain assets related to the Christopher & Banks eCommerce business, including primarily inventory, furniture, equipment, and certain intangible assets. The Company plans to launch a new weekly Christopher & Banks television program on its ShopHQ network, which will also promote the brand’s website, cristopherandbanks.com, its two retail stores in Coon Rapids, Minnesota, and Branson, Missouri, and its planned launch of Christopher & Banks Stylists, an online interactive video platform that customizes wardrobe that is outfitted for customers by a Christopher & Banks stylist.

On March 1, 2021, the Company acquired all of the assets of Christopher & Banks, LLC (“C&B”). The acquisition of C&B was accounted for in accordance with ASC 805-10 “Business Combinations”. The total consideration transferred on the date of the transaction consisted of $3.5 million cash and assumed liabilities with a fair value of $4.2 million. In addition, the Company is obligated to issue common shares to Hilco with a value of $1.5 million as additional consideration. The Company expects to issue these shares in the fourth quarter of 2021. The preliminary allocation of the purchase price was based upon a preliminary valuation, and the Company’s estimates and assumptions of the assets acquired, and liabilities assumed are subject to change within the measurement period pending the finalization of a valuation.

Based on the preliminary valuation, the total consideration of $5.0 million has been allocated to assets acquired and liabilities assumed based on their respective fair values as follows:

    

Fair Value

Inventory

$

4,091,000

Fixed assets

 

1,500,000

Goodwill and Intangible assets

 

3,607,000

Liabilities assumed

 

(4,198,000)

Total consideration

$

5,000,000

Goodwill and intangible assets have been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed in the amount of $3.6 million, which was primarily related to the acquisition of the product designs, brand and customer list.

The preliminary purchase price allocation may be adjusted, as necessary, up to one year after the acquisition closing date if management obtains additional information regarding asset valuations and liabilities assumed.

The Closeout.com Acquisition

On February 5, 2021, the Company became a controlling member under the limited liability company agreement for TCO, LLC (“TCO”), a Delaware limited liability company entered into between the Company and LAKR Ecomm Group LLC (“LAKR”) to operate TheCloseout.com, an online marketplace that was previously owned in part by Invicta Media Investments. LAKR is a newly formed company indirectly owned by Invicta Media Investments, LLC and The Closeout.com LLC. The initial Board of Directors of TCO includes Tim Peterman, the Chief Executive Officer and a director of the Company, Landel Hobbs, the Chairman of the Board of the Company, and Eyal Lalo, a director of the Company. See Note 14 – “Related Party Transactions” for additional information regarding the Company’s relationships with Invicta Media Investments, LLC, Retailing Enterprises and Mr. Lalo.

Under the limited liability company agreement, the Company will act as the controlling member of TCO. Mr. Peterman and Mr. Hobbs, as the designees of the Company, will lead TCO, with certain significant corporate actions requiring the consent of both members. Mr. Peterman will be the Chairperson of TCO. Distributions of available cash may be made to the members at the discretion of TCO’s board of managers. In addition, beginning on February 5, 2026 and recurring every 12 months thereafter, the Company will have the right, but not the obligation, to acquire LAKR’s interest in TCO at a value determined based on financial benchmarks set forth in the TCO limited liability company agreement.

In connection with the establishment of TCO, the Company contributed assets in the form of inventory valued at $3.5 million in exchange for a 51% interest in the TCO, and LAKR contributed assets in the form of inventory and intellectual property valued at $3.4 million in exchange for a 49% interest in TCO. The Company also entered into a loan and security agreement with TCO, pursuant to which TCO may borrow up to $1.0 million from the Company on a revolving basis pursuant to a promissory note bearing interest at LIBOR plus 4%, provided that the floor of this interest rate is 4.25%. The promissory note is payable on demand by the Company, may be voluntarily prepaid at any time, and must be repaid prior to TCO making any distributions, other than advances for tax withholdings, to its members.

Non-controlling Interests

Non-controlling interests (“NCI”) represent equity interests owned by outside parties. NCI may be initially measured at fair value or at the NCI’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement is made on a transaction by transaction basis. iMedia elected to measure each NCI at its proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The share of net assets attributable to NCI are presented as a component of equity. Their share of net income or loss and comprehensive income or loss is recognized directly in equity. Total comprehensive income or loss of subsidiaries is attributed to the shareholders of the Company and to the NCI, even if this results in the NCI having a deficit balance.