Acquisition of Naples Wax, LLC

12 Months Ended

Dec. 31, 2023

Acquisition of Naples Wax, LLC

Acquisition of Naples Wax, LLC

Note 9. Acquisition of Naples Wax, LLC

On September 12, 2023, the Company acquired all of the equity interests in Naples Wax, LLC, d/b/a Naples Wax Centers, a Florida limited liability company (“Naples Wax”), for an aggregate purchase price of $1,624, of which $1,574 was paid in cash at closing. The remaining $50 will be held for six months as a holdback to cover any potential indemnification claims and included in accrued expenses and other current liabilities on the consolidated balance sheet as of December 31, 2023.

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts.

While the company uses its best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations.

Accounting for business combinations requires management to make estimates and assumptions, especially at the acquisition date, including estimates for intangible assets. Although the Company believes the assumptions and estimates that have been made are reasonable and appropriate, they are based in part on historical experience and information obtained from the acquired companies and are inherently uncertain. Estimates in valuing certain of the intangible assets the Company has acquired include future expected cash flows, and discount rates.

For income tax purposes, this acquisition of 100% of the units is treated as an asset acquisition. As a result of the acquisition of Naples Wax, the company generated tax deductible goodwill of $1.371 million.

Consideration paid	$	1,624
Fair value of assets acquired and liabilities assumed
Cash and cash equivalents	$	180
Prepaid expenses and other assets		13
Customer relationships		700
Trade name		200
Deferred revenue		(811)
Accounts payable		(25)
Accrued expenses and other liabilities		(4)
Total fair value of assets acquired and liabilities assumed		253
Goodwill	$	1,371

Determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment.

The fair value of intangible assets other than Goodwill was determined primarily using income approaches. This included estimated multi-period excess earnings valuation method for Customer relationships and the relief-from-royalty valuation for the tradename.

The following table sets forth the significant assumptions utilized when valuing the Customer Relationships:

Customer relationships Attrition Rate	15.00	%
Existing Customer Growth	75.00	%
Business Development Expense for New Customers	5.70	%
Customer relationships Discount Rate	31.00	%
Estimated Remaining Economic Life (Years) (approx.)	7	yrs

The following table sets forth the significant assumptions utilized when valuing the Tradename:

% of Revenue Attributable to Trade Name	100.00	%
Royalty Rate	2.00	%
Trade Name Discount Rate	31.00	%
Remaining Economic Life (Years)	9	yrs