Acquisitions (Tables)

9 Months Ended

Sep. 30, 2021

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table sets forth the revised preliminary allocation of the purchase price for TLA to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from TLA (in thousands):


Tangible net assets and liabilities:
Cash	$	1,823
Inventory	7,614
Property and equipment	2,214
Accounts payable	(1,319)
Other net assets	(5,380)
Total net assets	4,952
Intangible assets:
Trade name	4,100
Total intangible assets	4,100
Net assets acquired	9,052
Purchase consideration	24,916
Goodwill	$	15,864

The following table sets forth the preliminary allocation of the purchase price for Honey Birdette to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from Honey Birdette (in thousands):


Net assets and liabilities:
Cash	$	3,950
Inventory	15,153
Property and equipment	5,185
Other tangible net assets (liabilities)	(11,043)
Unfavorable leasehold interest, net	(1,839)
Trade name	77,238
Deferred tax liability	(22,634)
Total net assets acquired	66,010
Purchase consideration	288,790
Goodwill	$	222,780

Schedule of Consolidated Results of Operations in Business Combination

TLA’s operating results were consolidated with ours beginning on March 1, 2021. Therefore, the consolidated results of operations for the nine months ended September 30, 2021 may not be comparable to the same period in 2020. TLA’s results of operations included in our consolidated results of operations for the nine months ended September 30, 2021 are presented in the table below:


	Nine Months Ended September 30,
	2021
Net revenues	$	31,774
Costs and expenses
Cost of sales	(14,377)
Selling and administrative expenses	(15,688)
Total costs and expenses	(30,065)
Operating income	1,709
Nonoperating expense	3
Net income	$	1,712

Honey Birdette’s operating results are consolidated with our operating results beginning on August 9, 2021. Therefore, our consolidated results of operations for the nine months ended September 30, 2021 may not be comparable to the same period in 2020. Honey Birdette’s results of operations included in our consolidated results of operations for the nine months ended September 30, 2021 are presented in the table below:


	Nine Months Ended September 30,
	2021
Net revenues	$	7,440
Costs and expenses:
Cost of sales	(3,852)
Selling and administrative expenses	(5,253)
Total costs and expenses	(9,105)
Operating loss	(1,665)
Nonoperating expense	—
Benefit (expense) from income taxes	507
Net loss	$	(1,158)

Business Acquisition, Pro Forma Information

The following table summarizes certain of our supplemental pro forma financial information for the three and nine months ended September 30, 2021 and 2020, as if the acquisition of TLA had occurred as of January 1, 2020. The unaudited pro forma financial information for the three and nine months ended September 30, 2021 and 2020 reflects (i) the reduction in amortization expense based on fair value adjustments to the intangible assets acquired from TLA; (ii) the reduction in rent expense due to the amortization of unfavorable leasehold interest acquired from TLA; and (iii) the reversal of interest expense on TLA’s debt that was settled on the acquisition date. There were no transaction costs incurred by us and TLA during the three months ended September 30, 2021. For the nine months ended September 30, 2021, transaction costs incurred by us and TLA were $0.9 million and $0.7 million, respectively. The unaudited pro forma financial information is for comparative purposes only and is not necessarily indicative of what would have occurred had the acquisition been made at that date or of results which may occur in the future (in thousands).


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma
Net revenues	$	58,356	$	58,356	$	35,004	$	46,849	$	150,887	$	159,736	$	101,335	$	128,230
Net loss	$	(7,699)	$	(7,699)	$	1,266	$	1,401	$	(21,612)	$	(20,200)	$	(4,759)	$	(11,698)

The following table summarizes certain of our supplemental pro forma financial information for the three and nine months ended September 30, 2021 and 2020, as if the acquisition of Honey Birdette had occurred as of January 1, 2020. The unaudited pro forma financial information for the three and nine months ended September 30, 2021 and 2020 reflects (i) the increase in amortization expense based on fair value adjustments to the intangible assets acquired from Honey Birdette; (ii) the reduction in rent expense due to the amortization of unfavorable leasehold interest, net acquired from Honey Birdette; (iii) interest expense associated with the borrowing of an additional $70.0 million under our New Credit Agreement used to partially finance the acquisition; (iv) amortization of the inventory fair value step-up adjustment; (v) tax adjustments calculated using an estimated blended statutory rate of 27.55% based on the predominant taxable jurisdictions of Honey Birdette; and (vi) certain adjustments to convert Honey Birdette’s consolidated income statements from IFRS to U.S. GAAP. Transaction costs incurred by us and Honey Birdette during the three and nine months ended September 30, 2021 were $8.7 million and $12.9 million, respectively. The unaudited pro forma financial information is for comparative purposes only and is not necessarily indicative of what would have occurred had the acquisition been made at that date or of results which may occur in the future (in thousands).


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma
Net revenues	$	58,356	$	66,578	$	35,004	$	49,729	$	150,887	$	197,009	$	101,335	$	137,330
Net (loss) income	$	(7,699)	$	(3,207)	$	1,266	$	3,202	$	(21,612)	$	(11,708)	$	(4,759)	$	(9,618)

Schedule of Fair Value of Consideration Transferred

The following table presents the fair value of the consideration transferred in the acquisition of Honey Birdette (in thousands) at the closing of the acquisition. The amounts initially reported in Australian dollars, were translated into U.S. dollars using an exchange rate of 0.7356 as of the Closing Date.


Cash consideration	$	233,441
Stock consideration:
Transferred shares (1)	29,889
Lock-up shares (2)	25,460
Total consideration transferred	$	288,790

(1) The fair value of approximately 1,124,919 shares of common stock of the Company transferred to the sellers based on a price of $26.57 per share at closing.

(2) The fair value of approximately 1,030,930 shares of common stock of the Company issued and held at the Company’s transfer agent account based on a price of $26.57 per share at closing, and true-up adjustments representing a fair value of the settlement at closing based on Honey Birdette’s fiscal year 2021 EBITDA results and price per share of $26.57 at Closing, as well as fiscal year 2022 forecasted revenue. The fiscal year 2021 EBITDA and Closing true-up resulted in 4,412 shares of our common stock being issued to the Honey Birdette sellers on August 19, 2021.