Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

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Acquisitions
6 Months Ended
Mar. 31, 2024
Business Combination and Asset Acquisition [Abstract]  
Acquisitions Acquisitions
Acquisition of CRO
On October 13, 2023, Flooring Liquidators acquired certain assets and assumed certain liabilities of Carpet Remnant Outlet, Inc. (“CRO”), a floor covering retailer and installer serving residential and commercial customers throughout Northwest Arkansas. Total consideration for the acquisition was approximately $1.8 million and was comprised of cash at close of approximately $1.0 million, an indemnification holdback amount of $300,000, and additional consideration valued at $425,000.
The fair value of the purchase price components was $1.8 million, as detailed below (in $000's):
Cash $ 1,034 
Additional consideration 425 
Holdback 300 
Purchase price $ 1,759 
Under the preliminary purchase price allocation, the Company recognized goodwill of $425,000, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of October 13, 2023, as calculated by an independent third-party firm. The value of the additional consideration was calculated by management. The Company anticipates the $425,000 of goodwill arising from the acquisition to be fully deductible for tax purposes. The table below outlines the purchase price allocation of the purchase for CRO to the acquired identifiable assets, liabilities assumed and goodwill as of March 31, 2024 (in $000’s):
Total purchase price $ 1,759 
Accounts payable 770 
Accrued liabilities 1,298 
Total liabilities assumed 2,068 
Total consideration 3,827 
Accounts receivable 259 
Inventory 1,406 
Property, plant and equipment 261 
Intangible assets 1,190 
Other assets 286 
Total assets acquired 3,402 
Total goodwill $ 425 
Acquisition of Johnson
On November 30, 2023, CRO acquired certain assets and assumed certain liabilities of Johnson Floor & Home (“Johnson”), a floor covering retailer and installer serving residential and commercial customers through four locations in the Tulsa, Oklahoma area, and one in Joplin, Missouri. Total consideration for the acquisition was $2.0 million, comprised of cash at close of $500,000, deferred consideration in the form of a seller note of $1.2 million, with additional
consideration paid in the form of an earnout valued at approximately $300,000. The deferred consideration is payable in three $400,000 installments due annually on the first three anniversary dates following the closing date. Each installment will accrue interest at 6.0% per annum until paid.
The fair value of the purchase price components outlined above was approximately $2.0 million, as detailed below (in $000's):
Cash $ 500 
Deferred consideration 1,200 
Earnout 301 
Purchase price $ 2,001 
The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of November 30, 2023, as calculated by management. The table below outlines the purchase price allocation of the purchase for Johnson to the acquired identifiable assets, liabilities assumed and goodwill as of March 31, 2024 (in $000’s):
Total purchase price $ 2,001 
Accounts payable 1,017 
Accrued liabilities 1,141 
Total liabilities assumed 2,158 
Total consideration 4,159 
Accounts receivable 1,252 
Inventory 1,127 
Property, plant and equipment 157 
Intangible assets
Customer relationships $ 1,301 
Non-compete agreement 306 
Subtotal intangible assets 1,607 
Other assets 16 
Total assets acquired 4,159 
Total goodwill $ — 
Acquisition of Harris Flooring Group® Brands
On September 20, 2023, Marquis acquired the Harris Flooring Group® brands from Q.E.P., a designer, manufacturer, and distributor of a broad range of best-in-class flooring and installation solutions for commercial and home improvement projects. Specifically, Marquis acquired the Harris Flooring Group brands, inventory, and book of business and intends to retain all sales representatives. The purchase price was $10.1 million, consisting of $3.0 million in cash at close, and the recording of a deferred payment of $5.1 million and holdback of $2.0 million. The acquisition was determined to be an asset acquisition for accounting purposes. The entirety of the purchase price was allocated to inventory.
Acquisition of PMW
On July 20, 2023 (“Effective Date”), the Company acquired PMW, a Kentucky-based metal stamping and value-added manufacturing company. PMW was acquired for total consideration of approximately $28 million, comprised of a $25 million purchase price, plus closing cash, and subject to working capital adjustments, with additional consideration of up to $3 million paid in the form of an earn-out. The purchase price was funded in part by a $2.5 million seller note, borrowings under a credit facility of $14.4 million, and proceeds under a sale and leaseback transaction of approximately $8.6 million. The acquisition involved no issuance of stock of the Company.
As of the Effective Date, the Company entered into a sales and leaseback transaction for two properties acquired, one located in Frankfort, Kentucky, and the other located in Louisville, Kentucky, with Legacy West Kentucky Portfolio, LLC (“Lessor”). The aggregate sales price of the real estate was approximately $14.5 million. The Louisville, Kentucky property was acquired on the Effective Date for $5.1 million in connection with an option of PMW to purchase that property.
The provisions of each of the two lease agreements include a 20-year lease term with two five-year renewal options. The base rent under the Frankfort lease agreement is $34,977 per month for the first year of the term and a 2% per annum escalator thereafter. The base rent under the Louisville lease agreement is $63,493 per month for the first year of the term and a 2% per annum escalator thereafter. Both lease agreements are “net leases,” such that the lessees are also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the real property incurred by the lessor. Due to the highly specialized nature of the leased assets, the Company currently believes it is more likely than not that each of the two five-year options will be exercised. The proceeds of $14.5 million, net of closing fees, from the sale-leaseback were used to assist in funding the acquisition of PMW.
The fair value of the purchase price components outlined above was $26.8 million due to fair value adjustments for the contingent consideration, cash acquired, and working capital adjustments, as detailed below (in $000’s):
Purchase price $ 25,000 
Fair value of earnout 2,675 
Cash from balance sheet 1,602 
Working capital adjustment (2,500)
Net purchase price $ 26,777 
Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $4.0 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of July 20, 2023, as calculated by an independent third-party firm. Because the transaction was considered a stock purchase for tax purposes, none of the goodwill arising from the acquisition will be deductible for tax purposes. During the three months ended December 31, 2023, the Company recorded noncash fair value adjustments related to inventory and other liabilities assumed, as well as an adjustment to deferred tax liabilities in the aggregate amount of $652,000. The table below outlines the purchase price allocation of the purchase for PMW to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s):
Net purchase price $ 26,777 
Accounts payable 10,788 
Accrued liabilities 4,995 
Total liabilities assumed 15,783 
Total consideration 42,560 
Cash 1,602 
Accounts receivable 12,613 
Inventory 6,266 
Property, plant and equipment 13,616 
Intangible assets 3,600 
Other assets 849 
Total assets acquired 38,546 
Total goodwill $ 4,014 
Acquisition of Cal Coast Carpets
On June 2, 2023, Flooring Liquidators acquired certain fixed assets and other intangible assets of Cal Coast Carpets, Inc. (“Cal Coast”), and its shareholders. No liabilities were assumed as part of either transaction. The purchase price for the fixed assets acquired from Cal Coast was $35,000, and the intangible assets acquired from the shareholders was approximately $1.265 million, for a total combined purchase price of $1.3 million. The intangible assets acquired were comprised of customer relationships, trade name, and non-compete agreements. The acquisition was determined to be an asset acquisition for accounting purposes and, as such, no goodwill was recorded as part of the transaction. The values assigned to the assets acquired are based on their estimates of fair value available as of June 2, 2023, as calculated by management.
The table below outlines the purchase price allocation of the purchase for Cal Coast to the acquired identifiable assets (in $000’s):
Property, plant and equipment $ 35 
Intangible assets
Customer relationships 785 
Trade name 425 
Non-compete agreement 55 
Total intangible assets 1,265 
Total assets acquired $ 1,300 
Acquisition of Flooring Liquidators
On January 18, 2023, Live Ventures acquired 100% of the issued and outstanding equity interests (the “Equity Interests”) of Flooring Liquidators, Inc., Elite Builder Services, Inc. (“EBS”), 7 Day Stone, Inc., Floorable, LLC, K2L Leasing, LLC, and SJ & K Equipment, Inc. (collectively, the “Acquired Companies”). The Acquired Companies are leading retailers and installers of floors, carpets, and countertops to consumers, builders and contractors in California and Nevada.
The acquisition was effected pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with an effective date of January 18, 2023 by and among the Company, and Stephen J. Kellogg, as the seller representative of the equity holders of the Acquired Companies and individually in his capacity as an equity holder of the Acquired Companies, and the other equity holders of the Acquired Companies (collectively, the “Seller”). The purchase price for the Equity Interests was $83.8 million before any fair value considerations, and is comprised of the following:
$41.8 million in cash to the Seller;
$34.0 million (the “Note Amount”) to certain trusts for the benefit of Kellogg and members of his family (the “Kellogg Trusts”) pursuant to the issuance by the Company of a subordinated promissory note (the “Note”) in favor of the Kellogg Trusts;
$4.0 million to the Kellogg 2022 Family Irrevocable Nevada Trust by issuance of 116,441 shares of Company Common Stock (as defined in the Purchase Agreement) (the “Share Amount”), calculated in the manner described in the Purchase Agreement;
$2.0 million holdback; and
$2.0 million of contingent consideration, comprised of $1.0 million in cash and $1.0 million in restricted stock units.
The fair value of the purchase price components outlined above was $78.7 million due to fair value adjustments for the Note, and restricted stock, as detailed below (in $000's).
Purchase price $ 83,800 
Fair value adjustment, sellers note (3,300)
Fair value adjustment, restricted stock (1,800)
Net purchase price $ 78,700 

Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $31.4 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of January 18, 2023, as calculated by an independent third-party firm. The Company anticipates approximately $13.4 million of the goodwill arising from the acquisition to be fully deductible for tax purposes. During the three months ended December 31, 2023, the Company recorded a fair value adjustment related to its contingent
consideration of $1 million. The table below outlines the purchase price allocation, as revised, of the purchase for Flooring Liquidators to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s):
Purchase price $ 78,700 
Accounts payable 5,189 
Accrued liabilities 10,700 
Debt 60 
Total liabilities assumed 15,949 
Total consideration 94,649 
Cash 9,131 
Accounts receivable 4,824 
Inventory 19,402 
Property, plant and equipment 4,643 
Intangible assets
Trade names $ 13,275 
Customer relationships 7,700 
Non-compete agreements 1,625 
Other 49 
Subtotal intangible assets 22,649 
Other 2,581 
Total assets acquired 63,230 
Total goodwill $ 31,419 
Pro Forma Information
The table below presents selected proforma information for the Company for the three and six-month periods ended March 31, 2023, assuming that the acquisition had occurred on October 1, 2022 (the beginning of the Company’s 2023 fiscal year), pursuant to ASC 805-10-50 (in $000's). This proforma information does not purport to represent what the actual results of operations of the Company would have been had the acquisition occurred on that date, nor does it purport to predict the results of operations for future periods.
As Reported Adjustments Proforma
Live Unaudited Three Months Ended March 31, 2023 Flooring Liquidators Unaudited Three Months Ended March 31, 2023
Adjustments(1)
Live for the Three Months Ended March 31, 2023
Net revenue $ 91,122  $ 4,222  $ 95,344 
Net income $ 1,558  $ (2,188) $ (300) $ (930)
Earnings per basic common share $ 0.50  $ (0.30)
Earnings per basic diluted share $ 0.49  $ (0.29)
As Reported Adjustments Proforma
Live Unaudited Six Months Ended March 31, 2023 Flooring Liquidators Unaudited Six Months Ended March 31, 2023
Adjustments(1)
Live for the Six Months Ended March 31, 2023
Net revenue $ 160,108  $ 37,702  $ 197,810 
Net income $ 3,402  $ (1,033) $ (2,226) $ 143 
Earnings per basic common share $ 1.10  $ 0.05 
Earnings per basic diluted share $ 1.08  $ 0.05 
(1) Adjustments are related to adjustments made for the following:
Amortization expense of definite-lived intangible assets has been adjusted based on the preliminary fair value at the acquisition date.
Interest expense has been adjusted to include proforma interest expense that would have been incurred as a result of the acquisition financing obtained by the Company.
Elimination of revenue and costs of revenue associated with sales between Flooring Liquidators and the Company prior to acquisition.