Acquisitions Acquisition of Natural Merchants, Inc.
|6 Months Ended|
Jun. 30, 2022
|Acquisitions And Dispositions [Abstract]|
|Acquisition of Assets of Natural Merchants, Inc.||
Note 3. Acquisition of Assets of Natural Merchants, Inc.
In May 2021, the Company entered into an asset purchase agreement (the "NM Purchase Agreement") pursuant to which it purchased certain assets of a boutique wine importer, primarily consisting of relationships with certain suppliers, for a total purchase price of up to $13.0 million (comprised of up to $12.0 million in cash and $1.0 million in shares of the Company's Series F redeemable convertible preferred stock). The initial purchase price was $8.0 million cash and $1.0 million in shares of the Company's Series F redeemable convertible preferred stock (71,428 shares at $14.00 per share). The additional $4.0 million of cash payments are contingent upon achieving certain performance targets between May 2021 and May 2023 (up to $2.0 million of additional consideration in each year).
The acquisition was accounted for as an asset acquisition and resulted in the recognition of $10.0 million of intangible assets and $2.0 million of net working capital. The Company capitalized transaction costs of $0.4 million related to the acquisition. Additionally, at the acquisition date, the Company recognized $2.0 million of contingent consideration as a liability as it was concluded to be probable of being paid to the seller. These amounts were capitalized as part of the cost of the assets acquired and allocated to increase the eligible assets on a relative fair value basis. The acquired intangible assets, primarily consisting of relationships with certain suppliers, have a useful life of 20 years.
The Company reassesses the contingent consideration on a quarterly basis and as of June 30, 2022, determined that $1.6 million and $1.8 million was probable of being paid to the seller for the earnout periods ending May 2022 and 2023, respectively.
Subsequent to June 30, 2022, the Company entered into an amendment to the NM Purchase Agreement that, among other things, restructured the payment of the $1.6 million contingent consideration for the earnout period ending May 2022 (the "2021 Earnout Amount") into nine monthly installments beginning September 15, 2022. The amendment also made the repayment of the 2021 Earnout Amount subject to a 10% annualized interest rate, accruing monthly from July 1, 2022. Each of the first eight payments will equal one-twelfth of the balance, and the ninth and final payment will equal the remaining balance. The amendment also provides that the payment of any unpaid amount of the 2021 Earnout Amount may be accelerated under certain circumstances, including in the event the Company secures certain third-party financing or undergoes a change of control or sale of all or substantially all of its assets.
The Company recognized amortization expense related to the acquired intangible assets of $0.1 million for both the three months ended June 30, 2022 and 2021, and $0.3 million and $0.1 million during the six months ended June 30, 2022 and 2021, respectively.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef