Document and Entity Information
Document and Entity Information | 6 Months Ended |
Dec. 31, 2022 | |
Document and Entity Information [Abstract] | |
Document Type | S-1 |
Entity Registrant Name | ALLIANCE ENTERTAINMENT HOLDING CORPORATION |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth Company | false |
Entity Central Index Key | 0001823584 |
Amendment Flag | false |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jul. 01, 2022 | Sep. 30, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Condensed Consolidated Statements of Operations | |||||||||
Net Revenues | $ 445,162 | $ 538,445 | $ 683,862 | $ 831,646 | $ 1,417,377 | $ 1,323,567 | $ 775,596 | ||
Cost of Revenues (excluding depreciation and amortization) | 424,265 | 465,407 | 637,495 | 717,889 | 1,234,995 | 1,140,885 | 656,485 | ||
Operating Expenses | |||||||||
Distribution and Fulfillment Expense | 20,365 | 19,947 | 35,230 | 33,207 | 64,260 | 56,885 | 35,877 | ||
Selling, General and Administrative Expense | 15,044 | 15,831 | 29,777 | 29,610 | 58,110 | 57,249 | 50,007 | ||
Depreciation and Amortization | 1,529 | 2,064 | 3,166 | 4,373 | 8,259 | 11,651 | 15,784 | ||
Transaction Costs | $ 694 | $ 350 | 367 | 34 | 1,007 | (282) | (251) | 3,509 | |
IC DISC Commissions | 1,444 | 2,767 | 2,833 | 6,263 | 9,907 | 5,394 | 8,182 | ||
Loss on Disposal of Fixed Assets | (3) | (3) | 87 | ||||||
Total Operating Expenses | 38,746 | 40,643 | 72,010 | 73,171 | 140,285 | 134,775 | 109,850 | ||
Operating (Loss) Income | (17,849) | 32,395 | (25,643) | 40,586 | 42,098 | 47,907 | 9,261 | ||
Other Expenses | |||||||||
Interest Expense, Net | 3,544 | 1,008 | 5,898 | 1,736 | 4,056 | 2,938 | 3,524 | ||
Total Other Expenses | 3,544 | 1,008 | 5,898 | 1,736 | 4,056 | 2,938 | 3,524 | ||
(Loss) Income Before Income Tax (Benefit) Expense | (21,393) | 31,387 | (31,541) | 38,850 | 38,042 | 44,969 | 5,737 | ||
Income Tax (Benefit) Expense | (5,878) | 7,533 | (8,516) | 9,324 | 9,423 | 10,791 | 376 | ||
Net (Loss) Income | $ (15,515) | $ 23,854 | $ (23,025) | $ 29,526 | 28,619 | 34,178 | 5,361 | ||
Other Comprehensive Income | |||||||||
Foreign Currency Translation | 7 | 15 | (318) | ||||||
Total Comprehensive Income | $ 28,626 | $ 34,193 | $ 5,043 | ||||||
Net (Loss) Income per Share - Basic | $ (17.24) | $ 26.50 | $ (25.58) | $ 32.81 | $ 31.80 | $ 37.98 | $ 5.96 | ||
Net (Loss) Income per Share - Diluted | $ (17.24) | $ 26.50 | $ (25.58) | $ 32.81 | $ 31.80 | $ 37.98 | $ 5.96 | ||
Shares Used in Computing Net Income per Share, Basic | 900 | 900 | 900 | 900 | 900 | 900 | 900 | ||
Shares Used in Computing Net Income per Share, Diluted | 900 | 900 | 900 | 900 | 900 | 900 | 900 | ||
Distributions of Paid In Capital per Share | $ 7.57 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets $ in Thousands | Dec. 31, 2022 USD ($) |
Current Assets | |
Cash and Cash Equivalents | $ 1,374 |
Trade Receivables, Net | 170,851 |
Inventory, Net | 175,322 |
Other Current Assets | 9,431 |
Total Current Assets | 356,978 |
Property and Equipment, Net | 10,732 |
Operating Lease Right-Of-Use Assets | 6,612 |
Goodwill | 87,151 |
Intangibles, Net | 25,768 |
Other Long-Term Assets | 305 |
Deferred Tax Asset, Net | 3,409 |
Total Assets | 490,955 |
Current Liabilities | |
Accounts Payable | 193,801 |
Accrued Expenses | 12,418 |
Current Portion of Operating Lease Obligations | 3,456 |
Revolving Credit Facility, Net | 176,615 |
Debt, Current | 8,252 |
Total Current Liabilities | 394,542 |
Operating Lease Obligations, Non-Current | 3,918 |
Total Liabilities | 398,460 |
Commitments and Contingencies | |
Stockholders' Equity | |
Paid In Capital | 46,592 |
Treasury Stock, 57 Shares Carried at Cost | (2,674) |
Accumulated Other Comprehensive Loss | (66) |
Retained Earnings | 48,643 |
Total Stockholders' Equity | 92,495 |
Total Liabilities and Stockholders' Equity | $ 490,955 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Condensed Consolidated Balance Sheets | |||
Common Stock, No Par Value | $ 0 | $ 0 | $ 0 |
Common Stock, Authorized | 1,000 | 1,000 | 1,000 |
Common Stock, Issued | 957 | 957 | 957 |
Common Stock, Outstanding | 900 | 900 | 900 |
Treasury Stock, Shares Carried at Cost | 57 | 57 | 57 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Common Stock Shares Issued | Paid In Capital | Cost of Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Total |
Balances at the beginning at Jun. 30, 2019 | $ 42,951 | $ (2,675) | $ 230 | $ 3,510 | $ 44,016 | |
Balances at the beginning (in shares) at Jun. 30, 2019 | 900 | |||||
Other Comprehensive Income | ||||||
Currency Translation Adjustment | (318) | (318) | ||||
Capital Contribution | 3,860 | 3,860 | ||||
Net Income(Loss) | 5,361 | 5,361 | ||||
Balances at the end at Jun. 30, 2020 | 46,811 | (2,675) | (88) | 8,871 | 52,919 | |
Balances at the end (in shares) at Jun. 30, 2020 | 900 | |||||
Other Comprehensive Income | ||||||
Currency Translation Adjustment | 15 | 15 | ||||
Distributions of Paid In Capital | (6,811) | (6,811) | ||||
Purchase of Treasury Stock | (1) | (1) | ||||
Net Income(Loss) | 34,178 | 34,178 | ||||
Balances at the end at Jun. 30, 2021 | 40,000 | (2,674) | (73) | 43,049 | $ 80,302 | |
Balances at the end (in shares) at Jun. 30, 2021 | 900 | 900 | ||||
Balances at the end at Dec. 31, 2021 | 40,000 | (2,674) | (73) | 72,575 | $ 109,828 | |
Balances at the end (in shares) at Dec. 31, 2021 | 900 | |||||
Balances at the beginning at Jun. 30, 2021 | 40,000 | (2,674) | (73) | 43,049 | $ 80,302 | |
Balances at the beginning (in shares) at Jun. 30, 2021 | 900 | 900 | ||||
Other Comprehensive Income | ||||||
Net Income(Loss) | 29,526 | $ 29,526 | ||||
Balances at the end at Dec. 31, 2021 | 40,000 | (2,674) | (73) | 72,575 | 109,828 | |
Balances at the end (in shares) at Dec. 31, 2021 | 900 | |||||
Balances at the beginning at Jun. 30, 2021 | 40,000 | (2,674) | (73) | 43,049 | $ 80,302 | |
Balances at the beginning (in shares) at Jun. 30, 2021 | 900 | 900 | ||||
Other Comprehensive Income | ||||||
Currency Translation Adjustment | 7 | $ 7 | ||||
Net Income(Loss) | 28,619 | 28,619 | ||||
Balances at the end at Jun. 30, 2022 | 40,000 | (2,674) | (66) | 71,668 | $ 108,928 | |
Balances at the end (in shares) at Jun. 30, 2022 | 900 | 900 | ||||
Balances at the beginning at Sep. 30, 2021 | 40,000 | (2,674) | (73) | 48,721 | $ 85,974 | |
Balances at the beginning (in shares) at Sep. 30, 2021 | 900 | |||||
Other Comprehensive Income | ||||||
Net Income(Loss) | 23,854 | 23,854 | ||||
Balances at the end at Dec. 31, 2021 | 40,000 | (2,674) | (73) | 72,575 | 109,828 | |
Balances at the end (in shares) at Dec. 31, 2021 | 900 | |||||
Balances at the end at Dec. 31, 2022 | 46,592 | (2,674) | (66) | 48,643 | $ 92,495 | |
Balances at the end (in shares) at Dec. 31, 2022 | 900 | 900 | ||||
Balances at the beginning at Jun. 30, 2022 | 40,000 | (2,674) | (66) | 71,668 | $ 108,928 | |
Balances at the beginning (in shares) at Jun. 30, 2022 | 900 | 900 | ||||
Other Comprehensive Income | ||||||
Capital Contribution | 6,592 | $ 6,592 | ||||
Net Income(Loss) | (23,025) | (23,025) | ||||
Balances at the end at Dec. 31, 2022 | 46,592 | (2,674) | (66) | 48,643 | $ 92,495 | |
Balances at the end (in shares) at Dec. 31, 2022 | 900 | 900 | ||||
Balances at the beginning at Sep. 30, 2022 | 40,000 | (2,674) | (66) | 64,158 | $ 101,418 | |
Balances at the beginning (in shares) at Sep. 30, 2022 | 900 | |||||
Other Comprehensive Income | ||||||
Capital Contribution | 6,592 | 6,592 | ||||
Net Income(Loss) | (15,515) | |||||
Balances at the end at Dec. 31, 2022 | $ 46,592 | $ (2,674) | $ (66) | $ 48,643 | $ 92,495 | |
Balances at the end (in shares) at Dec. 31, 2022 | 900 | 900 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows $ in Thousands | 6 Months Ended |
Dec. 31, 2022 USD ($) | |
Cash Flows from Operating Activities: | |
Net Income | $ (23,025) |
Adjustments to Reconcile Net (Loss) Income to Net Cash Used In Operating Activities: | |
Inventory write-down | 10,800 |
Depreciation of Property and Equipment | 1,138 |
Amortization of Intangible Assets | 2,028 |
Amortization of Deferred Financing Costs (Included in Interest) | 83 |
Bad Debt Expense | 330 |
Gain on Disposal of Fixed Assets | (3) |
Changes in Assets and Liabilities, Net of Acquisitions | |
Trade Receivables | (69,193) |
Related Party Receivable | 245 |
Inventory | 68,547 |
Income Taxes Payable\Receivable | (9,098) |
Operating Lease Right-Of-Use Assets | 1,748 |
Operating Lease Obligations | (1,943) |
Other Assets | (5,424) |
Accounts Payable | (28,981) |
Accrued Expenses | 12,088 |
Net Cash Used in Operating Activities | (40,660) |
Cash Flows from Investing Activities: | |
Cash Received for Business Acquisitions, Net of Cash Acquired | 1 |
Net Cash Provided by Investing Activities | 1 |
Cash Flows from Financing Activities: | |
Payments on Revolving Credit Facility | (580,484) |
Borrowings on Revolving Credit Facility | 621,048 |
Net Cash Provided by Financing Activities | 40,564 |
Net Decrease in Cash and Cash Equivalents | (95) |
Cash, Beginning of the Period | 1,469 |
Cash, End of the Period | 1,374 |
Supplemental disclosure for Cash Flow Information | |
Cash Paid for Interest | 5,898 |
Cash Paid for Income Taxes | 586 |
Supplemental Disclosure for Non-Cash Investing and Financing Activities | |
Fixed Asset Financed with Debt | 8,252 |
Capital Contribution | $ 6,592 |
Organization and Principal Busi
Organization and Principal Business Activity | 12 Months Ended |
Jun. 30, 2023 | |
Organization and Principal Business Activity | |
Organization and Principal Business Activity | Note 1: Organization and Principal Business Activity Alliance Entertainment Holding Corporation (the “Company” or “Alliance”) was formed on August 9, 2010. The Company provides full-service distribution of pre-recorded music, video movies, video games and related accessories, and merchandising to retailers and other independent customers primarily in the United States. It provides product and commerce solutions to “brick-and-mortar”, e-commerce retailers, and consumer direct websites, while maintaining trading relationships with manufacturers of pre-recorded music, video movies, video games and related accessories. The Company also provides third party logistics (3PL) products and services to customers. On February 10, 2023, Alliance, Adara Acquisition Corp. (“Adara”) and a Merger Sub consummated the closing of the transactions contemplated by a Business Combination Agreement. Pursuant to the terms of the Business Combination Agreement, a business combination of Alliance and Adara was affected by the merger of Merger Sub with and into Alliance (the “Merger”), with Alliance surviving the Merger as a wholly-owned subsidiary of Adara Following the consummation of the Merger on the closing date of the Business Combination, Adara changed its name from Adara Acquisition Corp. to Alliance Entertainment Holding Corporation). On July 1, 2022 the company added Think3Fold LTD. to its portfolio. Previously on September 30, 2020, the Company added COKeM International LTD to its portfolio. Consolidated financial statements are presented for Alliance Entertainment Holding Corporation and business operations are conducted through seven subsidiaries. The Company’s corporate offices are headquartered in Sunrise, FL, with primary warehouse facilities located in Shepherdsville, KY and Shakopee, MN. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company. All material intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include certain information and footnotes required by GAAP for complete financial statements. However, in management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals and adjustments) which are necessary in order to state fairly the Company’s results of operations, financial position, stockholders’ equity and cash flows as of and for the periods presented. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes, including the Summary of Significant Accounting Policies, included elsewhere in this Registration Statement for the fiscal year ended June 30, 2022. The June 30, 2022, balance sheet information contained herein was derived from the Company’s audited consolidated financial statements as of that date included elsewhere in this Registration Statement for the fiscal year ended June 30, 2022. The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The estimates and assumptions made may not prove to be correct, and actual results could differ from the estimates. Liquidity and Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Note 1: Organization and Principal Business Activity (continued) Pursuant to the requirements of the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt about the Company’s ability to continue as a going concern exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates the substantial doubt. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. Our principal source of liquidity is our borrowing capacity under the revolving credit facility (the ‘‘Revolver’’) with Bank of America, which matures less than one year from the balance sheet date, and cash generated from operations. For the six-month period ended December 31, 2022, the Company has suffered losses from operations, experienced negative cash generated from operations, has a working capital deficit, and has failed certain financial covenants of the Revolver. Management is in active discussions with lenders to renew the Revolver prior to its maturity on September 29, 2023. These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these unaudited condensed consolidated financial statements. As described in Note 17, the Revolver should have been classified as a current liability as of September 30, 2022. Since these conditions that raised substantial doubt about our ability to continue as a going concern at December 31, 2022 were also present at September 30, 2022, the Company should have disclosed there is substantial doubt about the Company’s ability to continue as a going concern in the September 30, 2022 unaudited condensed consolidated financial statements. Mitigation efforts include cost reduction, process efficiencies, and execution of growth and diversification strategies. If we are unable to get an extension of our revolver and implement our mitigation efforts, we may need to alter our operations including ceasing some functions. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Summary of Significant Accounting Policies | ||
Summary of Significant Accounting Policies | Note 2: Summary of Significant Accounting Policies There have been no material changes to the Company’s significant accounting policies from those described in Note 1 to the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2022. | Note 1: Summary of Significant Accounting Policies A summary of the significant accounting policies consistently applied in the preparation of the consolidated financial statements: Basis of Consolidation The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The consolidated financial statements include the accounts of the Alliance Entertainment Holding Corporation and its wholly owned subsidiaries. Significant intercompany transactions have been eliminated in consolidation. Revenue Recognition The Company enters into contracts with its customers for the purchase of products in the ordinary course of business. A contract with commercial substance exists once the Company receives and accepts a purchase order under a sales contract. Revenue from the sale and distribution of pre-recorded music, video, games, accessories, and other related products are recognized when the performance obligations under the terms of a contract with its customer are satisfied, which occurs with the transfer of control of the product. For the majority of the Company’s products, control is transferred, and revenue is recognized when the product is shipped from the Company’s distribution center to the Company’s customers, which primarily consist of retailers. For most of the Company’s distribution contracts, the Company is considered to be the principal to these transactions and the revenue is recognized on a gross basis, since the Company is the primary obligor for fulfilling the promise to its customers on these arrangements, has inventory risk, and has latitude in establishing prices. Additionally, the Company ships some of its products to retailers on a consignment basis. The Company retains ownership of its products stored at these retailers. As the Company’s products are sold by the retailer, ownership is transferred from the Company to the retailer. At that time, the Company invoices the retailer and recognizes revenue for these consignment transactions. If a contract contains more than one performance obligation, the transaction price is allocated to each performance obligation based on relative standalone selling price. Shipping and handling activities are treated as a fulfillment activity rather than a promised service, and therefore, are not considered a performance obligation. Sales, use, value-added, and other excise taxes the Company collects concurrent with revenue producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense when incurred. The Company applies ASC 606, Revenue from Contracts with Customers Ø Portfolio approach practical expedient relative to the estimation of variable consideration. Ø Shipping and handling practical expedient to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities. Ø Costs of obtaining a contract practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset is one year or less. Ø Sales taxes practical expedient to exclude sales taxes and other similar taxes from the transaction price. Ø Significant financing component practical expedient Revenue is recognized at the transaction price which the Company expects to be entitled to receive. When determining the transaction price, the Company estimates variable consideration by applying the portfolio approach practical expedient under ASC 606. The primary sources of variable consideration for the Company are rebate programs, incentive programs and product returns. The rebate and incentives are recorded as a reduction to revenue at the time of the initial sale or when offered. The Company estimates variable consideration related to products sold under its rebate and incentive programs using the expected value method, which is based on sales terms with customers, historical experience, inventory levels, volume purchases, and known changes in relevant trends in the future. There are no material instances where variable consideration is constrained and not recorded at the initial time of sale. Substantially all of the Company’s sales are domestic and are made to customers under agreements permitting certain limited rights of return based upon the prior months’ sales and vendor return rights. Except for video games and vinyl sales, which are not returnable, generally it is the Company’s policy not to accept product returns that cannot be returned to the Company’s vendors. Revenue from product sales is recognized net of estimated returns. Sales in the pre-recorded music and video movies industry generally give certain customers the right to return products. In addition, the Company’s suppliers generally permit the Company to return products that are in the supplier’s current product listing, except for video games and vinyl. Based on historical returns, review of current catalog list and the change of mass merchant’s floor space and store locations carrying the Company’s products, management provides for estimated net returns at the time of sale and other specific reserves when appropriate. This is typically done using a twelve-month average return rate by product. The Company has determined that the nature, amount, timing, and uncertainty of revenue and cash flows are most significantly affected by the overall economic health of the consumer product industry in the United States. Cash and Cash Equivalents Cash equivalents include all investments with original maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Trade Receivables, Net The Company grants credit to customers on credit terms in the ordinary course of business. Credit is extended based on an evaluation of a customer’s financial condition and collateral is generally not required. Trade receivables are carried at original invoice amount less estimates made for allowances for uncollectible accounts based on a periodic review of all outstanding amounts. Management determines these allowances by regularly evaluating individual customer receivables and considering a customer’s financial condition and credit history. Trade receivables are written off against the allowance when they are deemed uncollectible. Recoveries of trade receivables previously written off are recorded as a credit to the allowance for uncollectible accounts when received. Inventory and Inventory Reserves Inventory is stated at the lower of cost or net realizable value, using the weighted average cost method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Excess or obsolete inventory reserves are established when inventory is estimated to not be sellable or returnable to suppliers based on product demand and product life cycle. Property and Equipment, Net Property and equipment are recorded at cost less accumulated depreciation. Depreciation and amortization are calculated using the straight-line method over the estimated useful life of the asset. Costs of major additions and improvements are capitalized while repair and maintenance costs are charged to expense as incurred. When items are disposed of, the cost and accumulated depreciation are eliminated from the accounts, and any gain or loss is reflected in the consolidated statements of operations. Depreciation and Amortization Depreciation is provided in amounts sufficient to allocate the cost of depreciable assets to operations over their estimated useful lives using the straight-line method. The estimated useful lives are as follows: Asset Class Useful Life Leasehold Improvements 5 – 10 years Machinery and Equipment 3 – 7 years Furniture and Fixtures 5 – 7 years Capitalized Software 1 – 3 years Equipment Under Capital Leases 5 years Computer Equipment 2 – 5 years Leasehold improvements and equipment under capitalized leases are amortized over the shorter of the useful life of the asset or the life of the lease. Depreciation and amortization expense was approximately $3.1 million, $5.6 million, and $7.1 million for the years ended June 30, 2022, 2021, and 2020, respectively. Goodwill and Definite-Lived Intangible Assets, Net Goodwill is assessed using either a qualitative assessment or quantitative approach to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. The qualitative assessment evaluates factors including macroeconomic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than it carrying value, a quantitative assessment is performed. Otherwise, no further assessment is required. The quantitative approach compares the estimated fair value of the reporting units to it carrying amount, including goodwill. Impairment is indicated if the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, and an impairment charge is recognized for the differential. The Company completes its annual goodwill impairment test as of June 30 each year. For the years ended June 30, 2022, 2021 and 2020, the Company did not record any impairment. Intangible assets are stated at cost, less accumulated amortization. Amortization of customer relationships and lists is recorded using an accelerated method over the useful lives of the related assets, which range from 10 to 15 years. Covenants not to compete, trade name and favorable leases are amortized using the straight-line method over the estimated useful lives of the related assets, which range from five Impairment of Long-Lived Assets Recoverability of long-lived assets, including property and equipment and certain identifiable intangible assets are evaluated whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Factors considered important which could trigger an impairment review include but are not limited to significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the assets or the strategy for the overall business, significant decrease in the market value of the assets and significant negative industry or economic trends. In the event the carrying amount of the long-lived assets may not be recoverable based upon the existence of one or more of the indicators, the assets are assessed for impairment based on the estimated future undiscounted cash flows expected to result from the use of the asset and its eventual deposition. If the carrying amount of an asset exceeds the sum of the estimated future undiscounted cash flow, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value. There was no impairment during the years ended June 30, 2022, 2021 and 2020. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include management’s estimates of doubtful accounts, sales returns, rebates, defective products, and inventory recoverability. On an ongoing basis, management evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. Fair Value of Financial Instruments The Company complies with ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles and expands disclosure requirements about fair value measurements. Under ASC 820, there are three categories for the classification and measurement of assets and liabilities carried at fair value: Level 1: Valuation based on quoted market prices in active markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Examples include publicly traded equity securities and publicly traded mutual funds that are actively traded on a major exchange or over-the- counter market. Level 2: Valuation based on quoted market prices of investments that are not actively traded or for which certain significant inputs are not observable, either directly or indirectly. Examples include municipal bonds, where fair value is estimated using recently executed transactions, bid asked prices and pricing models that factor in, where applicable, interest rates, bond spreads and volatility. Level 3: Valuation based on inputs that are unobservable and reflect management’s best estimate of what market participants would use as fair value. Examples include limited partnerships and private equity investments. Cash, trade accounts receivable, accounts payable, accrued expenses and other current liabilities estimated fair values approximate carrying amounts as of June 30, 2022 and 2021, based on the short-term nature and maturity of these instruments. The estimated fair value of debt and the credit facility is based on Level 2 inputs, which consist of interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities. As of June 30, 2022, 2021 and 2020 the estimated fair value of the Company’s short and long-term debt approximates it carrying value due to market interest rates charged on such debt or their short-term maturities. The estimated fair value of the tangible and intangible assets acquired, and the liabilities assumed in connection with the acquisition of COKeM were measured using Level 2 and Level 3 inputs. Advertising Costs Advertising costs, which consist primarily of mailers, catalogs, online marketing and other promotions, are expensed in the period in which the advertisement or promotion occurs. Additionally, the Company maintains cooperative advertising agreements with certain vendors to include their logos and product descriptions prominently in the catalogs and calendars. The fee revenues charged to the vendors for the cooperative advertising arrangements are recorded as a reduction of advertising expense and any excess fees are recorded as a reduction of cost of goods sold. Advertising costs, net, for the years ended June 30, 2022, 2021, and 2020, were $6.5 million, $6.1 million, and $6.5 million, respectively. Deferred Financing Costs Deferred financing costs relating to the Company’s revolving credit facility are deferred and amortized ratably over the life of the debt using the straight-line method. Deferred financing costs are included as an addition to interest expense on the consolidated statements of operations and comprehensive income and are included in Revolving Credit Facility, Net on the Consolidated Balance Sheets. Shipping and Handling The Company accounts for shipping and handling activities as fulfillment activities. As such, the Company does not evaluate shipping and handling as promised services to its customers. Shipping and handling costs are included in cost of revenues in the accompanying consolidated statements of operations and comprehensive income. Foreign Currency Translation and Transactions The financial position and results of operations of the Company’s foreign subsidiary is measured using the local currency as the functional currency. Assets and liabilities of this subsidiary are translated into United States dollars at the exchange rate in effect at each period end. Income statement accounts are translated at the average rate of exchange prevailing during the period. Foreign currency translation income totaled $7 and $15 thousand for the years ended June 30, 2022, and 2021 respectively. Foreign currency translation loss totaled $318 thousand for the year ended June 30, 2020. The Company does not typically hedge its foreign exchange rate position. Realized gains or losses from foreign currency transactions are included in operations as incurred. Business Combinations — Valuation of Acquired Assets and Liabilities Assumed The Company allocates the purchase price for each business combination, or acquired business, based upon (i) the fair value of the consideration paid and (ii) the fair value of net assets acquired, and liabilities assumed. The determination of the fair value of net assets acquired and liabilities assumed requires estimates and judgements of future cash flow expectations for the acquired business and the allocation of those cash flows to identifiable tangible and intangible assets. Fair values are calculated by applying estimates related to Internal Rate of Return (IRR) and Weighted Average Cost of Capital (WACC) assumptions as well as incorporating expected cash flows into industry standard valuation techniques. Goodwill is the amount by which the purchase price consideration exceeds the fair value of tangible and intangible assets acquired, less assumed liabilities. Intangible assets, such as customer relations and trade names, when identified, are separately recognized and amortized over their estimated useful lives, if considered definite lived. Acquisition costs are expensed as incurred and are included the consolidated statements of operations and comprehensive income. Leases The Company is a lessee in multiple noncancelable operating and financing leases. If the contract provides the Company the right to substantially all the economic benefits and the right to direct the use of the identified asset, it is generally considered to be or contain a lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term. The ROU asset is also adjusted for any lease prepayments made, lease incentives received, and initial direct costs incurred. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. Increases (decreases) to variable lease payments due to subsequent changes in an index or rate are recorded as variable lease expense (income) in the future period in which they are incurred. The discount rate used is the implicit rate in the lease contract, if it is readily determinable, or the Company’s incremental borrowing rate. The Company uses the incremental borrowing rate based on the information available at the commencement date for all leases. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. The ROU asset for operating leases is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e., present value of the remaining lease payments), plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received, and any impairment recognized. Operating leases with fluctuating lease payments: For operating leases with lease payments that fluctuate over the lease term, the total lease costs are recognized on a straight-line basis over the lease term. The ROU asset for finance leases is amortized on a straight-line basis over the lease term. For all underlying classes of assets, the Company has elected to not recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Leases containing termination clauses in which either party may terminate the lease without cause and the notice period is less than 12 months are generally deemed short-term leases with lease costs included in short-term lease expense. The Company recognizes short-term lease cost on a straight-line basis over the lease term. Variable Interest Entity The Company evaluates its ownership, contractual, and other interests in entities to determine if it has any variable interest in a variable interest entity (VIE). These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical information, among other factors. If the Company determines that an entity in which it holds a contractual, or ownership, interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; Changes in consolidation status are applied prospectively. The Company evaluated its transactions with a related party (included in Note 12) and concluded that the arrangements do not result in variable interests and do not require consolidation of any of the related party entities. Segments Operating segments are defined as components of an enterprise where discrete financial information is available and evaluated regularly by the chief operating decision maker or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision makers manage the business, allocate resources, and assess performance on a consolidated basis. Accordingly, the Company has one operating and reportable Accounting Pronouncements Recently issued and adopted accounting pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which was issued to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This ASU also clarifies and simplifies other aspects of the accounting for income taxes. This update is effective for fiscal years beginning after December 15, 2020, and early adoption is permitted. The company adopted the new standard on July 1, 2021. The adoption of this standard did not have a material impact on the company’s consolidated financials statements. In June 2016, the FASB issued ASU 2016-13, Financials Instruments — Credit Losses (Topic 848): Measurement of Credit Losses on Financials Instruments to amend the current accounting guidance which requires an incurred loss model for recognizing credit losses. Under the new guidance, the Company now measures all expected losses based on a forward-looking expected loss model which reflects probable losses based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted the new standard on July 1, 2020. The adoption of this standard did not have a material impact on the company’s consolidated financial statements. Recently issued but not yet adopted accounting pronouncements In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The new guidance provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. The provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. The Company is currently evaluating the impact that adopting this guidance may have on its consolidated financial statements. In October 2021, The FASB issued ASU No. 2021-08, Accounting for contract Assets and Contract Liabilities from contracts with customers (Topic 805) (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. ASU 2021-08 is effective for annual periods beginning December 15, 2022, including interim periods within those fiscal years. Adoption of SU 2021-08 should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption. The Company is currently evaluating the impact of ASU 2021-08 on its consolidated financial statements. |
Trade Receivables, Net
Trade Receivables, Net | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Trade Receivables, Net | ||
Trade Receivables, Net | Note 3: Trade Receivables, Net Trade Receivables, Net consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Trade Receivables $ 175,861 $ 101,064 Less: Allowances for Doubtful Accounts (311) (557) Sales Returns Reserve, Net (3,100) (1,898) Customer Rebate and Discount Reserve (1,599) 90 Total Allowances (5,010) (2,366) Trade Receivables, Net $ 170,851 $ 98,699 Concentration of Credit Risk Concentration of Credit Risk consists of the following at: Revenue Six Months Ended Six Months Ended ($ in thousands) December 31, 2022 December 31, 2021 Customer #1 19.3 % 24.2 % Receivables Balance ($ in thousands) December 31, 2022 June 30, 2022 Customer #1 14.2 % 21.4 % Customer #2 13.6 % * Customer #3 10.2 % 14.2 % * Less than 10% | Note 2: Trade Receivables, Net Trade Receivables, Net consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Trade receivables $ 101,064 $ 115,618 Less: Allowances for Doubtful Accounts (558) (1,145) Sales returns reserve, net (1,898) (2,975) Customer Rebate and Discount Reserve 90 (166) Total Allowances (2,366) (4,286) Trade Receivables, Net $ 98,699 $ 111,332 Concentration of Credit Risk Revenue Concentration of Credit Risk consists of the following at: Year Ended ($ in thousands) June 30, 2022 June 30, 2021 June 30, 2020 Customer #1 23.6 % 23.7 % 19.6 % Receivables Balance ($ in thousands) June 30, 2022 June 30, 2021 Customer #1 21.4 % 12.2 % Customer #2 14.2 % * * Less than 10% |
Inventory, Net
Inventory, Net | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Inventory, Net. | ||
Inventory, Net | Note 4: Inventory, Net The Company completed an evaluation of the net realizable value of our inventory at December 31, 2022. As a result of this evaluation, the Company recorded a $7.1 Inventory, Net (all finished goods) consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Inventory $ 186,895 $ 255,236 Less: Reserves (11,573) (5,797) Inventory, Net $ 175,322 $ 249,439 | Note 3: Inventory, Net Inventory, Net (all finished goods) consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Inventory $ 255,236 $ 145,740 Less: Reserves (5,797) (4,079) Inventory, Net $ 249,439 $ 141,661 |
Other Current and Long-Term Ass
Other Current and Long-Term Assets | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Other Current and Long-Term Assets | ||
Other Current and Long-Term Assets | Note 5: Other Current and Long-Term Assets Other Current and Long-Term Assets consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Other Assets – Current Prepaid Intellectual Property $ 2,197 $ 2,443 Prepaid Insurance 639 431 Prepaid Acquisitions 2,865 2,243 Prepaid Freight 325 216 Prepaid Manufacturing Components 28 79 Prepaid Rent 886 — Prepaid Maintenance 825 885 Prepaid Shipping Supplies 1,666 2,831 Total Other Assets – Current $ 9,431 $ 9,128 Other Long-Term Assets Deposits $ 305 $ 3,748 Total Other Long-Term Assets $ 305 $ 3,748 | Note 4: Other Current and Long-Term Assets Other Current and Long-Term Assets consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Other Assets – Current Prepaid Intellectual Property $ 2,443 $ 3,411 Prepaid Insurance 431 2,011 Prepaid Acquisitions 2,243 — Prepaid Freight 216 — Prepaid Manufacturing Components 79 167 Prepaid Maintenance 885 165 Prepaid Shipping Supplies 2,832 1,533 Total Other Assets – Current $ 9,129 $ 7,287 Other Assets – Long Term Deposits $ 3,748 $ 361 Total Other Assets – Long Term $ 3,748 $ 361 |
Property and Equipment, Net
Property and Equipment, Net | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Property and Equipment, Net | ||
Property and Equipment, Net | Note 6: Property and Equipment, Net Property and Equipment, Net consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Property and Equipment Leasehold Improvements $ 1,680 $ 1,680 Machinery and Equipment 25,430 19,440 Furniture and Fixtures 1,749 3,530 Capitalized Software 10,508 11,451 Equipment Under Capital Leases 12,488 12,917 Computer Equipment 1,626 2,662 Construction in Progress 489 154 53,970 51,834 Less: Accumulated Depreciation and Amortization (43,238) (48,550) Total Property and Equipment, Net 10,732 $ 3,284 Depreciation and Amortization Expense for the three months ended December 31, 2022, and 2021, was $0.5 million and $0.8 million respectively and six months ended December 31, 2022, and 2021 was $1.1 million and $1.8 million, respectively. | Note 5: Property and Equipment, Net Property and Equipment, Net consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Property and Equipment Leasehold Improvements $ 1,680 $ 1,597 Machinery and Equipment 19,440 19,236 Furniture and Fixtures 3,530 2,622 Capitalized Software 11,451 11,422 Equipment Under Capital Leases 12,917 12,917 Computer Equipment 2,662 2,665 Construction in Progress 154 104 51,834 50,563 Less: Accumulated Depreciation and Amortization (48,550) (44,233) Total Property and Equipment, Net $ 3,284 $ 6,330 Depreciation and Amortization Expense for the years ended 2022, 2021 and 2020 was $3.1 million, $5.6 million, and $7.1 million respectively. |
Goodwill and Intangibles, Net
Goodwill and Intangibles, Net | 6 Months Ended |
Dec. 31, 2022 | |
Goodwill and Intangibles, Net | |
Goodwill and Intangibles, Net | Note 7: Goodwill and Intangibles, Net ($ in thousands) December 31, 2022 June 30, 2022 Goodwill: $ 79,903 $ 79,903 Additions to Goodwill 7,248 — Goodwill, Net $ 87,151 $ 79,903 Note 7: Goodwill and Intangibles, Net (continued) Intangibles, Net consists of the following at: ($in thousands) December 31, 2022 June 30, 2022 Intangibles: Customer Relationships $ 78,000 $ 78,000 Trade Name - Alliance 5,200 5,200 Covenant Not to Compete 10 10 Mecca Customer Relationships 8,023 8,023 Customer List 18,792 9,760 Total $ 110,025 $ 100,993 Accumulated Amortization (84,257) (82,229) Intangibles, Net $ 25,768 $ 18,764 During the three months ended December 31, 2022, and 2021 the company recorded amortization expense of $1.0 million and $1.3 million, respectively and during the six months ended December 31, 2022, and 2021, amortization expense of $2.0 million and $2.6 million, respectively. Expected amortization over the next five years and thereafter, at December 31, 2022, is as follows: ($ in thousands) Intangible Assets Year Ended June 30 2023 $ 2,781 2024 4,223 2025 3,651 2026 3,339 2027 3,289 Thereafter 8,485 Total Expected Amortization $ 25,768 |
Accrued Expenses
Accrued Expenses | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Accrued Expenses | ||
Accrued Expenses | Note 8: Accrued Expenses Accrued Expenses consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Marketing Funds Accruals $ 2,768 $ 2,738 Payroll and Payroll Tax Accruals 2,802 3,904 Accruals for Other Expenses 6,848 4,931 Total Accrued Expenses $ 12,418 $ 11,573 | Note 7: Accrued Expenses Accrued Expenses consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Marketing Funds Accruals $ 2,738 $ 1,294 Payroll and Payroll Tax Accruals 3,904 6,833 Accruals for Other Expenses 4,931 5,428 Total Accrued Expenses $ 11,573 $ 13,555 |
Lines of Credit and Long-Term O
Lines of Credit and Long-Term Obligation | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Lines of Credit and Long-Term Obligation | ||
Lines of Credit and Long-Term Obligation | Note 9: Lines of Credit and Long-Term Obligation Line of Credit The Company executed an amendment to its Credit Facility with Bank of America on January 24, 2022, (retroactive to January 1, 2022), to transition the interest rate benchmark from Libor to a Secured Overnight Financing Rate (SOFR). The effective interest rate on the revolver using SOFR for the six months ended December 31, 2022, was 4.76% (SOFR plus a spread of 2.11%). The effective interest rate for the six months ended December 31, 2021, was 2.34% (Libor rate plus 2%). All assets (with certain capitalized lease exceptions) and interest in assets of the Company are pledged as collateral under the Credit Facility. The Credit Facility matures on September 29, 2023, with a variable annual interest rate equal to the higher of the Prime rate, Federal Funds rate plus .5% or Bank of America Libor rate plus 2%, up to January 1, 2022, and SOFR plus a spread of 2.11% going forward. On June 30, 2022, the Credit Facility with Bank of America was increased from $175 million to $225 million. The Credit Facility contains certain financial covenants with which the Company is required to comply. Failure to comply with the financial covenants contained in the Credit Facility could result in an event of default. An event of default, if not cured or waived, would permit acceleration of any outstanding indebtedness under the Credit Facility. The Company obtained a waiver for non-compliance with one non-financial covenant related to its delivery of the monthly unaudited financial statements and compliance certificates for the periods pertaining to June 30, 2022, July 31, 2022, and August 31, 2022. These non-compliances resulted in events of default under the Revolving Credit Facility and accordingly, the Credit Facility was classified as a current liability as of June 30, 2022. The Company failed to meet the Fixed Charge Coverage Ratio covenant requirement as of November 30, 2022, December 31, 2022, and January 31, 2023. The Company is in negotiations with its lender to obtain a waiver for non-compliance. We cannot provide any assurance that our lender will provide us with a waiver for the current event of default related to the non-compliance with the Fixed Charge Coverage Ratio, or any future instances of non-compliance. The Company has other debt in the amount of $8,252 that includes cross-default provisions with other debt. Accordingly, this debt is recorded as a current liability as of December 31, 2022, due to the Credit Facility being in default. The failure to maintain compliance with covenant requirements if not waived by our lender causes the outstanding borrowings to be in default and payable on demand which would have a material adverse effect on us and our ability to continue as a going concern. Availability under the Credit Facility is limited by the Company’s borrowing base calculation, as defined in the Credit Agreement. In addition, there is a commitment fee of 0.25% for unused credit line with fees for the six months ended December 31, 2022, and 2021 of $60 thousand and $95 thousand, respectively. Availability as of December 31, 2022, was $48.3 million with an outstanding revolver balance of $176.7 million. Because of the event of default, the lenders are under no obligation to fund any loan, arrange for the issuance of any letter of credit, or grant any other accommodation to or for the benefit of the Company. Availability as of June 30, 2022, was $48 million with an outstanding revolver balance of $136 million. Revolver Balance consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Bank of America Revolving Credit Agreement $ 176,740 $ 136,176 Less: Deferred Finance Costs (125) (208) Revolving Credit, Net $ 176,615 $ 135,968 | Note 8: Lines of Credit and Long-Term Obligation Line of Credit On June 30, 2022, the credit line with Bank of America was amended for the current period which ends September 29, 2023 and increased from $175 million to $225 million with a variable annual interest rate equal to the higher of the Prime rate, Federal Funds rate plus .5% or Bank of America SOFR rate plus 2.11% (Libor rate plus 2% is the prior agreement). As of June 30, 2022, the interest rate was 3.61% (SOFR 1.5% plus a spread of 2.11%). As of June 30, 2021, the interest rate was 2.25% (Libor .25% plus a spread of 2%) with borrowing above the contracted Libor at 4.25% (Base Rate 3.25% plus a spread of 1%). The weighted average interest rate on the revolver for fiscal years ended June 30, 2022 and 2021 was 2.5% and 4.15% respectively. All assets (with certain capitalized lease exceptions) and interest in assets of the Company are pledged as collateral under the Credit Facility. In addition, the Credit Facility contains certain financial covenants with which the Company is required to comply. Failure to comply with the financial covenants contained in the Credit Facility could result in an event of default. An event of default, if not cured or waived, would permit acceleration of any outstanding indebtedness under the Credit Facility. As of June 30, 2022, the Company was in compliance with all financial covenants pertaining to the credit facility. The Company obtained a waiver for non-compliance with one non-financial covenant related to its delivery of the monthly unaudited financial statements and compliance certificates for the periods pertaining to June 30, 2022, July 31, 2022, and August 31, 2022. This non-compliance resulted in events of default under the Revolving Credit Facility. As a result of this non-compliance as of the June 30, 2022 balance sheet date and periods thereafter, the Company has classified the outstanding balance of the Revolving Credit Facility Net of $135,968 as a current liability as of June 30, 2022. The Company expects that it will comply with this non-financial covenant for a period of at least one year from the issuance of these financial statements. Availability under the Credit Facility is limited by the Company’s borrowing base calculation, as defined in the Credit Agreement. In addition, there is a commitment fee of 0.25% for unused credit line with fees for year ended June 30, 2022, and 2021 of $100 thousand and $300 thousand, respectively. Availability at June 30, 2022, was $48 million with an outstanding revolver balance of $136 million. Availability on June 30, 2021 was $95 million with an outstanding revolver balance of $54 million. Revolver Balance consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Bank of America Revolving Credit Agreement $ 136,176 $ 53,955 Less: Deferred Finance Costs (208) (375) Revolving Credit, Net $ 135,968 $ 53,580 Seller Notes As part of the acquisition described in Note 15, the Company issued an $8.5 million subordinated note payable effective September 2020 that matures in September 2022. Interest is incurred at an annual rate of 6%. After a $2.5 million early payment, there was $3.75 million outstanding in current and long-term liabilities on the consolidated balance sheet as of June 30, 2021. As of June 30, 2022, the Seller Note balance was paid in full. |
Employee Benefits
Employee Benefits | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Employee Benefits | ||
Employee Benefits | Note 10: Employee Benefits Company Health Plans The Company sponsors the Alliance Health & Benefits Plan (AHBP) consisting of the following plans: self-insured medical (PPO and HDHP), dental (PPO and HMO), vision, life Insurance, short & long-term disability. The medical insurance is self-insured to a maximum company exposure of $200 thousand per individual occurrence, at which time a stop loss policy covers the balance of covered claims. The Company contributes various percentages to different levels of premium coverage. As of December 31, 2022, the Company fully accrued for estimated run out exposure on a mature claim basis, as provided and calculated by our plan administrator. The Dental insurance HMO is self-insured to a maximum per individual procedure based on a published schedule which measures exposure. The PPO policy is fully insured. The Company contributes various percentages to different levels of premium coverage. As of December 31, 2022, the Company was fully accrued for estimated run out exposure on a mature claim basis, as provided and calculated by the plan administrator. The vision plan, life insurance plan, and short and long-term disability plans are fully insured, sponsored by the Company and premiums are paid by the employer and employee based on various Board approved schedules. At December 31, 2022 and June 30, 2022, the accrued estimated run out exposure totaled approximately $218 thousand and $234 thousand, respectively, for the medical and dental insurance plans. Accrued estimated runout exposure is included in accrued expenses on the consolidated balance sheets. 401(k) Plan The Company has the Alliance Entertainment 401(k) Plan (401(k) Plan) covering all eligible employees of the Company. All employees over the age of 18 are eligible to participate in the Plan at the beginning of the month following date of hire. The Plan has automatic deferral at the beginning of the month following date of hire. Employees are automatically enrolled in the Plan with a 3% contribution; however, they have the option to increase/decrease their deferrals or opt out of the Plan at any time. The Company currently offers a match contribution of $.50 of every dollar up to 4% of contribution percentage. The Company conducts a retirement plan review on an annual basis. | Note 9: Employee Benefits Company Health Plans The Company sponsors the Alliance Health & Benefits Plan (AHBP) consisting of the following plans: self-insured medical (PPO and HDHP), dental (PPO and HMO), vision, life Insurance, short & long-term disability. The medical insurance is self-insured to a maximum company exposure of $200K per individual occurrence, at which time a stop loss policy covers the balance of covered claims. The Company contributes various percentages to different levels of premium coverage. As of June 30, 2022, the Company fully accrued for estimated run out exposure on a mature claim basis, as provided and calculated by our plan administrator. The Dental insurance HMO is self-insured to a maximum per individual procedure based on a published schedule which measures exposure. The PPO policy is fully insured. The Company contributes various percentages to different levels of premium coverage. As of June 30, 2022, the Company was fully accrued for estimated run out exposure on a mature claim basis, as provided and calculated by the plan administrator. The vision plan, life insurance plan, and short & long-term disability plans are fully insured, sponsored by the company and premiums are paid by the employer and employee based on various Board approved schedules. During the years ended June 30, 2022, and 2021, the accrued estimated run out exposure totaled approximately $218 thousand and $436 thousand, respectively, for the medical and dental insurance plans. Accrued estimated runout exposure is included in accrued expenses on the consolidated balance sheets. 401(k) Plan The Company has the Alliance Entertainment 401(k) Plan (401(k) Plan) covering all eligible employees of the Company. All employees over the age of 18 are eligible to participate in the Plan at the beginning of the month following date of hire. The Plan has automatic deferral at the beginning of the month following date of hire. Employees are automatically enrolled in the Plan with a 3% contribution; however, they have the option to increase/decrease their deferrals or opt out of the Plan at any time. The Company currently offers a match contribution of $.50 of every dollar up to 4% of contribution percentage. The Company conducts a retirement plan review on an annual basis. During the years ended June 30, 2022, 2021, and 2020 the Company contributed approximately $695 thousand, $502 thousand, and $539 thousand to this retirement plan, respectively which is recorded in Selling, General and Administrative Expense in the Consolidated Statements of Operations and Comprehensive Income. |
Income Taxes
Income Taxes | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Income Taxes | ||
Income Taxes | Note 11: Income Taxes The effective tax rate was 27% for the six months ended December 31,2022, compared to 26% for the same periods of 2021. State tax rates vary among states and average approximately 6.0% although some state rates are higher, and a small number of states do not impose an income tax. For the six months ended December 31, 2022, and 2021, the difference between the Company’s effective tax rate and the federal statutory rate primarily resulted from state income taxes. | Note 10: Income Taxes The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns as well as tax credits carry forward. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax laws or rates. Valuation allowances are established as necessary to reduce deferred tax assets to the amount more likely than not to be realized. The Company’s policy on income statement classification of interest and penalties related to income tax obligations is to include such items as part of total interest expense and other expense, respectively. As of June 30, 2022, and 2021, the Company did not have any material uncertain tax positions and thus has not recognized any interest or penalties in these consolidated financial statements. Domestic income (loss) before income taxes and details of the income tax expense (benefit) are as follows: Year Ended June 30 (In thousands) 2022 2021 2020 Income Tax Expense (Benefit): Current: Federal $ 7,937 $ 7,201 $ (1,759) State 2,663 2,304 849 Total Current $ 10,599 $ 9,505 $ (910) Deferred: Federal (951) 1,070 1,137 State (226) 216 149 Total Deferred (1,177) 1,286 1,286 Income Tax Expense $ 9,423 $ 10,791 $ 376 The items accounting for the difference between income taxes computed at the U.S. federal statutory income tax rate and the income tax expense (benefit) at the effective tax rate for each of the years are as follows: Year Ended June 30 (In thousands) 2022 2021 2020 Federal Income Tax Provision at Statutory Rate $ 7,484 21 % $ 9,444 21 % $ 1,205 21 % State Taxes, Net of Federal Benefits 2,437 6 % 2,520 6 % 997 17 % Meals Entertainments — 0 % 6 0 % 18 0 % Foreign Derived Intangible Income (618) -2 % (802) -2 % (598) -10 % NOL Carryback Refund Before AMT — 0 % — 0 % (1,216) -21 % Debt Forgiveness and Interest Income — 0 % — 0 % — 0 % Other 120 -1 % (377) -1 % (30) -1 % Income Tax Expense $ 9,423 24 % $ 10,791 24 % $ 376 6 % In year ended June 30, 2020 the company recorded an Income Tax benefit of $2.5 million related to NOL Carrybacks under the provision in the CARES Act. Deferred income taxes reflect the net tax effects of temporary differences between the amount of assets and liabilities for accounting purposes and the amounts used for tax purposes. The components of deferred taxes consist of the following (amounts in thousands): Year Ended June 30 (In thousands) 2022 2021 Deferred Tax Assets: Other Deferred (ICDISC) $ 583 $ 245 Net Operating Losses 30 30 Bad Debt 39 83 Total Deferred Tax Assets 652 358 Deferred Tax Liabilities: Inventory (324) (875) Accruals Not Currently Deductible (792) (98) Prepaids (1,004) (1,224) Property and Equipment (1,399) (1,924) Goodwill/Intangibles (2,404) (2,685) Total Deferred Tax Liabilities (5,923) (6,806) Net Deferred Tax Liability $ (5,271) $ (6,448) As of June 30, 2022, 2021 and 2020, the Company had recorded no unrecognized tax benefits and, therefore, no accrued interest or penalties for unrecognized tax positions as of fiscal year ended June 30, 2022. In addition, the Company is under examination by Internal Revenue Service and Florida tax authorities. These proceedings may lead to adjustments or proposed adjustments to their taxes or provisions for uncertain tax provisions. The Company believes that it would prevail under such examination and, accordingly, has not recorded a provision for uncertain tax positions. The Company evaluates deferred tax assets each period for recoverability. The Company records a valuation allowance for assets that do not meet the threshold of “more likely than not” to be realized in the future. To make that determination, the Company evaluates the likelihood of realization based on the weight of all positive and negative evidence available. As of June 30, 2022, and 2021, the Company has not recorded a valuation allowance. The Company will reevaluate this determination quarterly and record a tax expense if and when future evidence requires a valuation allowance. The Company’s tax years after fiscal year 2018 remain open for federal purposes and fiscal year 2016 for certain state taxes. In addition, due to the Florida tax examination, tax years 2008 through 2016 also remain open. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Commitments and Contingencies. | ||
Commitments and Contingencies | Note 12: Commitments and Contingencies Commitments The Company enters into various agreements with suppliers for the products it distributes. The Company had no long-term purchase commitments or arrangements with its suppliers as of December 31, 2022, and June 30, 2022. Litigation, Claims and Assessments We are exposed to claims, litigation and/or cyber-attacks of varying degrees arising in the ordinary course of business and use various methods to resolve these matters. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. | Note 11: Commitments and Contingencies Commitments The Company enters into various agreements with suppliers for the products it distributes. The Company had no long-term purchase commitments or arrangements with its suppliers as of June 30, 2022 or 2021. Litigation, Claims and Assessments We are exposed to claims, litigation and/or cyber-attacks of varying degrees arising in the ordinary course of business and use various methods to resolve these matters. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. |
Related Party Transactions
Related Party Transactions | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Related Party Transactions | ||
Related Party Transactions | Note 13: Related Party Transactions Interest-Charge Domestic International Sales Corporation (“IC-DISC”) The Company has an affiliate, My Worldwide Market Place, Inc. which is an IC-DISC and was established February 12, 2013. The IC-DISC is owned by the Company Stockholders. Effective December 31, 2022, IC-DISC was discontinued as a result there will be no future accruals or commissions paid out. The IC-DISC is organized to manage sales to certain qualified customers and receive commissions from the Company for this activity. The commissions expenses were $1.4 million and $2.8 million for the three months ended December 31, 2022 and 2021, and $2.8 million and $6.3 million for the six months ended December 31, 2022, and 2021 respectively. The commission is determined under formulas and rules defined in the law and regulations of the US tax code, and under these regulations, the commission is deductible by the Company and results in a specified profit to the IC-DISC. This net profit is not subject to federal income tax. The IC-DISC distributes the profit to its stockholders, who are taxed on the income as a dividend. The owners of the IC-DISC elected to forgive the commissions earned for the twelve months ended December 31, 2022. The forgiveness of $6.6 million was recorded as a deemed capital contribution by the Company Stockholders. Captive Insurance Policies Bruce Ogilvie, Executive Chairman and a principal stockholder of Alliance, and Jeff Walker, Chief executive Office, a director, and a principal stockholder of Alliance, established two insurance companies; Guard Yourself Insurance Company, Ltd. and Super O Insurance Company, Ltd., replaced effective April 1, 2018, with the current new insurance companies, Airlie Protection Ins. Co., Inc. and Protection for You Ins. Co., Inc. These insurance companies additionally insure the general assets, liabilities and claims of Alliance through March 30, 2022, and were not renewed for future periods. Premium payments are allowed based on the Loan Agreement dated February 21, 2017. The Company is not a guarantor and does not have exposure in the event of a loss. Total captive policy expense for the three months December 31, 2022 and 2021, were $0.0 million and $0.54 million respectively and for the six months ended December 31, 2022, and December 31, 2021, were $0.0 and $1.09 million respectively, which are included in related party receivables on the consolidated balance sheets. Captive Claims receivables for six months ended December 31, 2022, and December 31, 2021, was $0.0 and $0.9 million respectively. Other Related Party Transactions During the three months December 31, 2022 and 2021, and the six-month periods ended December 31, 2022, and 2021, the Company had sales to a related party company owned by the Company’s shareholders of $1.6 million, 2.6 million, $2.3 million, and $4.8 million, respectively. Also, during the same periods, the Company had costs incurred with another related party company in the amount of $3.5 million, $6.7 million, $5.4 million and $7.8 million, respectively. | Note 12: Related Party Transactions Captive Insurance Policies In addition to insurance policies as required by the Company’s loan agreement, which insure certain assets, liabilities and general operations of the Company, the Stockholders of the Company established two insurance companies; Guard Yourself Insurance Company, Ltd. and Super O Insurance Company, Ltd., replaced effective April 1, 2018, with the current new insurance companies, Airlie Protection Ins. Co., Inc. and Protection for You Ins. Co., Inc. These insurance companies additionally insure the general assets, liabilities and claims of the Company through March 30, 2022, and were not renewed for future periods. The entities are known as captive insurance companies. New policies cover the period of March 31, 2021, to March 30, 2022, and will incur an annual expense of $2.4 million. Premium payments are allowed based on the Loan Agreement dated February 21, 2017. The Company is not a guarantor and does not have exposure in the event of a loss. Total captive policy expense for years ending June 30, 2022, 2021, and 2020 was $1.6 million, $2.2 million, and $2.7 million, respectively. Total claims filed for the years ended June 30, 2022, 2021, and 2020 were $1.4 million, $1.4 million, and $0.9 million respectively. On June 30, 2022, and 2021, receivables from the captive insurance companies were $0.25 million and $1.5 million, respectively, which are included in related party receivables on the consolidated balance sheets. Interest-Charge Domestic International Sales Corporation The Company has an affiliate, My Worldwide Market Place, Inc. which is an IC-DISC and was established February 12, 2013. The IC-DISC is owned by the Company Stockholders. The IC-DISC is organized to manage sales to certain qualified customers and receive commissions from the Company for this activity. The commissions expense ($9.9 million, $5.4 million, and $8.2 million for the years ended June 30, 2022, 2021, and 2020, respectively) was determined under formulas and rules defined in the law and regulations of the US tax code. Under these regulations, the commission is deductible by the Company and results in a specified profit to the IC-DISC. This net profit is not subject to Federal income tax. The IC-DISC distributes the profit to its Stockholders, who are taxed on the income as a dividend. During the years ended June 30, 2022, 2021 and 2020, the Company had sales to a related party company owned by the Company’s shareholders of $7.1 million, $5.3 $3.0 |
Leases
Leases | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Leases | ||
Leases | Note 14: Leases The Company leases office and warehouse, computer equipment and vehicles. Certain operating leases may contain one or more options to renew. The renewal terms can extend the lease term from one The depreciable lives of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Payments due under the lease contracts include fixed payments plus, may include variable payments. The Company’s office space leases require it to make variable payments for the Company’s proportionate share of the building’s property taxes, insurance, and common area maintenance. These variable lease payments are not included in lease payments used to determine the lease liability and are recognized as variable costs when incurred. Fixed payments may contain predetermined fixed rent escalations. Operating leases are included in the following asset and liability accounts on the Company’s Balance Sheet: Operating Lease Right-of-Use Assets, Current Portion of Operating Lease Obligations, and Noncurrent Operating Lease Obligations. ROU assets and liabilities arising from finance leases are included in the following asset and liability accounts on the Company’s Consolidated Balance Sheet: Property & Equipment - Net, Current Portion of Finance Lease Obligation, and Noncurrent Finance Lease Obligations. Components of lease expense were as follows for the three and six months ended December 31, 2022, and December 31, 2021: Three Months Ended Three Months Ended Six Months Ended Six Months Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Lease Cost Finance Lease Cost: Amortization of Right of Use Assets 51 179 102 475 Interest on lease liabilities 3 8 7 18 Operating Lease Cost 1,013 1,132 2,092 2,263 Short-Term Lease Cost 7 — 14 — Total Lease Cost 1,074 1,319 2,215 2,756 Other Information (Gains) and losses on sale and leaseback transactions, net Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases 3 8 7 20 Operating cash flows from Capitalized Operating leases 1,105 1,213 2,264 2,392 Financing cash flows from finance leases 53 289 105 778 Net ROU remeasurement (9) (1,298) (9) (1,190) Three Months Ended Three Months Ended Six Months Ended Six Months Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Weighted average remaining lease term – finance leases (in Years) 1.59 1.97 1.59 1.97 Weighted average remaining lease term – Capitalized Operating leases (in Years) 1.94 2.77 1.94 2.77 Weighted average discount rate – finance leases 3.70 3.67 3.70 3.67 Weighted average discount rate – Capitalized Operating leases 4.13 4.09 4.13 4.09 Note 14: Leases (continued) Maturities of lease liabilities are as follows as of December 31, 2022: Operating ($ in thousands) Leases 2023 4,123 2024 3,312 2025 110 2026 100 Total Lease Payments 7,655 Less Imputed Interest (271) Total $ 7,374 | Note 13: Leases The Company leases office and warehouse, computer equipment and vehicles. Certain operating leases may contain one or more options to renew. The renewal terms can extend the lease term from one The depreciable lives of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Payments due under the lease contracts include fixed payments plus, may include variable payments. The Company’s office space leases require it to make variable payments for the Company’s proportionate share of the building’s property taxes, insurance, and common area maintenance. These variable lease payments are not included in lease payments used to determine the lease liability and are recognized as variable costs when incurred. Fixed payments may contain predetermined fixed rent escalations. Operating leases are included in the following asset and liability accounts on the Company’s Balance Sheet: Operating Lease Right-of-Use Assets, Current Portion of Operating Lease Obligations, and Noncurrent Operating Lease Obligations. ROU assets and liabilities arising from finance leases are included in the following asset and liability accounts on the Company’s Consolidated Balance Sheet: Property & Equipment — Net, Current Portion of Finance Lease Obligation, and Noncurrent Finance Lease Obligations. Components of lease expense were as follows for the years ended June 30, 2022, 2021 and 2020: ($ in thousands) 2022 2021 2020 Lease cost Finance Lease Costs: Amortization of Right-of-Use Assets $ 675 $ 1,189 $ 1,095 Interest on Lease Liabilities 27 81 125 Operating Lease Cost 4,515 4,789 3,827 Short Term Lease Cost 1,140 — — Variable Lease Cost 1,633 869 680 Total Lease Cost $ 7,990 $ 6,928 $ 5,727 Other Information Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Operating Cash Flows from Financing Leases $ 30 $ 86 $ 125 Operating Cash Flows from Operating Leases $ 4,820 $ 4,944 $ 3,973 Financing Cash Flows from Finance Leases 1,070 1,931 1,720 Right-of Use Assets Obtained in Exchange for New Finance Lease Liabilities — — 1,561 Right-of Use Assets Obtained in Exchange for Capitalized Operating Lease Liabilities — 3,640 39 Net ROU Remeasurement (651) 841 169 Year Ended June 30, 2022 2021 2020 Weighted-Average Remaining Lease Term – Operating Leases 2.33 1.63 2.13 Weighted-Average Remaining Lease Term – Financing Leases 2.06 3.12 4.09 Weighted-Average Discount Rate – Operating Leases 4.10 3.35 3.26 Weighted-Average Discount Rate – Financing Leases 3.70 4.46 4.45 Maturities of lease liabilities are as follows as of June 30, 2022: Operating ($ in thousands) Leases 2023 4,403 2024 4,019 2025 1,402 2026 99 Total Lease Payments 9,923 Less Imputed Interest (606) Total $ 9,317 |
Earnings per Share (EPS)
Earnings per Share (EPS) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Earnings per Share (EPS) | ||
Earnings per Share (EPS) | Note 15: Earnings per Share (EPS) Basic EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period. Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue shares, such as stock options, warrants, and unvested restricted stock units, were exercised and converted into common shares. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares had been issued and were dilutive. The Company does not have any potentially dilutive securities outstanding for the three or six months ended December 31, 2022, or 2021. | Note 14: Earnings per Share (EPS) Basic EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period. Diluted EPS considers the potential dilution that could occur if securities or other contracts to issue shares, such as stock options, warrants, and unvested restricted stock units, were exercised and converted into common shares. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares had been issued and were dilutive. The Company does not have any potentially dilutive securities outstanding on June 30, 2022, 2021 or 2020. |
Business Acquisition
Business Acquisition | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Business Acquisition | ||
Business Acquisition | Note 16: Business Acquisition On July 1, 2022, Alliance purchased 100% of the stock of Think3Fold, a collectibles distribution company for no consideration. The merged entity expanded and diversified the Company’s portfolio of products and enabled scale and fixed cost leverage. The results of operations of the acquired entity are included in the Consolidated Financial Statements from July 1, 2022, through December 31, 2022. The Company recognized $694 thousand of acquisition-related costs that were expensed in the current period. These costs are included in the consolidated statements of operations and comprehensive income within Transaction Costs. Think3Fold revenue and earnings included in the Company’s consolidated statements of operations for the periods July 1, 2022, through December 31, 2022, are as follows: Three Months Ended Six Months Ended ($ in thousands) December 31, 2022 December 31, 2022 Revenue $ 6,784 $ 10,605 Net Income 1,360 1,086 Note 16: Business Acquisition (continued) The Think3Fold acquisition was treated for accounting purposes as a purchase of Think3Fold using the acquisition method of accounting in accordance with ASC 805, Business Combination. Under the acquisition method of accounting, the aggregate consideration was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair value as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired (or net liabilities assumed) being allocated to intangible assets and goodwill. The initial accounting for this business acquisition is incomplete and the following assets and liabilities were recognized on a provisional basis, since the Company is currently assessing the purchase price allocation and the fair value measurements. During the quarter ended December 31, 2022, the Company recorded a measurement period adjustment to reduce the fair value of the inventory acquired by $5.2 million, which resulted in a corresponding increase in goodwill. Provisional Allocation of purchase price consideration ($ in thousands) Cash Acquired $ 1 Trade Receivables 3,289 Inventory 5,232 Intangibles 9,031 Other Assets 19 Accounts Payable (24,820) Total identifiable net assets (liabilities) (7,248) Goodwill 7,248 Total Consideration $ — Goodwill is attributable primarily to the assembled workforce acquired, as well as benefits from the increased scale of the Company as a result of the Think3fold acquisition. The goodwill from this acquisition is not deductible for income tax purposes. | Note 15: Business Acquisition On September 30, 2020, Alliance Entertainment (AEC) purchased 100% of the stock of COKeM International (COKeM), a video games distribution company. The merged entity expanded and diversified AEC’s portfolio of products and enabled scale and fixed cost leverage. The aggregate purchase price for the acquisition was $80.4 million. The results of operations of the acquired entity are included in the FY2021 Consolidated Financial Statements from October 1, 2020, through June 30, 2021. The Company recognized $0.35 million of acquisition-related costs that were expensed in the current period. These costs are included in the consolidated statements of operations and comprehensive income within Transaction Costs. COKeM’s revenue and earnings included in the Company’s consolidated statements of operations for the periods October 1, 2020, through June 30, 2021, are as follows: Nine Months Ended ($ in thousands) June 30, 2021 Revenue $ 405,714 Net Income 19,567 The Acquisition date fair value of the consideration transferred totaled $80.4 million, which consisted of the following: Cash at Close $ 71,859 Note to Seller 8,500 $ 80,359 ($ in thousands) Cash Acquired $ 6,450 Trade Receivables 48,729 Inventory 70,267 Other Assets 1,779 Accounts Payable (48,770) Accrued Expenses (734) Property and Equipment 2,638 Total Purchase Price $ 80,359 In connection with the above stock purchase, the Company amended its credit line with Bank of America. The terms increase the borrowing limits to $175 million and the agreement was extended to September 2023. The following table presents the unaudited supplemental pro forma financial information as if the acquisition had closed as of July 1, 2019. Year Ended ($ in thousands) June 30, 2021 June 30, 2020 Revenue $ 1,414,039 $ 1,195,005 Net Income 42,542 3,402 |
Restatement of Previously Issue
Restatement of Previously Issued Financial Statements | 6 Months Ended |
Dec. 31, 2022 | |
Restatement of Previously Issued Financial Statements | |
Restatement of Previously Issued Financial Statements | Note 17: Restatement of Previously Issued Financial Statements Subsequent to the issuance of the Company’s unaudited condensed consolidated financial statements for the three months ended September 30, 2022, included in Amendment No. 4 to Form S-4 filed with the Securities Exchange Commission on November 30, 2022, the Company determined that it incorrectly classified the revolving credit facility, net, as a non-current liability instead of as a current liability. The Company determined that such financial statements were materially misstated and should be restated. The classification error had no impact on the Company’s unaudited condensed consolidated statements of operations, changes in stockholders’ equity and cash flows for the three months ended September 30, 2022. The following table sets forth the effects of the restatement on the consolidated balance sheet at September 30, 2022: Previously Reported Adjustment As Restated Total Assets $ 516,943 $ — $ 516,943 Liabilities: Revolving Credit Facility, net $ — $ 183,524 $ 183,524 Total Current Liabilities $ 219,476 $ 183,524 $ 403,000 Revolving Credit Facility, net $ 183,524 $ (183,524) $ — Total Liabilities $ 415,524 $ — $ 415,524 Total Stockholders’ Equity $ 101,418 $ — $ 101,418 |
Subsequent Events
Subsequent Events | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Subsequent Events | ||
Subsequent Events | Note 18: Subsequent Events On February 10, 2023, Alliance, Adara Acquisition Corp. (“Adara”) and a Merger Sub consummated the closing of the transactions contemplated by a Business Combination Agreement. Pursuant to the terms of the Business Combination Agreement, a business combination of Alliance and Adara was affected by the merger of Merger Sub with and into Alliance (the “Merger”), with Alliance surviving the Merger as a wholly-owned subsidiary of Adara Following the consummation of the Merger on the closing date of the Business Combination, Adara changed its name from Adara Acquisition Corp. to Alliance Entertainment Holding Corporation). of Adara Following the consummation of the Merger on the closing date of the Business Combination, Adara changed its name from Adara Acquisition Corp. to Alliance Entertainment Holding Corporation). | Note 16: Subsequent Events On July 1, 2022 the company completed the acquisition of a toys and collectibles distribution company for an aggregated purchase price of approximately $9.2 million. Due to the limited amount of time since this acquisition, the initial purchase accounting for it is incomplete. Subsequent events have been evaluated through October 17, 2022, the date these financial statements were available to be issued. |
Trade Receivables, Net (Tables)
Trade Receivables, Net (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Trade Receivables, Net | ||
Schedule of trade receivables, net | ($ in thousands) December 31, 2022 June 30, 2022 Trade Receivables $ 175,861 $ 101,064 Less: Allowances for Doubtful Accounts (311) (557) Sales Returns Reserve, Net (3,100) (1,898) Customer Rebate and Discount Reserve (1,599) 90 Total Allowances (5,010) (2,366) Trade Receivables, Net $ 170,851 $ 98,699 | ($ in thousands) June 30, 2022 June 30, 2021 Trade receivables $ 101,064 $ 115,618 Less: Allowances for Doubtful Accounts (558) (1,145) Sales returns reserve, net (1,898) (2,975) Customer Rebate and Discount Reserve 90 (166) Total Allowances (2,366) (4,286) Trade Receivables, Net $ 98,699 $ 111,332 |
Schedule of concentration of credit risk | Six Months Ended Six Months Ended ($ in thousands) December 31, 2022 December 31, 2021 Customer #1 19.3 % 24.2 % ($ in thousands) December 31, 2022 June 30, 2022 Customer #1 14.2 % 21.4 % Customer #2 13.6 % * Customer #3 10.2 % 14.2 % * Less than 10% | Year Ended ($ in thousands) June 30, 2022 June 30, 2021 June 30, 2020 Customer #1 23.6 % 23.7 % 19.6 % ($ in thousands) June 30, 2022 June 30, 2021 Customer #1 21.4 % 12.2 % Customer #2 14.2 % * * Less than 10% |
Inventory, Net (Tables)
Inventory, Net (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Inventory, Net. | ||
Schedule of inventory, net (all finished goods) | ($ in thousands) December 31, 2022 June 30, 2022 Inventory $ 186,895 $ 255,236 Less: Reserves (11,573) (5,797) Inventory, Net $ 175,322 $ 249,439 | ($ in thousands) June 30, 2022 June 30, 2021 Inventory $ 255,236 $ 145,740 Less: Reserves (5,797) (4,079) Inventory, Net $ 249,439 $ 141,661 |
Other Current and Long-Term A_2
Other Current and Long-Term Assets (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Other Current and Long-Term Assets | ||
Summary of Other Current and Long-Term Assets | ($ in thousands) December 31, 2022 June 30, 2022 Other Assets – Current Prepaid Intellectual Property $ 2,197 $ 2,443 Prepaid Insurance 639 431 Prepaid Acquisitions 2,865 2,243 Prepaid Freight 325 216 Prepaid Manufacturing Components 28 79 Prepaid Rent 886 — Prepaid Maintenance 825 885 Prepaid Shipping Supplies 1,666 2,831 Total Other Assets – Current $ 9,431 $ 9,128 Other Long-Term Assets Deposits $ 305 $ 3,748 Total Other Long-Term Assets $ 305 $ 3,748 | ($ in thousands) June 30, 2022 June 30, 2021 Other Assets – Current Prepaid Intellectual Property $ 2,443 $ 3,411 Prepaid Insurance 431 2,011 Prepaid Acquisitions 2,243 — Prepaid Freight 216 — Prepaid Manufacturing Components 79 167 Prepaid Maintenance 885 165 Prepaid Shipping Supplies 2,832 1,533 Total Other Assets – Current $ 9,129 $ 7,287 Other Assets – Long Term Deposits $ 3,748 $ 361 Total Other Assets – Long Term $ 3,748 $ 361 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Property and Equipment, Net | ||
Summary of Property and Equipment, Net | ($ in thousands) December 31, 2022 June 30, 2022 Property and Equipment Leasehold Improvements $ 1,680 $ 1,680 Machinery and Equipment 25,430 19,440 Furniture and Fixtures 1,749 3,530 Capitalized Software 10,508 11,451 Equipment Under Capital Leases 12,488 12,917 Computer Equipment 1,626 2,662 Construction in Progress 489 154 53,970 51,834 Less: Accumulated Depreciation and Amortization (43,238) (48,550) Total Property and Equipment, Net 10,732 $ 3,284 | ($ in thousands) June 30, 2022 June 30, 2021 Property and Equipment Leasehold Improvements $ 1,680 $ 1,597 Machinery and Equipment 19,440 19,236 Furniture and Fixtures 3,530 2,622 Capitalized Software 11,451 11,422 Equipment Under Capital Leases 12,917 12,917 Computer Equipment 2,662 2,665 Construction in Progress 154 104 51,834 50,563 Less: Accumulated Depreciation and Amortization (48,550) (44,233) Total Property and Equipment, Net $ 3,284 $ 6,330 |
Goodwill and Intangibles, Net (
Goodwill and Intangibles, Net (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Goodwill and Intangibles, Net | ||
Schedule of goodwill | ($ in thousands) December 31, 2022 June 30, 2022 Goodwill: $ 79,903 $ 79,903 Additions to Goodwill 7,248 — Goodwill, Net $ 87,151 $ 79,903 | |
Schedule of intangible assets, net | ($in thousands) December 31, 2022 June 30, 2022 Intangibles: Customer Relationships $ 78,000 $ 78,000 Trade Name - Alliance 5,200 5,200 Covenant Not to Compete 10 10 Mecca Customer Relationships 8,023 8,023 Customer List 18,792 9,760 Total $ 110,025 $ 100,993 Accumulated Amortization (84,257) (82,229) Intangibles, Net $ 25,768 $ 18,764 | |
Schedule of expected amortization over the next five years and thereafter | ($ in thousands) Intangible Assets Year Ended June 30 2023 $ 2,781 2024 4,223 2025 3,651 2026 3,339 2027 3,289 Thereafter 8,485 Total Expected Amortization $ 25,768 | Expected amortization over the next five years and thereafter, at June 30, 2022, is as follows: Intangible ($ in thousands) Assets Year Ended June 30 2023 $ 4,056 2024 3,470 2025 2,898 2026 2,586 2027 2,536 Thereafter 3,218 Total Expected Amortization $ 18,764 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Accrued Expenses | ||
Summary of Accrued Expenses | ($ in thousands) December 31, 2022 June 30, 2022 Marketing Funds Accruals $ 2,768 $ 2,738 Payroll and Payroll Tax Accruals 2,802 3,904 Accruals for Other Expenses 6,848 4,931 Total Accrued Expenses $ 12,418 $ 11,573 | ($ in thousands) June 30, 2022 June 30, 2021 Marketing Funds Accruals $ 2,738 $ 1,294 Payroll and Payroll Tax Accruals 3,904 6,833 Accruals for Other Expenses 4,931 5,428 Total Accrued Expenses $ 11,573 $ 13,555 |
Lines of Credit and Long-Term_2
Lines of Credit and Long-Term Obligation (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Lines of Credit and Long-Term Obligation | ||
Schedule of revolver balance | ($ in thousands) December 31, 2022 June 30, 2022 Bank of America Revolving Credit Agreement $ 176,740 $ 136,176 Less: Deferred Finance Costs (125) (208) Revolving Credit, Net $ 176,615 $ 135,968 | ($ in thousands) June 30, 2022 June 30, 2021 Bank of America Revolving Credit Agreement $ 136,176 $ 53,955 Less: Deferred Finance Costs (208) (375) Revolving Credit, Net $ 135,968 $ 53,580 |
Leases (Tables)
Leases (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Leases | ||
Summary of components of lease expense | ($ in thousands) 2022 2021 2020 Lease cost Finance Lease Costs: Amortization of Right-of-Use Assets $ 675 $ 1,189 $ 1,095 Interest on Lease Liabilities 27 81 125 Operating Lease Cost 4,515 4,789 3,827 Short Term Lease Cost 1,140 — — Variable Lease Cost 1,633 869 680 Total Lease Cost $ 7,990 $ 6,928 $ 5,727 | |
Summary of other information related to leases | Three Months Ended Three Months Ended Six Months Ended Six Months Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Weighted average remaining lease term – finance leases (in Years) 1.59 1.97 1.59 1.97 Weighted average remaining lease term – Capitalized Operating leases (in Years) 1.94 2.77 1.94 2.77 Weighted average discount rate – finance leases 3.70 3.67 3.70 3.67 Weighted average discount rate – Capitalized Operating leases 4.13 4.09 4.13 4.09 | Other Information Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Operating Cash Flows from Financing Leases $ 30 $ 86 $ 125 Operating Cash Flows from Operating Leases $ 4,820 $ 4,944 $ 3,973 Financing Cash Flows from Finance Leases 1,070 1,931 1,720 Right-of Use Assets Obtained in Exchange for New Finance Lease Liabilities — — 1,561 Right-of Use Assets Obtained in Exchange for Capitalized Operating Lease Liabilities — 3,640 39 Net ROU Remeasurement (651) 841 169 Year Ended June 30, 2022 2021 2020 Weighted-Average Remaining Lease Term – Operating Leases 2.33 1.63 2.13 Weighted-Average Remaining Lease Term – Financing Leases 2.06 3.12 4.09 Weighted-Average Discount Rate – Operating Leases 4.10 3.35 3.26 Weighted-Average Discount Rate – Financing Leases 3.70 4.46 4.45 |
Summary of maturities of lease liabilities | Operating ($ in thousands) Leases 2023 4,123 2024 3,312 2025 110 2026 100 Total Lease Payments 7,655 Less Imputed Interest (271) Total $ 7,374 | Operating ($ in thousands) Leases 2023 4,403 2024 4,019 2025 1,402 2026 99 Total Lease Payments 9,923 Less Imputed Interest (606) Total $ 9,317 |
Business Acquisition (Tables)
Business Acquisition (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Business Acquisition | ||
Summary of revenue and earnings of business acquired included in the Company's consolidated statements of operations | Three Months Ended Six Months Ended ($ in thousands) December 31, 2022 December 31, 2022 Revenue $ 6,784 $ 10,605 Net Income 1,360 1,086 | Nine Months Ended ($ in thousands) June 30, 2021 Revenue $ 405,714 Net Income 19,567 |
Summary of acquisition date fair value of consideration transferred | Provisional Allocation of purchase price consideration ($ in thousands) Cash Acquired $ 1 Trade Receivables 3,289 Inventory 5,232 Intangibles 9,031 Other Assets 19 Accounts Payable (24,820) Total identifiable net assets (liabilities) (7,248) Goodwill 7,248 Total Consideration $ — | Cash at Close $ 71,859 Note to Seller 8,500 $ 80,359 ($ in thousands) Cash Acquired $ 6,450 Trade Receivables 48,729 Inventory 70,267 Other Assets 1,779 Accounts Payable (48,770) Accrued Expenses (734) Property and Equipment 2,638 Total Purchase Price $ 80,359 |
Restatement of Previously Iss_2
Restatement of Previously Issued Financial Statements (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Restatement of Previously Issued Financial Statements | |
Schedule of impact of the restatement on the balance sheets | The following table sets forth the effects of the restatement on the consolidated balance sheet at September 30, 2022: Previously Reported Adjustment As Restated Total Assets $ 516,943 $ — $ 516,943 Liabilities: Revolving Credit Facility, net $ — $ 183,524 $ 183,524 Total Current Liabilities $ 219,476 $ 183,524 $ 403,000 Revolving Credit Facility, net $ 183,524 $ (183,524) $ — Total Liabilities $ 415,524 $ — $ 415,524 Total Stockholders’ Equity $ 101,418 $ — $ 101,418 |
Trade Receivables, Net (Details
Trade Receivables, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Trade Receivables, Net | |||
Trade Receivables | $ 175,861 | $ 101,064 | $ 115,618 |
Allowances for Doubtful Accounts | (311) | (557) | (1,145) |
Sales Returns Reserve, Net | (3,100) | (1,898) | (2,975) |
Customer Rebate and Discount Reserve | (1,599) | 90 | (166) |
Total Allowances | (5,010) | (2,366) | (4,286) |
Trade Receivables, Net | $ 170,851 | $ 98,699 | $ 111,332 |
Trade Receivables, Net - Concen
Trade Receivables, Net - Concentration of Credit Risk (Details) - Customer | 6 Months Ended | 12 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Revenue | Customer #1 | |||||
Concentration of Credit Risk | |||||
Concentration of credit risk (in percent) | 19.30% | 24.20% | 23.60% | 23.70% | 19.60% |
Receivables Balance | Customer #1 | |||||
Concentration of Credit Risk | |||||
Concentration of credit risk (in percent) | 14.20% | 21.40% | 12.20% | ||
Receivables Balance | Customer #2 | |||||
Concentration of Credit Risk | |||||
Concentration of credit risk (in percent) | 13.60% | 14.20% | |||
Receivables Balance | Customer #3 | |||||
Concentration of Credit Risk | |||||
Concentration of credit risk (in percent) | 10.20% | 14.20% |
Inventory, Net (Details)
Inventory, Net (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 | |
Inventory, Net. | |||
Inventory | $ 186,895 | $ 255,236 | $ 145,740 |
Less: Reserves | (11,573) | (5,797) | (4,079) |
Inventory, Net | 175,322 | $ 249,439 | $ 141,661 |
Write down | $ 10,800 |
Other Current and Long-Term A_3
Other Current and Long-Term Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Other Assets - Current | |||
Prepaid Intellectual Property | $ 2,197 | $ 2,443 | $ 3,411 |
Prepaid Insurance | 639 | 431 | 2,011 |
Prepaid Acquisitions | 2,865 | 2,243 | |
Prepaid Freight | 325 | 216 | |
Prepaid Manufacturing Components | 28 | 79 | 167 |
Prepaid Rent | 886 | ||
Prepaid Maintenance | 825 | 885 | 165 |
Prepaid Shipping Supplies | 2,832 | 1,533 | |
Total Other Assets - Current | 9,431 | 9,128 | 7,287 |
Other Long-Term Assets | |||
Deposits | 305 | 3,748 | 361 |
Total Other Long-Term Assets | $ 305 | $ 3,748 | $ 361 |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Property and Equipment | |||||||
Total Property and Equipment | $ 53,970 | $ 53,970 | $ 51,834 | $ 50,563 | |||
Less: Accumulated Depreciation and Amortization | (43,238) | (43,238) | (48,550) | (44,233) | |||
Total Property and Equipment, Net | 10,732 | 10,732 | 3,284 | 6,330 | |||
Depreciation and amortization expense | 500 | $ 800 | 1,138 | $ 1,792 | 3,096 | 5,623 | $ 7,124 |
Leasehold Improvements | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 1,680 | 1,680 | 1,680 | 1,597 | |||
Machinery and Equipment | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 25,430 | 25,430 | 19,440 | 19,236 | |||
Furniture and Fixtures | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 1,749 | 1,749 | 3,530 | 2,622 | |||
Capitalized Software | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 10,508 | 10,508 | 11,451 | 11,422 | |||
Equipment Under Capital Leases | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 12,488 | 12,488 | 12,917 | 12,917 | |||
Computer Equipment | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 1,626 | 1,626 | 2,662 | 2,665 | |||
Construction in Progress | |||||||
Property and Equipment | |||||||
Total Property and Equipment | $ 489 | $ 489 | $ 154 | $ 104 |
Goodwill and Intangibles, Net -
Goodwill and Intangibles, Net - Goodwill (Details) $ in Thousands | 6 Months Ended |
Dec. 31, 2022 USD ($) | |
Goodwill and Intangibles, Net | |
Goodwill: | $ 79,903 |
Additions to Goodwill | 7,248 |
Goodwill, Net | $ 87,151 |
Goodwill and Intangibles, Net_2
Goodwill and Intangibles, Net - Intangible Assets, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | |
Intangibles: | |||||
Intangibles, Total | $ 110,025 | $ 110,025 | $ 100,993 | ||
Accumulated Amortization | (84,257) | (84,257) | (82,229) | ||
Intangibles, Net | 25,768 | 25,768 | 18,764 | ||
Amortization of Intangible Assets | 1,000 | $ 1,300 | 2,000 | $ 2,600 | |
Customer relationships | |||||
Intangibles: | |||||
Intangibles, Total | 78,000 | 78,000 | 78,000 | ||
Trade Name - Alliance | |||||
Intangibles: | |||||
Intangibles, Total | 5,200 | 5,200 | 5,200 | ||
Covenant Not to Compete | |||||
Intangibles: | |||||
Intangibles, Total | 10 | 10 | 10 | ||
Mecca Customer Relationships | |||||
Intangibles: | |||||
Intangibles, Total | 8,023 | 8,023 | 8,023 | ||
Customer List | |||||
Intangibles: | |||||
Intangibles, Total | $ 18,792 | $ 18,792 | $ 9,760 |
Goodwill and Intangibles, Net_3
Goodwill and Intangibles, Net - Expected amortization over the next five years and thereafter (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 |
Expected amortization over the next five years and thereafter | ||
2023 | $ 2,781 | $ 4,056 |
2024 | 4,223 | 3,470 |
2025 | 3,651 | 2,898 |
2026 | 3,339 | 2,586 |
2027 | 3,289 | 2,536 |
Thereafter | 8,485 | 3,218 |
Total Expected Amortization | $ 25,768 | $ 18,764 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Accrued Expenses | |||
Marketing Funds Accruals | $ 2,768 | $ 2,738 | $ 1,294 |
Payroll and Payroll Tax Accruals | 2,802 | 3,904 | 6,833 |
Accruals for Other Expenses | 6,848 | 4,931 | 5,428 |
Total Accrued Expenses | $ 12,418 | $ 11,573 | $ 13,555 |
Lines of Credit and Long-Term_3
Lines of Credit and Long-Term Obligation - Revolver Balance (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Lines of Credit and Long-Term Obligation | ||||
Revolving Credit Facility, Net | $ 176,615 | $ 183,524 | $ 135,968 | |
Less: Deferred Finance Costs | (125) | (208) | $ (375) | |
Bank of America Revolving Credit Agreement | ||||
Lines of Credit and Long-Term Obligation | ||||
Revolving Credit Facility, Net | $ 176,740 | $ 136,176 |
Lines of Credit and Long-Term_4
Lines of Credit and Long-Term Obligation - Additional Information (Details) - USD ($) | 1 Months Ended | 6 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Lines of Credit and Long-Term Obligation | |||||
Other debt | $ 8,252 | ||||
SOFR spread | |||||
Lines of Credit and Long-Term Obligation | |||||
Basis rate | 2.11% | ||||
Line of Credit | |||||
Lines of Credit and Long-Term Obligation | |||||
Annual interest rate | 5% | ||||
Interest rate | 4.76% | 2.34% | 3.61% | 2.25% | |
Weighted average interest rate | 2.50% | 4.15% | |||
Line of Credit | Minimum | |||||
Lines of Credit and Long-Term Obligation | |||||
Maximum borrowing capacity | $ 175,000,000 | ||||
Line of Credit | Maximum | |||||
Lines of Credit and Long-Term Obligation | |||||
Maximum borrowing capacity | $ 225,000,000 | ||||
Line of Credit | Prime Rate | |||||
Lines of Credit and Long-Term Obligation | |||||
Annual interest rate | 5% | ||||
Interest rate | 3.25% | ||||
Basis rate | 1% | ||||
Line of Credit | LIBOR | |||||
Lines of Credit and Long-Term Obligation | |||||
Annual interest rate | 2% | ||||
Interest rate | 2% | 0.25% | |||
Basis rate | 2% | 2% | |||
Line of Credit | SOFR | |||||
Lines of Credit and Long-Term Obligation | |||||
Annual interest rate | 2.11% | ||||
Interest rate | 1.50% | ||||
Basis rate | 2.11% | 2.11% | |||
Line of Credit | contracted Libor | |||||
Lines of Credit and Long-Term Obligation | |||||
Interest rate | 4.25% | ||||
Seller Notes | |||||
Lines of Credit and Long-Term Obligation | |||||
Annual interest rate | 6% | ||||
Subordinated note | $ 8,500,000 | ||||
Repayments of debt | 2,500,000 | ||||
Outstanding current and long-term liabilities | $ 3,750,000 | ||||
Revolving Credit Facility | |||||
Lines of Credit and Long-Term Obligation | |||||
Outstanding balance | $ 135,968 | ||||
Commitment fee percentage | 0.25% | 0.25% | 0.25% | 0.25% | |
Commitment fee amount | $ 60,000 | $ 95,000 | $ 100,000 | $ 300,000 | |
Outstanding revolver balance | 176,700,000 | 136,000,000 | 54,000,000 | ||
Availability balance | $ 48,300,000 | $ 48,000,000 | $ 95,000,000 |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
AHBP | ||||
Employee Benefits | ||||
Maximum company exposure | $ 200,000 | $ 200,000 | ||
Accrued estimated run out exposure | $ 218,000 | $ 234,000 | ||
401(k) Plan | ||||
Employee Benefits | ||||
Percentage of employee contribution | 3% | 3% | ||
Matching contribution | $ 0.50 | $ 0.50 | ||
Matching contribution (in percent) | 4% | 4% | ||
Amount contributed | $ 695,000 | $ 502,000 | $ 539,000 |
Income Taxes (Details)
Income Taxes (Details) | 6 Months Ended | 12 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Income Taxes | |||||
Effective tax rate | 27% | 26% | 24% | 24% | 6% |
State Taxes, Net of Federal Benefits | 6% | 6% | 6% | 17% |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 | |
Commitments and Contingencies. | |||
Amount of long-term purchase commitments or arrangements | $ 0 | $ 0 | $ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Related Party Transactions | ||||||||
Related party transaction commission expenses | $ 1,400 | $ 2,800 | $ 2,800 | $ 6,300 | ||||
Amount of forgiveness | $ 6,600 | |||||||
Total captive policy expenses | 0 | 540 | 0 | 1,090 | ||||
Claims receivables | 0 | 900 | ||||||
Sales to a related party company | 1,600 | 2,600 | 2,300 | 4,800 | $ 7,100 | $ 4,800 | $ 2,500 | |
Costs incurred with related party company | $ 3,500 | $ 6,700 | $ 5,400 | $ 7,800 | $ 13,000 | $ 7,800 |
Leases (Details)
Leases (Details) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Leases | ||
Options to renew operating lease | true | true |
Minimum | ||
Leases | ||
Renewal term of operating lease | 1 year | 1 year |
Maximum | ||
Leases | ||
Renewal term of operating lease | 13 years | 13 years |
Leases (Details - Components of
Leases (Details - Components of lease expense) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Lease Cost | |||||||
Finance Lease Cost: Amortization of Right of Use Assets | $ 51 | $ 179 | $ 102 | $ 475 | $ 675 | $ 1,189 | $ 1,095 |
Finance Lease Cost: Interest on lease liabilities | 3 | 8 | 7 | 18 | 27 | 81 | 125 |
Capitalized Operating Lease Cost | 1,013 | 1,132 | 2,092 | 2,263 | 4,515 | 4,789 | 3,827 |
Short Term Lease Cost | 7 | 14 | 1,140 | ||||
Variable Lease Cost | 1,633 | 869 | 680 | ||||
Total Lease Cost | $ 1,074 | $ 1,319 | $ 2,215 | $ 2,756 | $ 7,990 | $ 6,928 | $ 5,727 |
Leases (Details - Other Informa
Leases (Details - Other Information) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Leases | |||||||
Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases | $ 3 | $ 8 | $ 7 | $ 20 | $ 30 | $ 86 | $ 125 |
Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from Capitalized Operating leases | 4,820 | 4,944 | 3,973 | ||||
Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows from finance leases | 53 | 289 | 105 | 778 | 1,070 | 1,931 | 1,720 |
Net ROU Remeasurement | $ (9) | $ (1,298) | $ (9) | $ (1,190) | $ (651) | $ 841 | $ 169 |
Weighted average remaining lease term - finance leases (in years) | 1 year 7 months 2 days | 1 year 11 months 19 days | 1 year 7 months 2 days | 1 year 11 months 19 days | 2 years 21 days | 3 years 1 month 13 days | 4 years 1 month 2 days |
Weighted average remaining lease term - Capitalized Operating leases (in Years) | 1 year 11 months 8 days | 2 years 9 months 7 days | 1 year 11 months 8 days | 2 years 9 months 7 days | 2 years 3 months 29 days | 1 year 7 months 17 days | 2 years 1 month 17 days |
Weighted-average discount rate - financing leases | 3.70% | 3.67% | 3.70% | 3.67% | 3.70% | 4.46% | 4.45% |
Weighted-average discount rate - Capitalized Operating leases | 4.13% | 4.09% | 4.13% | 4.09% | 4.10% | 3.35% | 3.26% |
Leases (Details - Maturities of
Leases (Details - Maturities of lease liabilities) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 |
Maturities of lease liabilities, Operating leases | ||
2023 | $ 4,123 | $ 4,403 |
2024 | 3,312 | 4,019 |
2025 | 110 | 1,402 |
2026 | 100 | 99 |
Total Lease Payments | 7,655 | 9,923 |
Less Imputed Interest | (271) | (606) |
Total | $ 7,374 | $ 9,317 |
Business Acquisition (Details)
Business Acquisition (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Jul. 01, 2022 | Sep. 30, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Business Acquisition | |||||||||
Aggregated purchase price | $ 80,400 | $ 80,359 | |||||||
Cash Acquired | $ 1 | $ 1 | 6,450 | $ 6,450 | |||||
Transaction Costs | $ 694 | $ 350 | 367 | $ 34 | 1,007 | $ (282) | $ (251) | 3,509 | |
Inventory acquired | $ 5,232 | $ 5,232 | $ 70,267 | $ 70,267 | |||||
COKeM International | |||||||||
Business Acquisition | |||||||||
Percentage of stock acquired | 100% |
Business Acquisition - Company'
Business Acquisition - Company's consolidated statements of operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended |
Dec. 31, 2022 | Dec. 31, 2022 | Jun. 30, 2021 | |
Business Acquisition | |||
Revenue | $ 6,784 | $ 10,605 | $ 405,714 |
Net Income | $ 1,360 | $ 1,086 | $ 19,567 |
Business Acquisition - Acquisit
Business Acquisition - Acquisition date fair value of the consideration transferred (Details) - USD ($) $ in Thousands | 6 Months Ended | 9 Months Ended |
Dec. 31, 2022 | Jun. 30, 2021 | |
Provisional Allocation of purchase price consideration | ||
Cash at Close | $ 71,859 | |
Note to Seller | 8,500 | |
Cash Acquired | $ 1 | 6,450 |
Trade Receivables | 3,289 | 48,729 |
Inventory | 5,232 | 70,267 |
Intangibles | 9,031 | |
Other Assets | 19 | 1,779 |
Accounts Payable | (24,820) | (48,770) |
Accrued Expenses | (734) | |
Property and Equipment | 2,638 | |
Total identifiable net assets (liabilities) | (7,248) | $ 80,359 |
Goodwill | $ 7,248 |
Restatement of Previously Iss_3
Restatement of Previously Issued Financial Statements (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2019 |
Restatement of Previously Issued Financial Statements | ||||||||
Total Assets | $ 490,955 | $ 516,943 | $ 473,039 | $ 388,963 | ||||
Liabilities: | ||||||||
Revolving Credit Facility, Net | 176,615 | 183,524 | 135,968 | |||||
Total Current Liabilities | 394,542 | 403,000 | 350,599 | 238,606 | ||||
Revolving Credit Facility, Net | 53,580 | |||||||
Total Liabilities | 398,460 | 415,524 | 364,111 | 308,661 | ||||
Total Stockholders' Equity | $ 92,495 | 101,418 | $ 108,928 | $ 109,828 | $ 85,974 | $ 80,302 | $ 52,919 | $ 44,016 |
Previously Reported | ||||||||
Restatement of Previously Issued Financial Statements | ||||||||
Total Assets | 516,943 | |||||||
Liabilities: | ||||||||
Total Current Liabilities | 219,476 | |||||||
Revolving Credit Facility, Net | 183,524 | |||||||
Total Liabilities | 415,524 | |||||||
Total Stockholders' Equity | 101,418 | |||||||
Adjustment | ||||||||
Liabilities: | ||||||||
Revolving Credit Facility, Net | 183,524 | |||||||
Total Current Liabilities | 183,524 | |||||||
Revolving Credit Facility, Net | $ (183,524) |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jul. 01, 2022 | Sep. 30, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Condensed Consolidated Statements of Operations | |||||||||
Net Revenues | $ 445,162 | $ 538,445 | $ 683,862 | $ 831,646 | $ 1,417,377 | $ 1,323,567 | $ 775,596 | ||
Cost of Revenues (excluding depreciation and amortization) | 424,265 | 465,407 | 637,495 | 717,889 | 1,234,995 | 1,140,885 | 656,485 | ||
Operating Expenses | |||||||||
Distribution and Fulfillment Expense | 20,365 | 19,947 | 35,230 | 33,207 | 64,260 | 56,885 | 35,877 | ||
Selling, General and Administrative Expense | 15,044 | 15,831 | 29,777 | 29,610 | 58,110 | 57,249 | 50,007 | ||
Depreciation and Amortization | 1,529 | 2,064 | 3,166 | 4,373 | 8,259 | 11,651 | 15,784 | ||
Transaction Costs | $ 694 | $ 350 | 367 | 34 | 1,007 | (282) | (251) | 3,509 | |
IC DISC Commissions | 1,444 | 2,767 | 2,833 | 6,263 | 9,907 | 5,394 | 8,182 | ||
Loss on Disposal of Fixed Assets | (3) | (3) | 87 | ||||||
Total Operating Expenses | 38,746 | 40,643 | 72,010 | 73,171 | 140,285 | 134,775 | 109,850 | ||
Operating (Loss) Income | (17,849) | 32,395 | (25,643) | 40,586 | 42,098 | 47,907 | 9,261 | ||
Other Expenses | |||||||||
Interest Expense, Net | 3,544 | 1,008 | 5,898 | 1,736 | 4,056 | 2,938 | 3,524 | ||
Total Other Expenses | 3,544 | 1,008 | 5,898 | 1,736 | 4,056 | 2,938 | 3,524 | ||
(Loss) Income Before Income Tax (Benefit) Expense | (21,393) | 31,387 | (31,541) | 38,850 | 38,042 | 44,969 | 5,737 | ||
Income Tax Expense | (5,878) | 7,533 | (8,516) | 9,324 | 9,423 | 10,791 | 376 | ||
Net (Loss) Income | $ (15,515) | $ 23,854 | $ (23,025) | $ 29,526 | 28,619 | 34,178 | 5,361 | ||
Other Comprehensive Income | |||||||||
Foreign Currency Translation | 7 | 15 | (318) | ||||||
Total Comprehensive Income | $ 28,626 | $ 34,193 | $ 5,043 | ||||||
Net Income per Share - Basic | $ (17.24) | $ 26.50 | $ (25.58) | $ 32.81 | $ 31.80 | $ 37.98 | $ 5.96 | ||
Net Income per Share - Diluted | $ (17.24) | $ 26.50 | $ (25.58) | $ 32.81 | $ 31.80 | $ 37.98 | $ 5.96 | ||
Shares Used in Computing Net Income per Share, Basic | 900 | 900 | 900 | 900 | 900 | 900 | 900 | ||
Shares Used in Computing Net Income per Share, Diluted | 900 | 900 | 900 | 900 | 900 | 900 | 900 | ||
Distributions of Paid In Capital per Share | $ 7.57 |
Balance Sheets
Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2022 | Jun. 30, 2021 |
Current Assets | ||
Cash and Cash Equivalents | $ 1,469 | $ 4,028 |
Trade Receivables, Net | 98,699 | 111,332 |
Related Party Receivable | 245 | 1,476 |
Inventory, Net | 249,439 | 141,661 |
Other Current Assets | 9,128 | 7,287 |
Total Current Assets | 358,980 | 265,784 |
Property and Equipment, Net | 3,284 | 6,330 |
Operating Lease Right-Of-Use Assets | 8,360 | 12,658 |
Goodwill | 79,903 | 79,903 |
Intangibles, Net | 18,764 | 23,927 |
Other Long-Term Assets | 3,748 | 361 |
Total Assets | 473,039 | 388,963 |
Current Liabilities | ||
Accounts Payable | 198,187 | 214,332 |
Accrued Expenses | 11,573 | 13,555 |
Current Portion of Financing Lease Obligations | 811 | |
Current Portion of Operating Lease Obligations | 4,453 | 4,622 |
Seller Note, Current | 3,000 | |
Income Taxes Payable | 418 | 2,286 |
Revolving Credit Facility, Net | 135,968 | |
Total Current Liabilities | 350,599 | 238,606 |
Revolving Credit Facility, Net | 53,580 | |
Debt, Non-Current | 3,377 | |
Seller Note, Non-Current | 750 | |
Operating Lease Obligations | 4,864 | 9,277 |
Deferred Tax Liability | 5,271 | 6,448 |
Total Liabilities | 364,111 | 308,661 |
Commitments and Contingencies | ||
Stockholders' Equity | ||
Paid In Capital | 40,000 | 40,000 |
Treasury Stock, 57 Shares Carried at Cost | (2,674) | (2,674) |
Accumulated Other Comprehensive Loss | (66) | (73) |
Retained Earnings | 71,668 | 43,049 |
Total Stockholders' Equity | 108,928 | 80,302 |
Total Liabilities and Stockholders' Equity | $ 473,039 | $ 388,963 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Condensed Consolidated Balance Sheets | |||
Common Stock, No Par Value | $ 0 | $ 0 | $ 0 |
Common Stock, Authorized | 1,000 | 1,000 | 1,000 |
Common Stock, Issued | 957 | 957 | 957 |
Common Stock, Outstanding | 900 | 900 | 900 |
Treasury Stock, Shares Carried at Cost | 57 | 57 | 57 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | ||
Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Cash Flows from Operating Activities: | ||||
Net Income | $ 29,526 | $ 28,619 | $ 34,178 | $ 5,361 |
Adjustments to Reconcile Net Income to Cash provided by (Used In) Operating Activities: | ||||
Depreciation of Property and Equipment | 1,792 | 3,096 | 5,623 | 7,124 |
Amortization of Intangible Assets | 2,581 | 5,163 | 5,772 | 8,660 |
Amortization of Deferred Financing Costs (Included in Interest) | 165 | 334 | 358 | |
Bad Debt Expense | (15) | 496 | 225 | 155 |
Deferred Income Taxes | (1,177) | 1,543 | 1,286 | |
Gain on Disposal of Fixed Assets | 87 | |||
Changes in Assets and Liabilities, Net of Acquisitions | ||||
Trade Receivables | (66,510) | 12,138 | 8,053 | 13,684 |
Related Party Receivable | 521 | 1,231 | 157 | (1,633) |
Inventory | (74,022) | (107,778) | (8,617) | 35,821 |
Income Taxes Payable\Receivable | 311 | (1,867) | 4,453 | (1,187) |
Operating Lease Right-Of-Use Assets | 2,075 | 4,299 | (817) | 3,137 |
Operating Lease Obligations | (2,760) | (4,583) | 664 | (3,284) |
Other Assets | (3,895) | (5,230) | 1,980 | 3,228 |
Accounts Payable | 42,293 | (16,146) | 18,686 | (38,761) |
Accrued Expenses | 2,497 | (1,980) | 2,395 | (6,560) |
Net Cash Used in Operating Activities | 65,606 | (83,554) | 74,718 | 27,391 |
Cash Flows from Investing Activities: | ||||
Capital Expenditures | (50) | (650) | (2,702) | |
Cash Paid for Business Acquisitions, Net of Cash Acquired | 1 | (65,409) | (2,561) | |
Net Cash Provided by Investing Activities | 1 | (50) | (66,059) | (5,263) |
Cash Flows from Financing Activities: | ||||
Payments on Seller Notes | (3,750) | (3,750) | (4,750) | |
Payments on Revolving Credit Facility | (727,325) | (1,346,442) | (1,310,333) | (724,783) |
Borrowings on Revolving Credit Facility | 791,446 | 1,428,664 | 1,318,518 | 698,670 |
Payments on Financing Leases | (811) | (2,101) | (2,478) | |
Proceeds from Debt | 3,377 | 1,378 | ||
Capital Dividends | (6,811) | |||
Capital Contribution | 3,000 | 3,860 | ||
Deferred Financing Costs | (500) | |||
Net Cash Provided by Financing Activities | 63,371 | 81,038 | (5,977) | (23,353) |
Net Decrease in Cash and Cash Equivalents | 128,978 | (2,566) | 2,682 | (1,225) |
Net Effect of Currency Translation on Cash and Cash Equivalents | 7 | 15 | (318) | |
Cash, Beginning of the Period | 4,028 | 4,028 | 1,331 | 2,874 |
Cash, End of the Period | 1,794 | 1,469 | 4,028 | 1,331 |
Supplemental disclosure for Cash Flow Information | ||||
Cash Paid for Interest | 1,736 | 2,878 | 2,079 | 3,272 |
Cash Paid for Income Taxes | $ 8,937 | $ 9,345 | 6,540 | 362 |
Supplemental Disclosure for Non-Cash Investing Activities | ||||
Property and Equipment Acquired Under Capital Leases | $ 1,378 | |||
Issuance of Seller's Note Related to Acquisition | 8,500 | |||
PPP Loan Forgiveness | $ 1,740 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Common Stock Shares Issued | Paid In Capital | Cost of Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Total |
Balances at the beginning at Jun. 30, 2019 | $ 42,951 | $ (2,675) | $ 230 | $ 3,510 | $ 44,016 | |
Balances at the beginning (in shares) at Jun. 30, 2019 | 900 | |||||
Other Comprehensive Income | ||||||
Currency Translation Adjustment | (318) | (318) | ||||
Capital Contribution | 3,860 | 3,860 | ||||
Net Income | 5,361 | 5,361 | ||||
Balances at the end at Jun. 30, 2020 | 46,811 | (2,675) | (88) | 8,871 | 52,919 | |
Balances at the end (in shares) at Jun. 30, 2020 | 900 | |||||
Other Comprehensive Income | ||||||
Currency Translation Adjustment | 15 | 15 | ||||
Distributions of Paid In Capital | (6,811) | (6,811) | ||||
Purchase of Treasury Stock | (1) | (1) | ||||
Net Income | 34,178 | 34,178 | ||||
Balances at the end at Jun. 30, 2021 | 40,000 | (2,674) | (73) | 43,049 | $ 80,302 | |
Balances at the end (in shares) at Jun. 30, 2021 | 900 | 900 | ||||
Balances at the end at Dec. 31, 2021 | 40,000 | (2,674) | (73) | 72,575 | $ 109,828 | |
Balances at the end (in shares) at Dec. 31, 2021 | 900 | |||||
Balances at the beginning at Jun. 30, 2021 | 40,000 | (2,674) | (73) | 43,049 | $ 80,302 | |
Balances at the beginning (in shares) at Jun. 30, 2021 | 900 | 900 | ||||
Other Comprehensive Income | ||||||
Net Income | 29,526 | $ 29,526 | ||||
Balances at the end at Dec. 31, 2021 | 40,000 | (2,674) | (73) | 72,575 | 109,828 | |
Balances at the end (in shares) at Dec. 31, 2021 | 900 | |||||
Balances at the beginning at Jun. 30, 2021 | 40,000 | (2,674) | (73) | 43,049 | $ 80,302 | |
Balances at the beginning (in shares) at Jun. 30, 2021 | 900 | 900 | ||||
Other Comprehensive Income | ||||||
Currency Translation Adjustment | 7 | $ 7 | ||||
Net Income | 28,619 | 28,619 | ||||
Balances at the end at Jun. 30, 2022 | 40,000 | (2,674) | (66) | 71,668 | $ 108,928 | |
Balances at the end (in shares) at Jun. 30, 2022 | 900 | 900 | ||||
Balances at the beginning at Sep. 30, 2021 | 40,000 | (2,674) | (73) | 48,721 | $ 85,974 | |
Balances at the beginning (in shares) at Sep. 30, 2021 | 900 | |||||
Other Comprehensive Income | ||||||
Net Income | 23,854 | 23,854 | ||||
Balances at the end at Dec. 31, 2021 | 40,000 | (2,674) | (73) | 72,575 | 109,828 | |
Balances at the end (in shares) at Dec. 31, 2021 | 900 | |||||
Balances at the end at Dec. 31, 2022 | 46,592 | (2,674) | (66) | 48,643 | $ 92,495 | |
Balances at the end (in shares) at Dec. 31, 2022 | 900 | 900 | ||||
Balances at the beginning at Jun. 30, 2022 | 40,000 | (2,674) | (66) | 71,668 | $ 108,928 | |
Balances at the beginning (in shares) at Jun. 30, 2022 | 900 | 900 | ||||
Other Comprehensive Income | ||||||
Capital Contribution | 6,592 | $ 6,592 | ||||
Net Income | (23,025) | (23,025) | ||||
Balances at the end at Dec. 31, 2022 | 46,592 | (2,674) | (66) | 48,643 | $ 92,495 | |
Balances at the end (in shares) at Dec. 31, 2022 | 900 | 900 | ||||
Balances at the beginning at Sep. 30, 2022 | 40,000 | (2,674) | (66) | 64,158 | $ 101,418 | |
Balances at the beginning (in shares) at Sep. 30, 2022 | 900 | |||||
Other Comprehensive Income | ||||||
Capital Contribution | 6,592 | 6,592 | ||||
Net Income | (15,515) | |||||
Balances at the end at Dec. 31, 2022 | $ 46,592 | $ (2,674) | $ (66) | $ 48,643 | $ 92,495 | |
Balances at the end (in shares) at Dec. 31, 2022 | 900 | 900 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Summary of Significant Accounting Policies | ||
Summary of Significant Accounting Policies | Note 2: Summary of Significant Accounting Policies There have been no material changes to the Company’s significant accounting policies from those described in Note 1 to the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2022. | Note 1: Summary of Significant Accounting Policies A summary of the significant accounting policies consistently applied in the preparation of the consolidated financial statements: Basis of Consolidation The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The consolidated financial statements include the accounts of the Alliance Entertainment Holding Corporation and its wholly owned subsidiaries. Significant intercompany transactions have been eliminated in consolidation. Revenue Recognition The Company enters into contracts with its customers for the purchase of products in the ordinary course of business. A contract with commercial substance exists once the Company receives and accepts a purchase order under a sales contract. Revenue from the sale and distribution of pre-recorded music, video, games, accessories, and other related products are recognized when the performance obligations under the terms of a contract with its customer are satisfied, which occurs with the transfer of control of the product. For the majority of the Company’s products, control is transferred, and revenue is recognized when the product is shipped from the Company’s distribution center to the Company’s customers, which primarily consist of retailers. For most of the Company’s distribution contracts, the Company is considered to be the principal to these transactions and the revenue is recognized on a gross basis, since the Company is the primary obligor for fulfilling the promise to its customers on these arrangements, has inventory risk, and has latitude in establishing prices. Additionally, the Company ships some of its products to retailers on a consignment basis. The Company retains ownership of its products stored at these retailers. As the Company’s products are sold by the retailer, ownership is transferred from the Company to the retailer. At that time, the Company invoices the retailer and recognizes revenue for these consignment transactions. If a contract contains more than one performance obligation, the transaction price is allocated to each performance obligation based on relative standalone selling price. Shipping and handling activities are treated as a fulfillment activity rather than a promised service, and therefore, are not considered a performance obligation. Sales, use, value-added, and other excise taxes the Company collects concurrent with revenue producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense when incurred. The Company applies ASC 606, Revenue from Contracts with Customers Ø Portfolio approach practical expedient relative to the estimation of variable consideration. Ø Shipping and handling practical expedient to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities. Ø Costs of obtaining a contract practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset is one year or less. Ø Sales taxes practical expedient to exclude sales taxes and other similar taxes from the transaction price. Ø Significant financing component practical expedient Revenue is recognized at the transaction price which the Company expects to be entitled to receive. When determining the transaction price, the Company estimates variable consideration by applying the portfolio approach practical expedient under ASC 606. The primary sources of variable consideration for the Company are rebate programs, incentive programs and product returns. The rebate and incentives are recorded as a reduction to revenue at the time of the initial sale or when offered. The Company estimates variable consideration related to products sold under its rebate and incentive programs using the expected value method, which is based on sales terms with customers, historical experience, inventory levels, volume purchases, and known changes in relevant trends in the future. There are no material instances where variable consideration is constrained and not recorded at the initial time of sale. Substantially all of the Company’s sales are domestic and are made to customers under agreements permitting certain limited rights of return based upon the prior months’ sales and vendor return rights. Except for video games and vinyl sales, which are not returnable, generally it is the Company’s policy not to accept product returns that cannot be returned to the Company’s vendors. Revenue from product sales is recognized net of estimated returns. Sales in the pre-recorded music and video movies industry generally give certain customers the right to return products. In addition, the Company’s suppliers generally permit the Company to return products that are in the supplier’s current product listing, except for video games and vinyl. Based on historical returns, review of current catalog list and the change of mass merchant’s floor space and store locations carrying the Company’s products, management provides for estimated net returns at the time of sale and other specific reserves when appropriate. This is typically done using a twelve-month average return rate by product. The Company has determined that the nature, amount, timing, and uncertainty of revenue and cash flows are most significantly affected by the overall economic health of the consumer product industry in the United States. Cash and Cash Equivalents Cash equivalents include all investments with original maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Trade Receivables, Net The Company grants credit to customers on credit terms in the ordinary course of business. Credit is extended based on an evaluation of a customer’s financial condition and collateral is generally not required. Trade receivables are carried at original invoice amount less estimates made for allowances for uncollectible accounts based on a periodic review of all outstanding amounts. Management determines these allowances by regularly evaluating individual customer receivables and considering a customer’s financial condition and credit history. Trade receivables are written off against the allowance when they are deemed uncollectible. Recoveries of trade receivables previously written off are recorded as a credit to the allowance for uncollectible accounts when received. Inventory and Inventory Reserves Inventory is stated at the lower of cost or net realizable value, using the weighted average cost method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Excess or obsolete inventory reserves are established when inventory is estimated to not be sellable or returnable to suppliers based on product demand and product life cycle. Property and Equipment, Net Property and equipment are recorded at cost less accumulated depreciation. Depreciation and amortization are calculated using the straight-line method over the estimated useful life of the asset. Costs of major additions and improvements are capitalized while repair and maintenance costs are charged to expense as incurred. When items are disposed of, the cost and accumulated depreciation are eliminated from the accounts, and any gain or loss is reflected in the consolidated statements of operations. Depreciation and Amortization Depreciation is provided in amounts sufficient to allocate the cost of depreciable assets to operations over their estimated useful lives using the straight-line method. The estimated useful lives are as follows: Asset Class Useful Life Leasehold Improvements 5 – 10 years Machinery and Equipment 3 – 7 years Furniture and Fixtures 5 – 7 years Capitalized Software 1 – 3 years Equipment Under Capital Leases 5 years Computer Equipment 2 – 5 years Leasehold improvements and equipment under capitalized leases are amortized over the shorter of the useful life of the asset or the life of the lease. Depreciation and amortization expense was approximately $3.1 million, $5.6 million, and $7.1 million for the years ended June 30, 2022, 2021, and 2020, respectively. Goodwill and Definite-Lived Intangible Assets, Net Goodwill is assessed using either a qualitative assessment or quantitative approach to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. The qualitative assessment evaluates factors including macroeconomic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than it carrying value, a quantitative assessment is performed. Otherwise, no further assessment is required. The quantitative approach compares the estimated fair value of the reporting units to it carrying amount, including goodwill. Impairment is indicated if the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, and an impairment charge is recognized for the differential. The Company completes its annual goodwill impairment test as of June 30 each year. For the years ended June 30, 2022, 2021 and 2020, the Company did not record any impairment. Intangible assets are stated at cost, less accumulated amortization. Amortization of customer relationships and lists is recorded using an accelerated method over the useful lives of the related assets, which range from 10 to 15 years. Covenants not to compete, trade name and favorable leases are amortized using the straight-line method over the estimated useful lives of the related assets, which range from five Impairment of Long-Lived Assets Recoverability of long-lived assets, including property and equipment and certain identifiable intangible assets are evaluated whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Factors considered important which could trigger an impairment review include but are not limited to significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the assets or the strategy for the overall business, significant decrease in the market value of the assets and significant negative industry or economic trends. In the event the carrying amount of the long-lived assets may not be recoverable based upon the existence of one or more of the indicators, the assets are assessed for impairment based on the estimated future undiscounted cash flows expected to result from the use of the asset and its eventual deposition. If the carrying amount of an asset exceeds the sum of the estimated future undiscounted cash flow, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value. There was no impairment during the years ended June 30, 2022, 2021 and 2020. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include management’s estimates of doubtful accounts, sales returns, rebates, defective products, and inventory recoverability. On an ongoing basis, management evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. Fair Value of Financial Instruments The Company complies with ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles and expands disclosure requirements about fair value measurements. Under ASC 820, there are three categories for the classification and measurement of assets and liabilities carried at fair value: Level 1: Valuation based on quoted market prices in active markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Examples include publicly traded equity securities and publicly traded mutual funds that are actively traded on a major exchange or over-the- counter market. Level 2: Valuation based on quoted market prices of investments that are not actively traded or for which certain significant inputs are not observable, either directly or indirectly. Examples include municipal bonds, where fair value is estimated using recently executed transactions, bid asked prices and pricing models that factor in, where applicable, interest rates, bond spreads and volatility. Level 3: Valuation based on inputs that are unobservable and reflect management’s best estimate of what market participants would use as fair value. Examples include limited partnerships and private equity investments. Cash, trade accounts receivable, accounts payable, accrued expenses and other current liabilities estimated fair values approximate carrying amounts as of June 30, 2022 and 2021, based on the short-term nature and maturity of these instruments. The estimated fair value of debt and the credit facility is based on Level 2 inputs, which consist of interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities. As of June 30, 2022, 2021 and 2020 the estimated fair value of the Company’s short and long-term debt approximates it carrying value due to market interest rates charged on such debt or their short-term maturities. The estimated fair value of the tangible and intangible assets acquired, and the liabilities assumed in connection with the acquisition of COKeM were measured using Level 2 and Level 3 inputs. Advertising Costs Advertising costs, which consist primarily of mailers, catalogs, online marketing and other promotions, are expensed in the period in which the advertisement or promotion occurs. Additionally, the Company maintains cooperative advertising agreements with certain vendors to include their logos and product descriptions prominently in the catalogs and calendars. The fee revenues charged to the vendors for the cooperative advertising arrangements are recorded as a reduction of advertising expense and any excess fees are recorded as a reduction of cost of goods sold. Advertising costs, net, for the years ended June 30, 2022, 2021, and 2020, were $6.5 million, $6.1 million, and $6.5 million, respectively. Deferred Financing Costs Deferred financing costs relating to the Company’s revolving credit facility are deferred and amortized ratably over the life of the debt using the straight-line method. Deferred financing costs are included as an addition to interest expense on the consolidated statements of operations and comprehensive income and are included in Revolving Credit Facility, Net on the Consolidated Balance Sheets. Shipping and Handling The Company accounts for shipping and handling activities as fulfillment activities. As such, the Company does not evaluate shipping and handling as promised services to its customers. Shipping and handling costs are included in cost of revenues in the accompanying consolidated statements of operations and comprehensive income. Foreign Currency Translation and Transactions The financial position and results of operations of the Company’s foreign subsidiary is measured using the local currency as the functional currency. Assets and liabilities of this subsidiary are translated into United States dollars at the exchange rate in effect at each period end. Income statement accounts are translated at the average rate of exchange prevailing during the period. Foreign currency translation income totaled $7 and $15 thousand for the years ended June 30, 2022, and 2021 respectively. Foreign currency translation loss totaled $318 thousand for the year ended June 30, 2020. The Company does not typically hedge its foreign exchange rate position. Realized gains or losses from foreign currency transactions are included in operations as incurred. Business Combinations — Valuation of Acquired Assets and Liabilities Assumed The Company allocates the purchase price for each business combination, or acquired business, based upon (i) the fair value of the consideration paid and (ii) the fair value of net assets acquired, and liabilities assumed. The determination of the fair value of net assets acquired and liabilities assumed requires estimates and judgements of future cash flow expectations for the acquired business and the allocation of those cash flows to identifiable tangible and intangible assets. Fair values are calculated by applying estimates related to Internal Rate of Return (IRR) and Weighted Average Cost of Capital (WACC) assumptions as well as incorporating expected cash flows into industry standard valuation techniques. Goodwill is the amount by which the purchase price consideration exceeds the fair value of tangible and intangible assets acquired, less assumed liabilities. Intangible assets, such as customer relations and trade names, when identified, are separately recognized and amortized over their estimated useful lives, if considered definite lived. Acquisition costs are expensed as incurred and are included the consolidated statements of operations and comprehensive income. Leases The Company is a lessee in multiple noncancelable operating and financing leases. If the contract provides the Company the right to substantially all the economic benefits and the right to direct the use of the identified asset, it is generally considered to be or contain a lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term. The ROU asset is also adjusted for any lease prepayments made, lease incentives received, and initial direct costs incurred. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. Increases (decreases) to variable lease payments due to subsequent changes in an index or rate are recorded as variable lease expense (income) in the future period in which they are incurred. The discount rate used is the implicit rate in the lease contract, if it is readily determinable, or the Company’s incremental borrowing rate. The Company uses the incremental borrowing rate based on the information available at the commencement date for all leases. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. The ROU asset for operating leases is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e., present value of the remaining lease payments), plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received, and any impairment recognized. Operating leases with fluctuating lease payments: For operating leases with lease payments that fluctuate over the lease term, the total lease costs are recognized on a straight-line basis over the lease term. The ROU asset for finance leases is amortized on a straight-line basis over the lease term. For all underlying classes of assets, the Company has elected to not recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Leases containing termination clauses in which either party may terminate the lease without cause and the notice period is less than 12 months are generally deemed short-term leases with lease costs included in short-term lease expense. The Company recognizes short-term lease cost on a straight-line basis over the lease term. Variable Interest Entity The Company evaluates its ownership, contractual, and other interests in entities to determine if it has any variable interest in a variable interest entity (VIE). These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical information, among other factors. If the Company determines that an entity in which it holds a contractual, or ownership, interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; Changes in consolidation status are applied prospectively. The Company evaluated its transactions with a related party (included in Note 12) and concluded that the arrangements do not result in variable interests and do not require consolidation of any of the related party entities. Segments Operating segments are defined as components of an enterprise where discrete financial information is available and evaluated regularly by the chief operating decision maker or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision makers manage the business, allocate resources, and assess performance on a consolidated basis. Accordingly, the Company has one operating and reportable Accounting Pronouncements Recently issued and adopted accounting pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which was issued to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This ASU also clarifies and simplifies other aspects of the accounting for income taxes. This update is effective for fiscal years beginning after December 15, 2020, and early adoption is permitted. The company adopted the new standard on July 1, 2021. The adoption of this standard did not have a material impact on the company’s consolidated financials statements. In June 2016, the FASB issued ASU 2016-13, Financials Instruments — Credit Losses (Topic 848): Measurement of Credit Losses on Financials Instruments to amend the current accounting guidance which requires an incurred loss model for recognizing credit losses. Under the new guidance, the Company now measures all expected losses based on a forward-looking expected loss model which reflects probable losses based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted the new standard on July 1, 2020. The adoption of this standard did not have a material impact on the company’s consolidated financial statements. Recently issued but not yet adopted accounting pronouncements In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The new guidance provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. The provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. The Company is currently evaluating the impact that adopting this guidance may have on its consolidated financial statements. In October 2021, The FASB issued ASU No. 2021-08, Accounting for contract Assets and Contract Liabilities from contracts with customers (Topic 805) (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. ASU 2021-08 is effective for annual periods beginning December 15, 2022, including interim periods within those fiscal years. Adoption of SU 2021-08 should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption. The Company is currently evaluating the impact of ASU 2021-08 on its consolidated financial statements. |
Trade Receivables, Net_2
Trade Receivables, Net | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Trade Receivables, Net | ||
Trade Receivables, Net | Note 3: Trade Receivables, Net Trade Receivables, Net consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Trade Receivables $ 175,861 $ 101,064 Less: Allowances for Doubtful Accounts (311) (557) Sales Returns Reserve, Net (3,100) (1,898) Customer Rebate and Discount Reserve (1,599) 90 Total Allowances (5,010) (2,366) Trade Receivables, Net $ 170,851 $ 98,699 Concentration of Credit Risk Concentration of Credit Risk consists of the following at: Revenue Six Months Ended Six Months Ended ($ in thousands) December 31, 2022 December 31, 2021 Customer #1 19.3 % 24.2 % Receivables Balance ($ in thousands) December 31, 2022 June 30, 2022 Customer #1 14.2 % 21.4 % Customer #2 13.6 % * Customer #3 10.2 % 14.2 % * Less than 10% | Note 2: Trade Receivables, Net Trade Receivables, Net consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Trade receivables $ 101,064 $ 115,618 Less: Allowances for Doubtful Accounts (558) (1,145) Sales returns reserve, net (1,898) (2,975) Customer Rebate and Discount Reserve 90 (166) Total Allowances (2,366) (4,286) Trade Receivables, Net $ 98,699 $ 111,332 Concentration of Credit Risk Revenue Concentration of Credit Risk consists of the following at: Year Ended ($ in thousands) June 30, 2022 June 30, 2021 June 30, 2020 Customer #1 23.6 % 23.7 % 19.6 % Receivables Balance ($ in thousands) June 30, 2022 June 30, 2021 Customer #1 21.4 % 12.2 % Customer #2 14.2 % * * Less than 10% |
Inventory, Net_2
Inventory, Net | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Inventory, Net. | ||
Inventory, Net | Note 4: Inventory, Net The Company completed an evaluation of the net realizable value of our inventory at December 31, 2022. As a result of this evaluation, the Company recorded a $7.1 Inventory, Net (all finished goods) consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Inventory $ 186,895 $ 255,236 Less: Reserves (11,573) (5,797) Inventory, Net $ 175,322 $ 249,439 | Note 3: Inventory, Net Inventory, Net (all finished goods) consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Inventory $ 255,236 $ 145,740 Less: Reserves (5,797) (4,079) Inventory, Net $ 249,439 $ 141,661 |
Other Current and Long-Term A_4
Other Current and Long-Term Assets | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Other Current and Long-Term Assets | ||
Other Current and Long-Term Assets | Note 5: Other Current and Long-Term Assets Other Current and Long-Term Assets consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Other Assets – Current Prepaid Intellectual Property $ 2,197 $ 2,443 Prepaid Insurance 639 431 Prepaid Acquisitions 2,865 2,243 Prepaid Freight 325 216 Prepaid Manufacturing Components 28 79 Prepaid Rent 886 — Prepaid Maintenance 825 885 Prepaid Shipping Supplies 1,666 2,831 Total Other Assets – Current $ 9,431 $ 9,128 Other Long-Term Assets Deposits $ 305 $ 3,748 Total Other Long-Term Assets $ 305 $ 3,748 | Note 4: Other Current and Long-Term Assets Other Current and Long-Term Assets consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Other Assets – Current Prepaid Intellectual Property $ 2,443 $ 3,411 Prepaid Insurance 431 2,011 Prepaid Acquisitions 2,243 — Prepaid Freight 216 — Prepaid Manufacturing Components 79 167 Prepaid Maintenance 885 165 Prepaid Shipping Supplies 2,832 1,533 Total Other Assets – Current $ 9,129 $ 7,287 Other Assets – Long Term Deposits $ 3,748 $ 361 Total Other Assets – Long Term $ 3,748 $ 361 |
Property and Equipment, Net_2
Property and Equipment, Net | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Property and Equipment, Net | ||
Property and Equipment, Net | Note 6: Property and Equipment, Net Property and Equipment, Net consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Property and Equipment Leasehold Improvements $ 1,680 $ 1,680 Machinery and Equipment 25,430 19,440 Furniture and Fixtures 1,749 3,530 Capitalized Software 10,508 11,451 Equipment Under Capital Leases 12,488 12,917 Computer Equipment 1,626 2,662 Construction in Progress 489 154 53,970 51,834 Less: Accumulated Depreciation and Amortization (43,238) (48,550) Total Property and Equipment, Net 10,732 $ 3,284 Depreciation and Amortization Expense for the three months ended December 31, 2022, and 2021, was $0.5 million and $0.8 million respectively and six months ended December 31, 2022, and 2021 was $1.1 million and $1.8 million, respectively. | Note 5: Property and Equipment, Net Property and Equipment, Net consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Property and Equipment Leasehold Improvements $ 1,680 $ 1,597 Machinery and Equipment 19,440 19,236 Furniture and Fixtures 3,530 2,622 Capitalized Software 11,451 11,422 Equipment Under Capital Leases 12,917 12,917 Computer Equipment 2,662 2,665 Construction in Progress 154 104 51,834 50,563 Less: Accumulated Depreciation and Amortization (48,550) (44,233) Total Property and Equipment, Net $ 3,284 $ 6,330 Depreciation and Amortization Expense for the years ended 2022, 2021 and 2020 was $3.1 million, $5.6 million, and $7.1 million respectively. |
Intangible Assets, Net
Intangible Assets, Net | 12 Months Ended |
Jun. 30, 2022 | |
Intangible Assets, Net | |
Intangible Assets, Net | Note 6: Intangible Assets, Net Intangible Assets, Net consists of the following at: Amortization Amortization Life Year Ended June 30, Year Ended June 30, ($ in thousands) (in yrs.) June 30, 2021 2021 June 30, 2022 2022 Identifiable Intangible Assets: Customer Relationships 15 $ (4,331) $ 14,633 $ (3,690) $ 10,943 Trade Name – Alliance 10 (382) 634 (254) 380 Covenant Not to Compete 7 (1) 4 (1) 3 Mecca Customer Relationships 15 (575) 3,932 (575) 3,357 Customer List 10 – 15 (739) 4,724 (643) 4,081 Total Identifiable Intangible Assets: $ (6,028) $ 23,927 $ (5,163) $ 18,764 Accumulated amortization as of June 30, 2022 and 2021 amounted to $90.9 million and $85.8 million, respectively. During the years ended June 30, 2022, 2021, and 2020, the Company recorded amortization expense of $5.2 million, $6.0 million, and $ 8.6 Expected amortization over the next five years and thereafter, at June 30, 2022, is as follows: Intangible ($ in thousands) Assets Year Ended June 30 2023 $ 4,056 2024 3,470 2025 2,898 2026 2,586 2027 2,536 Thereafter 3,218 Total Expected Amortization $ 18,764 |
Accrued Expenses_2
Accrued Expenses | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Accrued Expenses | ||
Accrued Expenses | Note 8: Accrued Expenses Accrued Expenses consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Marketing Funds Accruals $ 2,768 $ 2,738 Payroll and Payroll Tax Accruals 2,802 3,904 Accruals for Other Expenses 6,848 4,931 Total Accrued Expenses $ 12,418 $ 11,573 | Note 7: Accrued Expenses Accrued Expenses consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Marketing Funds Accruals $ 2,738 $ 1,294 Payroll and Payroll Tax Accruals 3,904 6,833 Accruals for Other Expenses 4,931 5,428 Total Accrued Expenses $ 11,573 $ 13,555 |
Lines of Credit and Long-Term_5
Lines of Credit and Long-Term Obligation | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Lines of Credit and Long-Term Obligation | ||
Lines of Credit and Long-Term Obligation | Note 9: Lines of Credit and Long-Term Obligation Line of Credit The Company executed an amendment to its Credit Facility with Bank of America on January 24, 2022, (retroactive to January 1, 2022), to transition the interest rate benchmark from Libor to a Secured Overnight Financing Rate (SOFR). The effective interest rate on the revolver using SOFR for the six months ended December 31, 2022, was 4.76% (SOFR plus a spread of 2.11%). The effective interest rate for the six months ended December 31, 2021, was 2.34% (Libor rate plus 2%). All assets (with certain capitalized lease exceptions) and interest in assets of the Company are pledged as collateral under the Credit Facility. The Credit Facility matures on September 29, 2023, with a variable annual interest rate equal to the higher of the Prime rate, Federal Funds rate plus .5% or Bank of America Libor rate plus 2%, up to January 1, 2022, and SOFR plus a spread of 2.11% going forward. On June 30, 2022, the Credit Facility with Bank of America was increased from $175 million to $225 million. The Credit Facility contains certain financial covenants with which the Company is required to comply. Failure to comply with the financial covenants contained in the Credit Facility could result in an event of default. An event of default, if not cured or waived, would permit acceleration of any outstanding indebtedness under the Credit Facility. The Company obtained a waiver for non-compliance with one non-financial covenant related to its delivery of the monthly unaudited financial statements and compliance certificates for the periods pertaining to June 30, 2022, July 31, 2022, and August 31, 2022. These non-compliances resulted in events of default under the Revolving Credit Facility and accordingly, the Credit Facility was classified as a current liability as of June 30, 2022. The Company failed to meet the Fixed Charge Coverage Ratio covenant requirement as of November 30, 2022, December 31, 2022, and January 31, 2023. The Company is in negotiations with its lender to obtain a waiver for non-compliance. We cannot provide any assurance that our lender will provide us with a waiver for the current event of default related to the non-compliance with the Fixed Charge Coverage Ratio, or any future instances of non-compliance. The Company has other debt in the amount of $8,252 that includes cross-default provisions with other debt. Accordingly, this debt is recorded as a current liability as of December 31, 2022, due to the Credit Facility being in default. The failure to maintain compliance with covenant requirements if not waived by our lender causes the outstanding borrowings to be in default and payable on demand which would have a material adverse effect on us and our ability to continue as a going concern. Availability under the Credit Facility is limited by the Company’s borrowing base calculation, as defined in the Credit Agreement. In addition, there is a commitment fee of 0.25% for unused credit line with fees for the six months ended December 31, 2022, and 2021 of $60 thousand and $95 thousand, respectively. Availability as of December 31, 2022, was $48.3 million with an outstanding revolver balance of $176.7 million. Because of the event of default, the lenders are under no obligation to fund any loan, arrange for the issuance of any letter of credit, or grant any other accommodation to or for the benefit of the Company. Availability as of June 30, 2022, was $48 million with an outstanding revolver balance of $136 million. Revolver Balance consists of the following at: ($ in thousands) December 31, 2022 June 30, 2022 Bank of America Revolving Credit Agreement $ 176,740 $ 136,176 Less: Deferred Finance Costs (125) (208) Revolving Credit, Net $ 176,615 $ 135,968 | Note 8: Lines of Credit and Long-Term Obligation Line of Credit On June 30, 2022, the credit line with Bank of America was amended for the current period which ends September 29, 2023 and increased from $175 million to $225 million with a variable annual interest rate equal to the higher of the Prime rate, Federal Funds rate plus .5% or Bank of America SOFR rate plus 2.11% (Libor rate plus 2% is the prior agreement). As of June 30, 2022, the interest rate was 3.61% (SOFR 1.5% plus a spread of 2.11%). As of June 30, 2021, the interest rate was 2.25% (Libor .25% plus a spread of 2%) with borrowing above the contracted Libor at 4.25% (Base Rate 3.25% plus a spread of 1%). The weighted average interest rate on the revolver for fiscal years ended June 30, 2022 and 2021 was 2.5% and 4.15% respectively. All assets (with certain capitalized lease exceptions) and interest in assets of the Company are pledged as collateral under the Credit Facility. In addition, the Credit Facility contains certain financial covenants with which the Company is required to comply. Failure to comply with the financial covenants contained in the Credit Facility could result in an event of default. An event of default, if not cured or waived, would permit acceleration of any outstanding indebtedness under the Credit Facility. As of June 30, 2022, the Company was in compliance with all financial covenants pertaining to the credit facility. The Company obtained a waiver for non-compliance with one non-financial covenant related to its delivery of the monthly unaudited financial statements and compliance certificates for the periods pertaining to June 30, 2022, July 31, 2022, and August 31, 2022. This non-compliance resulted in events of default under the Revolving Credit Facility. As a result of this non-compliance as of the June 30, 2022 balance sheet date and periods thereafter, the Company has classified the outstanding balance of the Revolving Credit Facility Net of $135,968 as a current liability as of June 30, 2022. The Company expects that it will comply with this non-financial covenant for a period of at least one year from the issuance of these financial statements. Availability under the Credit Facility is limited by the Company’s borrowing base calculation, as defined in the Credit Agreement. In addition, there is a commitment fee of 0.25% for unused credit line with fees for year ended June 30, 2022, and 2021 of $100 thousand and $300 thousand, respectively. Availability at June 30, 2022, was $48 million with an outstanding revolver balance of $136 million. Availability on June 30, 2021 was $95 million with an outstanding revolver balance of $54 million. Revolver Balance consists of the following at: ($ in thousands) June 30, 2022 June 30, 2021 Bank of America Revolving Credit Agreement $ 136,176 $ 53,955 Less: Deferred Finance Costs (208) (375) Revolving Credit, Net $ 135,968 $ 53,580 Seller Notes As part of the acquisition described in Note 15, the Company issued an $8.5 million subordinated note payable effective September 2020 that matures in September 2022. Interest is incurred at an annual rate of 6%. After a $2.5 million early payment, there was $3.75 million outstanding in current and long-term liabilities on the consolidated balance sheet as of June 30, 2021. As of June 30, 2022, the Seller Note balance was paid in full. |
Employee Benefits_2
Employee Benefits | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Employee Benefits | ||
Employee Benefits | Note 10: Employee Benefits Company Health Plans The Company sponsors the Alliance Health & Benefits Plan (AHBP) consisting of the following plans: self-insured medical (PPO and HDHP), dental (PPO and HMO), vision, life Insurance, short & long-term disability. The medical insurance is self-insured to a maximum company exposure of $200 thousand per individual occurrence, at which time a stop loss policy covers the balance of covered claims. The Company contributes various percentages to different levels of premium coverage. As of December 31, 2022, the Company fully accrued for estimated run out exposure on a mature claim basis, as provided and calculated by our plan administrator. The Dental insurance HMO is self-insured to a maximum per individual procedure based on a published schedule which measures exposure. The PPO policy is fully insured. The Company contributes various percentages to different levels of premium coverage. As of December 31, 2022, the Company was fully accrued for estimated run out exposure on a mature claim basis, as provided and calculated by the plan administrator. The vision plan, life insurance plan, and short and long-term disability plans are fully insured, sponsored by the Company and premiums are paid by the employer and employee based on various Board approved schedules. At December 31, 2022 and June 30, 2022, the accrued estimated run out exposure totaled approximately $218 thousand and $234 thousand, respectively, for the medical and dental insurance plans. Accrued estimated runout exposure is included in accrued expenses on the consolidated balance sheets. 401(k) Plan The Company has the Alliance Entertainment 401(k) Plan (401(k) Plan) covering all eligible employees of the Company. All employees over the age of 18 are eligible to participate in the Plan at the beginning of the month following date of hire. The Plan has automatic deferral at the beginning of the month following date of hire. Employees are automatically enrolled in the Plan with a 3% contribution; however, they have the option to increase/decrease their deferrals or opt out of the Plan at any time. The Company currently offers a match contribution of $.50 of every dollar up to 4% of contribution percentage. The Company conducts a retirement plan review on an annual basis. | Note 9: Employee Benefits Company Health Plans The Company sponsors the Alliance Health & Benefits Plan (AHBP) consisting of the following plans: self-insured medical (PPO and HDHP), dental (PPO and HMO), vision, life Insurance, short & long-term disability. The medical insurance is self-insured to a maximum company exposure of $200K per individual occurrence, at which time a stop loss policy covers the balance of covered claims. The Company contributes various percentages to different levels of premium coverage. As of June 30, 2022, the Company fully accrued for estimated run out exposure on a mature claim basis, as provided and calculated by our plan administrator. The Dental insurance HMO is self-insured to a maximum per individual procedure based on a published schedule which measures exposure. The PPO policy is fully insured. The Company contributes various percentages to different levels of premium coverage. As of June 30, 2022, the Company was fully accrued for estimated run out exposure on a mature claim basis, as provided and calculated by the plan administrator. The vision plan, life insurance plan, and short & long-term disability plans are fully insured, sponsored by the company and premiums are paid by the employer and employee based on various Board approved schedules. During the years ended June 30, 2022, and 2021, the accrued estimated run out exposure totaled approximately $218 thousand and $436 thousand, respectively, for the medical and dental insurance plans. Accrued estimated runout exposure is included in accrued expenses on the consolidated balance sheets. 401(k) Plan The Company has the Alliance Entertainment 401(k) Plan (401(k) Plan) covering all eligible employees of the Company. All employees over the age of 18 are eligible to participate in the Plan at the beginning of the month following date of hire. The Plan has automatic deferral at the beginning of the month following date of hire. Employees are automatically enrolled in the Plan with a 3% contribution; however, they have the option to increase/decrease their deferrals or opt out of the Plan at any time. The Company currently offers a match contribution of $.50 of every dollar up to 4% of contribution percentage. The Company conducts a retirement plan review on an annual basis. During the years ended June 30, 2022, 2021, and 2020 the Company contributed approximately $695 thousand, $502 thousand, and $539 thousand to this retirement plan, respectively which is recorded in Selling, General and Administrative Expense in the Consolidated Statements of Operations and Comprehensive Income. |
Income Taxes_2
Income Taxes | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Income Taxes | ||
Income Taxes | Note 11: Income Taxes The effective tax rate was 27% for the six months ended December 31,2022, compared to 26% for the same periods of 2021. State tax rates vary among states and average approximately 6.0% although some state rates are higher, and a small number of states do not impose an income tax. For the six months ended December 31, 2022, and 2021, the difference between the Company’s effective tax rate and the federal statutory rate primarily resulted from state income taxes. | Note 10: Income Taxes The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns as well as tax credits carry forward. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax laws or rates. Valuation allowances are established as necessary to reduce deferred tax assets to the amount more likely than not to be realized. The Company’s policy on income statement classification of interest and penalties related to income tax obligations is to include such items as part of total interest expense and other expense, respectively. As of June 30, 2022, and 2021, the Company did not have any material uncertain tax positions and thus has not recognized any interest or penalties in these consolidated financial statements. Domestic income (loss) before income taxes and details of the income tax expense (benefit) are as follows: Year Ended June 30 (In thousands) 2022 2021 2020 Income Tax Expense (Benefit): Current: Federal $ 7,937 $ 7,201 $ (1,759) State 2,663 2,304 849 Total Current $ 10,599 $ 9,505 $ (910) Deferred: Federal (951) 1,070 1,137 State (226) 216 149 Total Deferred (1,177) 1,286 1,286 Income Tax Expense $ 9,423 $ 10,791 $ 376 The items accounting for the difference between income taxes computed at the U.S. federal statutory income tax rate and the income tax expense (benefit) at the effective tax rate for each of the years are as follows: Year Ended June 30 (In thousands) 2022 2021 2020 Federal Income Tax Provision at Statutory Rate $ 7,484 21 % $ 9,444 21 % $ 1,205 21 % State Taxes, Net of Federal Benefits 2,437 6 % 2,520 6 % 997 17 % Meals Entertainments — 0 % 6 0 % 18 0 % Foreign Derived Intangible Income (618) -2 % (802) -2 % (598) -10 % NOL Carryback Refund Before AMT — 0 % — 0 % (1,216) -21 % Debt Forgiveness and Interest Income — 0 % — 0 % — 0 % Other 120 -1 % (377) -1 % (30) -1 % Income Tax Expense $ 9,423 24 % $ 10,791 24 % $ 376 6 % In year ended June 30, 2020 the company recorded an Income Tax benefit of $2.5 million related to NOL Carrybacks under the provision in the CARES Act. Deferred income taxes reflect the net tax effects of temporary differences between the amount of assets and liabilities for accounting purposes and the amounts used for tax purposes. The components of deferred taxes consist of the following (amounts in thousands): Year Ended June 30 (In thousands) 2022 2021 Deferred Tax Assets: Other Deferred (ICDISC) $ 583 $ 245 Net Operating Losses 30 30 Bad Debt 39 83 Total Deferred Tax Assets 652 358 Deferred Tax Liabilities: Inventory (324) (875) Accruals Not Currently Deductible (792) (98) Prepaids (1,004) (1,224) Property and Equipment (1,399) (1,924) Goodwill/Intangibles (2,404) (2,685) Total Deferred Tax Liabilities (5,923) (6,806) Net Deferred Tax Liability $ (5,271) $ (6,448) As of June 30, 2022, 2021 and 2020, the Company had recorded no unrecognized tax benefits and, therefore, no accrued interest or penalties for unrecognized tax positions as of fiscal year ended June 30, 2022. In addition, the Company is under examination by Internal Revenue Service and Florida tax authorities. These proceedings may lead to adjustments or proposed adjustments to their taxes or provisions for uncertain tax provisions. The Company believes that it would prevail under such examination and, accordingly, has not recorded a provision for uncertain tax positions. The Company evaluates deferred tax assets each period for recoverability. The Company records a valuation allowance for assets that do not meet the threshold of “more likely than not” to be realized in the future. To make that determination, the Company evaluates the likelihood of realization based on the weight of all positive and negative evidence available. As of June 30, 2022, and 2021, the Company has not recorded a valuation allowance. The Company will reevaluate this determination quarterly and record a tax expense if and when future evidence requires a valuation allowance. The Company’s tax years after fiscal year 2018 remain open for federal purposes and fiscal year 2016 for certain state taxes. In addition, due to the Florida tax examination, tax years 2008 through 2016 also remain open. |
Commitments and Contingencies_2
Commitments and Contingencies | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Commitments and Contingencies. | ||
Commitments and Contingencies | Note 12: Commitments and Contingencies Commitments The Company enters into various agreements with suppliers for the products it distributes. The Company had no long-term purchase commitments or arrangements with its suppliers as of December 31, 2022, and June 30, 2022. Litigation, Claims and Assessments We are exposed to claims, litigation and/or cyber-attacks of varying degrees arising in the ordinary course of business and use various methods to resolve these matters. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. | Note 11: Commitments and Contingencies Commitments The Company enters into various agreements with suppliers for the products it distributes. The Company had no long-term purchase commitments or arrangements with its suppliers as of June 30, 2022 or 2021. Litigation, Claims and Assessments We are exposed to claims, litigation and/or cyber-attacks of varying degrees arising in the ordinary course of business and use various methods to resolve these matters. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. |
Related Party Transactions_2
Related Party Transactions | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Related Party Transactions | ||
Related Party Transactions | Note 13: Related Party Transactions Interest-Charge Domestic International Sales Corporation (“IC-DISC”) The Company has an affiliate, My Worldwide Market Place, Inc. which is an IC-DISC and was established February 12, 2013. The IC-DISC is owned by the Company Stockholders. Effective December 31, 2022, IC-DISC was discontinued as a result there will be no future accruals or commissions paid out. The IC-DISC is organized to manage sales to certain qualified customers and receive commissions from the Company for this activity. The commissions expenses were $1.4 million and $2.8 million for the three months ended December 31, 2022 and 2021, and $2.8 million and $6.3 million for the six months ended December 31, 2022, and 2021 respectively. The commission is determined under formulas and rules defined in the law and regulations of the US tax code, and under these regulations, the commission is deductible by the Company and results in a specified profit to the IC-DISC. This net profit is not subject to federal income tax. The IC-DISC distributes the profit to its stockholders, who are taxed on the income as a dividend. The owners of the IC-DISC elected to forgive the commissions earned for the twelve months ended December 31, 2022. The forgiveness of $6.6 million was recorded as a deemed capital contribution by the Company Stockholders. Captive Insurance Policies Bruce Ogilvie, Executive Chairman and a principal stockholder of Alliance, and Jeff Walker, Chief executive Office, a director, and a principal stockholder of Alliance, established two insurance companies; Guard Yourself Insurance Company, Ltd. and Super O Insurance Company, Ltd., replaced effective April 1, 2018, with the current new insurance companies, Airlie Protection Ins. Co., Inc. and Protection for You Ins. Co., Inc. These insurance companies additionally insure the general assets, liabilities and claims of Alliance through March 30, 2022, and were not renewed for future periods. Premium payments are allowed based on the Loan Agreement dated February 21, 2017. The Company is not a guarantor and does not have exposure in the event of a loss. Total captive policy expense for the three months December 31, 2022 and 2021, were $0.0 million and $0.54 million respectively and for the six months ended December 31, 2022, and December 31, 2021, were $0.0 and $1.09 million respectively, which are included in related party receivables on the consolidated balance sheets. Captive Claims receivables for six months ended December 31, 2022, and December 31, 2021, was $0.0 and $0.9 million respectively. Other Related Party Transactions During the three months December 31, 2022 and 2021, and the six-month periods ended December 31, 2022, and 2021, the Company had sales to a related party company owned by the Company’s shareholders of $1.6 million, 2.6 million, $2.3 million, and $4.8 million, respectively. Also, during the same periods, the Company had costs incurred with another related party company in the amount of $3.5 million, $6.7 million, $5.4 million and $7.8 million, respectively. | Note 12: Related Party Transactions Captive Insurance Policies In addition to insurance policies as required by the Company’s loan agreement, which insure certain assets, liabilities and general operations of the Company, the Stockholders of the Company established two insurance companies; Guard Yourself Insurance Company, Ltd. and Super O Insurance Company, Ltd., replaced effective April 1, 2018, with the current new insurance companies, Airlie Protection Ins. Co., Inc. and Protection for You Ins. Co., Inc. These insurance companies additionally insure the general assets, liabilities and claims of the Company through March 30, 2022, and were not renewed for future periods. The entities are known as captive insurance companies. New policies cover the period of March 31, 2021, to March 30, 2022, and will incur an annual expense of $2.4 million. Premium payments are allowed based on the Loan Agreement dated February 21, 2017. The Company is not a guarantor and does not have exposure in the event of a loss. Total captive policy expense for years ending June 30, 2022, 2021, and 2020 was $1.6 million, $2.2 million, and $2.7 million, respectively. Total claims filed for the years ended June 30, 2022, 2021, and 2020 were $1.4 million, $1.4 million, and $0.9 million respectively. On June 30, 2022, and 2021, receivables from the captive insurance companies were $0.25 million and $1.5 million, respectively, which are included in related party receivables on the consolidated balance sheets. Interest-Charge Domestic International Sales Corporation The Company has an affiliate, My Worldwide Market Place, Inc. which is an IC-DISC and was established February 12, 2013. The IC-DISC is owned by the Company Stockholders. The IC-DISC is organized to manage sales to certain qualified customers and receive commissions from the Company for this activity. The commissions expense ($9.9 million, $5.4 million, and $8.2 million for the years ended June 30, 2022, 2021, and 2020, respectively) was determined under formulas and rules defined in the law and regulations of the US tax code. Under these regulations, the commission is deductible by the Company and results in a specified profit to the IC-DISC. This net profit is not subject to Federal income tax. The IC-DISC distributes the profit to its Stockholders, who are taxed on the income as a dividend. During the years ended June 30, 2022, 2021 and 2020, the Company had sales to a related party company owned by the Company’s shareholders of $7.1 million, $5.3 $3.0 |
Leases_2
Leases | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Leases | ||
Leases | Note 14: Leases The Company leases office and warehouse, computer equipment and vehicles. Certain operating leases may contain one or more options to renew. The renewal terms can extend the lease term from one The depreciable lives of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Payments due under the lease contracts include fixed payments plus, may include variable payments. The Company’s office space leases require it to make variable payments for the Company’s proportionate share of the building’s property taxes, insurance, and common area maintenance. These variable lease payments are not included in lease payments used to determine the lease liability and are recognized as variable costs when incurred. Fixed payments may contain predetermined fixed rent escalations. Operating leases are included in the following asset and liability accounts on the Company’s Balance Sheet: Operating Lease Right-of-Use Assets, Current Portion of Operating Lease Obligations, and Noncurrent Operating Lease Obligations. ROU assets and liabilities arising from finance leases are included in the following asset and liability accounts on the Company’s Consolidated Balance Sheet: Property & Equipment - Net, Current Portion of Finance Lease Obligation, and Noncurrent Finance Lease Obligations. Components of lease expense were as follows for the three and six months ended December 31, 2022, and December 31, 2021: Three Months Ended Three Months Ended Six Months Ended Six Months Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Lease Cost Finance Lease Cost: Amortization of Right of Use Assets 51 179 102 475 Interest on lease liabilities 3 8 7 18 Operating Lease Cost 1,013 1,132 2,092 2,263 Short-Term Lease Cost 7 — 14 — Total Lease Cost 1,074 1,319 2,215 2,756 Other Information (Gains) and losses on sale and leaseback transactions, net Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases 3 8 7 20 Operating cash flows from Capitalized Operating leases 1,105 1,213 2,264 2,392 Financing cash flows from finance leases 53 289 105 778 Net ROU remeasurement (9) (1,298) (9) (1,190) Three Months Ended Three Months Ended Six Months Ended Six Months Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Weighted average remaining lease term – finance leases (in Years) 1.59 1.97 1.59 1.97 Weighted average remaining lease term – Capitalized Operating leases (in Years) 1.94 2.77 1.94 2.77 Weighted average discount rate – finance leases 3.70 3.67 3.70 3.67 Weighted average discount rate – Capitalized Operating leases 4.13 4.09 4.13 4.09 Note 14: Leases (continued) Maturities of lease liabilities are as follows as of December 31, 2022: Operating ($ in thousands) Leases 2023 4,123 2024 3,312 2025 110 2026 100 Total Lease Payments 7,655 Less Imputed Interest (271) Total $ 7,374 | Note 13: Leases The Company leases office and warehouse, computer equipment and vehicles. Certain operating leases may contain one or more options to renew. The renewal terms can extend the lease term from one The depreciable lives of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Payments due under the lease contracts include fixed payments plus, may include variable payments. The Company’s office space leases require it to make variable payments for the Company’s proportionate share of the building’s property taxes, insurance, and common area maintenance. These variable lease payments are not included in lease payments used to determine the lease liability and are recognized as variable costs when incurred. Fixed payments may contain predetermined fixed rent escalations. Operating leases are included in the following asset and liability accounts on the Company’s Balance Sheet: Operating Lease Right-of-Use Assets, Current Portion of Operating Lease Obligations, and Noncurrent Operating Lease Obligations. ROU assets and liabilities arising from finance leases are included in the following asset and liability accounts on the Company’s Consolidated Balance Sheet: Property & Equipment — Net, Current Portion of Finance Lease Obligation, and Noncurrent Finance Lease Obligations. Components of lease expense were as follows for the years ended June 30, 2022, 2021 and 2020: ($ in thousands) 2022 2021 2020 Lease cost Finance Lease Costs: Amortization of Right-of-Use Assets $ 675 $ 1,189 $ 1,095 Interest on Lease Liabilities 27 81 125 Operating Lease Cost 4,515 4,789 3,827 Short Term Lease Cost 1,140 — — Variable Lease Cost 1,633 869 680 Total Lease Cost $ 7,990 $ 6,928 $ 5,727 Other Information Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Operating Cash Flows from Financing Leases $ 30 $ 86 $ 125 Operating Cash Flows from Operating Leases $ 4,820 $ 4,944 $ 3,973 Financing Cash Flows from Finance Leases 1,070 1,931 1,720 Right-of Use Assets Obtained in Exchange for New Finance Lease Liabilities — — 1,561 Right-of Use Assets Obtained in Exchange for Capitalized Operating Lease Liabilities — 3,640 39 Net ROU Remeasurement (651) 841 169 Year Ended June 30, 2022 2021 2020 Weighted-Average Remaining Lease Term – Operating Leases 2.33 1.63 2.13 Weighted-Average Remaining Lease Term – Financing Leases 2.06 3.12 4.09 Weighted-Average Discount Rate – Operating Leases 4.10 3.35 3.26 Weighted-Average Discount Rate – Financing Leases 3.70 4.46 4.45 Maturities of lease liabilities are as follows as of June 30, 2022: Operating ($ in thousands) Leases 2023 4,403 2024 4,019 2025 1,402 2026 99 Total Lease Payments 9,923 Less Imputed Interest (606) Total $ 9,317 |
Earnings per Share (EPS)_2
Earnings per Share (EPS) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Earnings per Share (EPS) | ||
Earnings per Share (EPS) | Note 15: Earnings per Share (EPS) Basic EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period. Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue shares, such as stock options, warrants, and unvested restricted stock units, were exercised and converted into common shares. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares had been issued and were dilutive. The Company does not have any potentially dilutive securities outstanding for the three or six months ended December 31, 2022, or 2021. | Note 14: Earnings per Share (EPS) Basic EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period. Diluted EPS considers the potential dilution that could occur if securities or other contracts to issue shares, such as stock options, warrants, and unvested restricted stock units, were exercised and converted into common shares. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares had been issued and were dilutive. The Company does not have any potentially dilutive securities outstanding on June 30, 2022, 2021 or 2020. |
Business Acquisition_2
Business Acquisition | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Business Acquisition | ||
Business Acquisition | Note 16: Business Acquisition On July 1, 2022, Alliance purchased 100% of the stock of Think3Fold, a collectibles distribution company for no consideration. The merged entity expanded and diversified the Company’s portfolio of products and enabled scale and fixed cost leverage. The results of operations of the acquired entity are included in the Consolidated Financial Statements from July 1, 2022, through December 31, 2022. The Company recognized $694 thousand of acquisition-related costs that were expensed in the current period. These costs are included in the consolidated statements of operations and comprehensive income within Transaction Costs. Think3Fold revenue and earnings included in the Company’s consolidated statements of operations for the periods July 1, 2022, through December 31, 2022, are as follows: Three Months Ended Six Months Ended ($ in thousands) December 31, 2022 December 31, 2022 Revenue $ 6,784 $ 10,605 Net Income 1,360 1,086 Note 16: Business Acquisition (continued) The Think3Fold acquisition was treated for accounting purposes as a purchase of Think3Fold using the acquisition method of accounting in accordance with ASC 805, Business Combination. Under the acquisition method of accounting, the aggregate consideration was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair value as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired (or net liabilities assumed) being allocated to intangible assets and goodwill. The initial accounting for this business acquisition is incomplete and the following assets and liabilities were recognized on a provisional basis, since the Company is currently assessing the purchase price allocation and the fair value measurements. During the quarter ended December 31, 2022, the Company recorded a measurement period adjustment to reduce the fair value of the inventory acquired by $5.2 million, which resulted in a corresponding increase in goodwill. Provisional Allocation of purchase price consideration ($ in thousands) Cash Acquired $ 1 Trade Receivables 3,289 Inventory 5,232 Intangibles 9,031 Other Assets 19 Accounts Payable (24,820) Total identifiable net assets (liabilities) (7,248) Goodwill 7,248 Total Consideration $ — Goodwill is attributable primarily to the assembled workforce acquired, as well as benefits from the increased scale of the Company as a result of the Think3fold acquisition. The goodwill from this acquisition is not deductible for income tax purposes. | Note 15: Business Acquisition On September 30, 2020, Alliance Entertainment (AEC) purchased 100% of the stock of COKeM International (COKeM), a video games distribution company. The merged entity expanded and diversified AEC’s portfolio of products and enabled scale and fixed cost leverage. The aggregate purchase price for the acquisition was $80.4 million. The results of operations of the acquired entity are included in the FY2021 Consolidated Financial Statements from October 1, 2020, through June 30, 2021. The Company recognized $0.35 million of acquisition-related costs that were expensed in the current period. These costs are included in the consolidated statements of operations and comprehensive income within Transaction Costs. COKeM’s revenue and earnings included in the Company’s consolidated statements of operations for the periods October 1, 2020, through June 30, 2021, are as follows: Nine Months Ended ($ in thousands) June 30, 2021 Revenue $ 405,714 Net Income 19,567 The Acquisition date fair value of the consideration transferred totaled $80.4 million, which consisted of the following: Cash at Close $ 71,859 Note to Seller 8,500 $ 80,359 ($ in thousands) Cash Acquired $ 6,450 Trade Receivables 48,729 Inventory 70,267 Other Assets 1,779 Accounts Payable (48,770) Accrued Expenses (734) Property and Equipment 2,638 Total Purchase Price $ 80,359 In connection with the above stock purchase, the Company amended its credit line with Bank of America. The terms increase the borrowing limits to $175 million and the agreement was extended to September 2023. The following table presents the unaudited supplemental pro forma financial information as if the acquisition had closed as of July 1, 2019. Year Ended ($ in thousands) June 30, 2021 June 30, 2020 Revenue $ 1,414,039 $ 1,195,005 Net Income 42,542 3,402 |
Subsequent Events_2
Subsequent Events | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Subsequent Events | ||
Subsequent Events | Note 18: Subsequent Events On February 10, 2023, Alliance, Adara Acquisition Corp. (“Adara”) and a Merger Sub consummated the closing of the transactions contemplated by a Business Combination Agreement. Pursuant to the terms of the Business Combination Agreement, a business combination of Alliance and Adara was affected by the merger of Merger Sub with and into Alliance (the “Merger”), with Alliance surviving the Merger as a wholly-owned subsidiary of Adara Following the consummation of the Merger on the closing date of the Business Combination, Adara changed its name from Adara Acquisition Corp. to Alliance Entertainment Holding Corporation). of Adara Following the consummation of the Merger on the closing date of the Business Combination, Adara changed its name from Adara Acquisition Corp. to Alliance Entertainment Holding Corporation). | Note 16: Subsequent Events On July 1, 2022 the company completed the acquisition of a toys and collectibles distribution company for an aggregated purchase price of approximately $9.2 million. Due to the limited amount of time since this acquisition, the initial purchase accounting for it is incomplete. Subsequent events have been evaluated through October 17, 2022, the date these financial statements were available to be issued. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2022 | |
Summary of Significant Accounting Policies | |
Basis of Consolidation | Basis of Consolidation The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The consolidated financial statements include the accounts of the Alliance Entertainment Holding Corporation and its wholly owned subsidiaries. Significant intercompany transactions have been eliminated in consolidation. |
Revenue Recognition | Revenue Recognition The Company enters into contracts with its customers for the purchase of products in the ordinary course of business. A contract with commercial substance exists once the Company receives and accepts a purchase order under a sales contract. Revenue from the sale and distribution of pre-recorded music, video, games, accessories, and other related products are recognized when the performance obligations under the terms of a contract with its customer are satisfied, which occurs with the transfer of control of the product. For the majority of the Company’s products, control is transferred, and revenue is recognized when the product is shipped from the Company’s distribution center to the Company’s customers, which primarily consist of retailers. For most of the Company’s distribution contracts, the Company is considered to be the principal to these transactions and the revenue is recognized on a gross basis, since the Company is the primary obligor for fulfilling the promise to its customers on these arrangements, has inventory risk, and has latitude in establishing prices. Additionally, the Company ships some of its products to retailers on a consignment basis. The Company retains ownership of its products stored at these retailers. As the Company’s products are sold by the retailer, ownership is transferred from the Company to the retailer. At that time, the Company invoices the retailer and recognizes revenue for these consignment transactions. If a contract contains more than one performance obligation, the transaction price is allocated to each performance obligation based on relative standalone selling price. Shipping and handling activities are treated as a fulfillment activity rather than a promised service, and therefore, are not considered a performance obligation. Sales, use, value-added, and other excise taxes the Company collects concurrent with revenue producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense when incurred. The Company applies ASC 606, Revenue from Contracts with Customers Ø Portfolio approach practical expedient relative to the estimation of variable consideration. Ø Shipping and handling practical expedient to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities. Ø Costs of obtaining a contract practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset is one year or less. Ø Sales taxes practical expedient to exclude sales taxes and other similar taxes from the transaction price. Ø Significant financing component practical expedient Revenue is recognized at the transaction price which the Company expects to be entitled to receive. When determining the transaction price, the Company estimates variable consideration by applying the portfolio approach practical expedient under ASC 606. The primary sources of variable consideration for the Company are rebate programs, incentive programs and product returns. The rebate and incentives are recorded as a reduction to revenue at the time of the initial sale or when offered. The Company estimates variable consideration related to products sold under its rebate and incentive programs using the expected value method, which is based on sales terms with customers, historical experience, inventory levels, volume purchases, and known changes in relevant trends in the future. There are no material instances where variable consideration is constrained and not recorded at the initial time of sale. Substantially all of the Company’s sales are domestic and are made to customers under agreements permitting certain limited rights of return based upon the prior months’ sales and vendor return rights. Except for video games and vinyl sales, which are not returnable, generally it is the Company’s policy not to accept product returns that cannot be returned to the Company’s vendors. Revenue from product sales is recognized net of estimated returns. Sales in the pre-recorded music and video movies industry generally give certain customers the right to return products. In addition, the Company’s suppliers generally permit the Company to return products that are in the supplier’s current product listing, except for video games and vinyl. Based on historical returns, review of current catalog list and the change of mass merchant’s floor space and store locations carrying the Company’s products, management provides for estimated net returns at the time of sale and other specific reserves when appropriate. This is typically done using a twelve-month average return rate by product. The Company has determined that the nature, amount, timing, and uncertainty of revenue and cash flows are most significantly affected by the overall economic health of the consumer product industry in the United States. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash equivalents include all investments with original maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. |
Trade Receivables, Net | Trade Receivables, Net The Company grants credit to customers on credit terms in the ordinary course of business. Credit is extended based on an evaluation of a customer’s financial condition and collateral is generally not required. Trade receivables are carried at original invoice amount less estimates made for allowances for uncollectible accounts based on a periodic review of all outstanding amounts. Management determines these allowances by regularly evaluating individual customer receivables and considering a customer’s financial condition and credit history. Trade receivables are written off against the allowance when they are deemed uncollectible. Recoveries of trade receivables previously written off are recorded as a credit to the allowance for uncollectible accounts when received. |
Inventory and Inventory Reserves | Inventory and Inventory Reserves Inventory is stated at the lower of cost or net realizable value, using the weighted average cost method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Excess or obsolete inventory reserves are established when inventory is estimated to not be sellable or returnable to suppliers based on product demand and product life cycle. |
Property and Equipment, Net | Property and Equipment, Net Property and equipment are recorded at cost less accumulated depreciation. Depreciation and amortization are calculated using the straight-line method over the estimated useful life of the asset. Costs of major additions and improvements are capitalized while repair and maintenance costs are charged to expense as incurred. When items are disposed of, the cost and accumulated depreciation are eliminated from the accounts, and any gain or loss is reflected in the consolidated statements of operations. |
Depreciation and Amortization | Depreciation and Amortization Depreciation is provided in amounts sufficient to allocate the cost of depreciable assets to operations over their estimated useful lives using the straight-line method. The estimated useful lives are as follows: Asset Class Useful Life Leasehold Improvements 5 – 10 years Machinery and Equipment 3 – 7 years Furniture and Fixtures 5 – 7 years Capitalized Software 1 – 3 years Equipment Under Capital Leases 5 years Computer Equipment 2 – 5 years Leasehold improvements and equipment under capitalized leases are amortized over the shorter of the useful life of the asset or the life of the lease. Depreciation and amortization expense was approximately $3.1 million, $5.6 million, and $7.1 million for the years ended June 30, 2022, 2021, and 2020, respectively. |
Goodwill and Definite-Lived Intangible Assets, Net | Goodwill and Definite-Lived Intangible Assets, Net Goodwill is assessed using either a qualitative assessment or quantitative approach to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. The qualitative assessment evaluates factors including macroeconomic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than it carrying value, a quantitative assessment is performed. Otherwise, no further assessment is required. The quantitative approach compares the estimated fair value of the reporting units to it carrying amount, including goodwill. Impairment is indicated if the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, and an impairment charge is recognized for the differential. The Company completes its annual goodwill impairment test as of June 30 each year. For the years ended June 30, 2022, 2021 and 2020, the Company did not record any impairment. Intangible assets are stated at cost, less accumulated amortization. Amortization of customer relationships and lists is recorded using an accelerated method over the useful lives of the related assets, which range from 10 to 15 years. Covenants not to compete, trade name and favorable leases are amortized using the straight-line method over the estimated useful lives of the related assets, which range from five |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Recoverability of long-lived assets, including property and equipment and certain identifiable intangible assets are evaluated whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Factors considered important which could trigger an impairment review include but are not limited to significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the assets or the strategy for the overall business, significant decrease in the market value of the assets and significant negative industry or economic trends. In the event the carrying amount of the long-lived assets may not be recoverable based upon the existence of one or more of the indicators, the assets are assessed for impairment based on the estimated future undiscounted cash flows expected to result from the use of the asset and its eventual deposition. If the carrying amount of an asset exceeds the sum of the estimated future undiscounted cash flow, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value. There was no impairment during the years ended June 30, 2022, 2021 and 2020. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include management’s estimates of doubtful accounts, sales returns, rebates, defective products, and inventory recoverability. On an ongoing basis, management evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company complies with ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles and expands disclosure requirements about fair value measurements. Under ASC 820, there are three categories for the classification and measurement of assets and liabilities carried at fair value: Level 1: Valuation based on quoted market prices in active markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Examples include publicly traded equity securities and publicly traded mutual funds that are actively traded on a major exchange or over-the- counter market. Level 2: Valuation based on quoted market prices of investments that are not actively traded or for which certain significant inputs are not observable, either directly or indirectly. Examples include municipal bonds, where fair value is estimated using recently executed transactions, bid asked prices and pricing models that factor in, where applicable, interest rates, bond spreads and volatility. Level 3: Valuation based on inputs that are unobservable and reflect management’s best estimate of what market participants would use as fair value. Examples include limited partnerships and private equity investments. Cash, trade accounts receivable, accounts payable, accrued expenses and other current liabilities estimated fair values approximate carrying amounts as of June 30, 2022 and 2021, based on the short-term nature and maturity of these instruments. The estimated fair value of debt and the credit facility is based on Level 2 inputs, which consist of interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities. As of June 30, 2022, 2021 and 2020 the estimated fair value of the Company’s short and long-term debt approximates it carrying value due to market interest rates charged on such debt or their short-term maturities. The estimated fair value of the tangible and intangible assets acquired, and the liabilities assumed in connection with the acquisition of COKeM were measured using Level 2 and Level 3 inputs. |
Advertising Costs | Advertising Costs Advertising costs, which consist primarily of mailers, catalogs, online marketing and other promotions, are expensed in the period in which the advertisement or promotion occurs. Additionally, the Company maintains cooperative advertising agreements with certain vendors to include their logos and product descriptions prominently in the catalogs and calendars. The fee revenues charged to the vendors for the cooperative advertising arrangements are recorded as a reduction of advertising expense and any excess fees are recorded as a reduction of cost of goods sold. Advertising costs, net, for the years ended June 30, 2022, 2021, and 2020, were $6.5 million, $6.1 million, and $6.5 million, respectively. |
Deferred Financing Costs | Deferred Financing Costs Deferred financing costs relating to the Company’s revolving credit facility are deferred and amortized ratably over the life of the debt using the straight-line method. Deferred financing costs are included as an addition to interest expense on the consolidated statements of operations and comprehensive income and are included in Revolving Credit Facility, Net on the Consolidated Balance Sheets. |
Shipping and Handling | Shipping and Handling The Company accounts for shipping and handling activities as fulfillment activities. As such, the Company does not evaluate shipping and handling as promised services to its customers. Shipping and handling costs are included in cost of revenues in the accompanying consolidated statements of operations and comprehensive income. |
Foreign Currency Translation and Transactions | Foreign Currency Translation and Transactions The financial position and results of operations of the Company’s foreign subsidiary is measured using the local currency as the functional currency. Assets and liabilities of this subsidiary are translated into United States dollars at the exchange rate in effect at each period end. Income statement accounts are translated at the average rate of exchange prevailing during the period. Foreign currency translation income totaled $7 and $15 thousand for the years ended June 30, 2022, and 2021 respectively. Foreign currency translation loss totaled $318 thousand for the year ended June 30, 2020. The Company does not typically hedge its foreign exchange rate position. Realized gains or losses from foreign currency transactions are included in operations as incurred. |
Business Combinations - Valuation of Acquired Assets and Liabilities Assumed | Business Combinations — Valuation of Acquired Assets and Liabilities Assumed The Company allocates the purchase price for each business combination, or acquired business, based upon (i) the fair value of the consideration paid and (ii) the fair value of net assets acquired, and liabilities assumed. The determination of the fair value of net assets acquired and liabilities assumed requires estimates and judgements of future cash flow expectations for the acquired business and the allocation of those cash flows to identifiable tangible and intangible assets. Fair values are calculated by applying estimates related to Internal Rate of Return (IRR) and Weighted Average Cost of Capital (WACC) assumptions as well as incorporating expected cash flows into industry standard valuation techniques. Goodwill is the amount by which the purchase price consideration exceeds the fair value of tangible and intangible assets acquired, less assumed liabilities. Intangible assets, such as customer relations and trade names, when identified, are separately recognized and amortized over their estimated useful lives, if considered definite lived. Acquisition costs are expensed as incurred and are included the consolidated statements of operations and comprehensive income. |
Leases | Leases The Company is a lessee in multiple noncancelable operating and financing leases. If the contract provides the Company the right to substantially all the economic benefits and the right to direct the use of the identified asset, it is generally considered to be or contain a lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term. The ROU asset is also adjusted for any lease prepayments made, lease incentives received, and initial direct costs incurred. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. Increases (decreases) to variable lease payments due to subsequent changes in an index or rate are recorded as variable lease expense (income) in the future period in which they are incurred. The discount rate used is the implicit rate in the lease contract, if it is readily determinable, or the Company’s incremental borrowing rate. The Company uses the incremental borrowing rate based on the information available at the commencement date for all leases. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. The ROU asset for operating leases is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e., present value of the remaining lease payments), plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received, and any impairment recognized. Operating leases with fluctuating lease payments: For operating leases with lease payments that fluctuate over the lease term, the total lease costs are recognized on a straight-line basis over the lease term. The ROU asset for finance leases is amortized on a straight-line basis over the lease term. For all underlying classes of assets, the Company has elected to not recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Leases containing termination clauses in which either party may terminate the lease without cause and the notice period is less than 12 months are generally deemed short-term leases with lease costs included in short-term lease expense. The Company recognizes short-term lease cost on a straight-line basis over the lease term. |
Variable Interest Entity | Variable Interest Entity The Company evaluates its ownership, contractual, and other interests in entities to determine if it has any variable interest in a variable interest entity (VIE). These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical information, among other factors. If the Company determines that an entity in which it holds a contractual, or ownership, interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; Changes in consolidation status are applied prospectively. The Company evaluated its transactions with a related party (included in Note 12) and concluded that the arrangements do not result in variable interests and do not require consolidation of any of the related party entities. |
Segments | Segments Operating segments are defined as components of an enterprise where discrete financial information is available and evaluated regularly by the chief operating decision maker or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision makers manage the business, allocate resources, and assess performance on a consolidated basis. Accordingly, the Company has one operating and reportable |
Accounting Pronouncements | Accounting Pronouncements Recently issued and adopted accounting pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which was issued to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This ASU also clarifies and simplifies other aspects of the accounting for income taxes. This update is effective for fiscal years beginning after December 15, 2020, and early adoption is permitted. The company adopted the new standard on July 1, 2021. The adoption of this standard did not have a material impact on the company’s consolidated financials statements. In June 2016, the FASB issued ASU 2016-13, Financials Instruments — Credit Losses (Topic 848): Measurement of Credit Losses on Financials Instruments to amend the current accounting guidance which requires an incurred loss model for recognizing credit losses. Under the new guidance, the Company now measures all expected losses based on a forward-looking expected loss model which reflects probable losses based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted the new standard on July 1, 2020. The adoption of this standard did not have a material impact on the company’s consolidated financial statements. Recently issued but not yet adopted accounting pronouncements In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The new guidance provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. The provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. The Company is currently evaluating the impact that adopting this guidance may have on its consolidated financial statements. In October 2021, The FASB issued ASU No. 2021-08, Accounting for contract Assets and Contract Liabilities from contracts with customers (Topic 805) (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. ASU 2021-08 is effective for annual periods beginning December 15, 2022, including interim periods within those fiscal years. Adoption of SU 2021-08 should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption. The Company is currently evaluating the impact of ASU 2021-08 on its consolidated financial statements. |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2022 | |
Summary of Significant Accounting Policies | |
Schedule of estimated useful lives of depreciable assets | Asset Class Useful Life Leasehold Improvements 5 – 10 years Machinery and Equipment 3 – 7 years Furniture and Fixtures 5 – 7 years Capitalized Software 1 – 3 years Equipment Under Capital Leases 5 years Computer Equipment 2 – 5 years |
Trade Receivables, Net (Table_2
Trade Receivables, Net (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Trade Receivables, Net | ||
Schedule of trade receivables, net | ($ in thousands) December 31, 2022 June 30, 2022 Trade Receivables $ 175,861 $ 101,064 Less: Allowances for Doubtful Accounts (311) (557) Sales Returns Reserve, Net (3,100) (1,898) Customer Rebate and Discount Reserve (1,599) 90 Total Allowances (5,010) (2,366) Trade Receivables, Net $ 170,851 $ 98,699 | ($ in thousands) June 30, 2022 June 30, 2021 Trade receivables $ 101,064 $ 115,618 Less: Allowances for Doubtful Accounts (558) (1,145) Sales returns reserve, net (1,898) (2,975) Customer Rebate and Discount Reserve 90 (166) Total Allowances (2,366) (4,286) Trade Receivables, Net $ 98,699 $ 111,332 |
Schedule of concentration of credit risk | Six Months Ended Six Months Ended ($ in thousands) December 31, 2022 December 31, 2021 Customer #1 19.3 % 24.2 % ($ in thousands) December 31, 2022 June 30, 2022 Customer #1 14.2 % 21.4 % Customer #2 13.6 % * Customer #3 10.2 % 14.2 % * Less than 10% | Year Ended ($ in thousands) June 30, 2022 June 30, 2021 June 30, 2020 Customer #1 23.6 % 23.7 % 19.6 % ($ in thousands) June 30, 2022 June 30, 2021 Customer #1 21.4 % 12.2 % Customer #2 14.2 % * * Less than 10% |
Inventory, Net (Tables)_2
Inventory, Net (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Inventory, Net. | ||
Schedule of inventory, net (all finished goods) | ($ in thousands) December 31, 2022 June 30, 2022 Inventory $ 186,895 $ 255,236 Less: Reserves (11,573) (5,797) Inventory, Net $ 175,322 $ 249,439 | ($ in thousands) June 30, 2022 June 30, 2021 Inventory $ 255,236 $ 145,740 Less: Reserves (5,797) (4,079) Inventory, Net $ 249,439 $ 141,661 |
Other Current and Long-Term A_5
Other Current and Long-Term Assets (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Other Current and Long-Term Assets | ||
Summary of Other Current and Long-Term Assets | ($ in thousands) December 31, 2022 June 30, 2022 Other Assets – Current Prepaid Intellectual Property $ 2,197 $ 2,443 Prepaid Insurance 639 431 Prepaid Acquisitions 2,865 2,243 Prepaid Freight 325 216 Prepaid Manufacturing Components 28 79 Prepaid Rent 886 — Prepaid Maintenance 825 885 Prepaid Shipping Supplies 1,666 2,831 Total Other Assets – Current $ 9,431 $ 9,128 Other Long-Term Assets Deposits $ 305 $ 3,748 Total Other Long-Term Assets $ 305 $ 3,748 | ($ in thousands) June 30, 2022 June 30, 2021 Other Assets – Current Prepaid Intellectual Property $ 2,443 $ 3,411 Prepaid Insurance 431 2,011 Prepaid Acquisitions 2,243 — Prepaid Freight 216 — Prepaid Manufacturing Components 79 167 Prepaid Maintenance 885 165 Prepaid Shipping Supplies 2,832 1,533 Total Other Assets – Current $ 9,129 $ 7,287 Other Assets – Long Term Deposits $ 3,748 $ 361 Total Other Assets – Long Term $ 3,748 $ 361 |
Property and Equipment, Net (_2
Property and Equipment, Net (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Property and Equipment, Net | ||
Summary of Property and Equipment, Net | ($ in thousands) December 31, 2022 June 30, 2022 Property and Equipment Leasehold Improvements $ 1,680 $ 1,680 Machinery and Equipment 25,430 19,440 Furniture and Fixtures 1,749 3,530 Capitalized Software 10,508 11,451 Equipment Under Capital Leases 12,488 12,917 Computer Equipment 1,626 2,662 Construction in Progress 489 154 53,970 51,834 Less: Accumulated Depreciation and Amortization (43,238) (48,550) Total Property and Equipment, Net 10,732 $ 3,284 | ($ in thousands) June 30, 2022 June 30, 2021 Property and Equipment Leasehold Improvements $ 1,680 $ 1,597 Machinery and Equipment 19,440 19,236 Furniture and Fixtures 3,530 2,622 Capitalized Software 11,451 11,422 Equipment Under Capital Leases 12,917 12,917 Computer Equipment 2,662 2,665 Construction in Progress 154 104 51,834 50,563 Less: Accumulated Depreciation and Amortization (48,550) (44,233) Total Property and Equipment, Net $ 3,284 $ 6,330 |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Intangible Assets, Net | ||
Schedule of intangible assets, net | Amortization Amortization Life Year Ended June 30, Year Ended June 30, ($ in thousands) (in yrs.) June 30, 2021 2021 June 30, 2022 2022 Identifiable Intangible Assets: Customer Relationships 15 $ (4,331) $ 14,633 $ (3,690) $ 10,943 Trade Name – Alliance 10 (382) 634 (254) 380 Covenant Not to Compete 7 (1) 4 (1) 3 Mecca Customer Relationships 15 (575) 3,932 (575) 3,357 Customer List 10 – 15 (739) 4,724 (643) 4,081 Total Identifiable Intangible Assets: $ (6,028) $ 23,927 $ (5,163) $ 18,764 | |
Schedule of expected amortization over the next five years and thereafter | ($ in thousands) Intangible Assets Year Ended June 30 2023 $ 2,781 2024 4,223 2025 3,651 2026 3,339 2027 3,289 Thereafter 8,485 Total Expected Amortization $ 25,768 | Expected amortization over the next five years and thereafter, at June 30, 2022, is as follows: Intangible ($ in thousands) Assets Year Ended June 30 2023 $ 4,056 2024 3,470 2025 2,898 2026 2,586 2027 2,536 Thereafter 3,218 Total Expected Amortization $ 18,764 |
Accrued Expenses (Tables)_2
Accrued Expenses (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Accrued Expenses | ||
Summary of Accrued Expenses | ($ in thousands) December 31, 2022 June 30, 2022 Marketing Funds Accruals $ 2,768 $ 2,738 Payroll and Payroll Tax Accruals 2,802 3,904 Accruals for Other Expenses 6,848 4,931 Total Accrued Expenses $ 12,418 $ 11,573 | ($ in thousands) June 30, 2022 June 30, 2021 Marketing Funds Accruals $ 2,738 $ 1,294 Payroll and Payroll Tax Accruals 3,904 6,833 Accruals for Other Expenses 4,931 5,428 Total Accrued Expenses $ 11,573 $ 13,555 |
Lines of Credit and Long-Term_6
Lines of Credit and Long-Term Obligation (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Lines of Credit and Long-Term Obligation | ||
Schedule of revolver balance | ($ in thousands) December 31, 2022 June 30, 2022 Bank of America Revolving Credit Agreement $ 176,740 $ 136,176 Less: Deferred Finance Costs (125) (208) Revolving Credit, Net $ 176,615 $ 135,968 | ($ in thousands) June 30, 2022 June 30, 2021 Bank of America Revolving Credit Agreement $ 136,176 $ 53,955 Less: Deferred Finance Costs (208) (375) Revolving Credit, Net $ 135,968 $ 53,580 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2022 | |
Income Taxes | |
Schedule of domestic income (loss) before income taxes and details of the income tax expense (benefit) | Year Ended June 30 (In thousands) 2022 2021 2020 Income Tax Expense (Benefit): Current: Federal $ 7,937 $ 7,201 $ (1,759) State 2,663 2,304 849 Total Current $ 10,599 $ 9,505 $ (910) Deferred: Federal (951) 1,070 1,137 State (226) 216 149 Total Deferred (1,177) 1,286 1,286 Income Tax Expense $ 9,423 $ 10,791 $ 376 |
Schedule of items accounting for the difference between income taxes computed at the U.S. federal statutory income tax rate and the income tax expense (benefit) at the effective tax rate | Year Ended June 30 (In thousands) 2022 2021 2020 Federal Income Tax Provision at Statutory Rate $ 7,484 21 % $ 9,444 21 % $ 1,205 21 % State Taxes, Net of Federal Benefits 2,437 6 % 2,520 6 % 997 17 % Meals Entertainments — 0 % 6 0 % 18 0 % Foreign Derived Intangible Income (618) -2 % (802) -2 % (598) -10 % NOL Carryback Refund Before AMT — 0 % — 0 % (1,216) -21 % Debt Forgiveness and Interest Income — 0 % — 0 % — 0 % Other 120 -1 % (377) -1 % (30) -1 % Income Tax Expense $ 9,423 24 % $ 10,791 24 % $ 376 6 % |
Schedule of components of deferred taxes | Year Ended June 30 (In thousands) 2022 2021 Deferred Tax Assets: Other Deferred (ICDISC) $ 583 $ 245 Net Operating Losses 30 30 Bad Debt 39 83 Total Deferred Tax Assets 652 358 Deferred Tax Liabilities: Inventory (324) (875) Accruals Not Currently Deductible (792) (98) Prepaids (1,004) (1,224) Property and Equipment (1,399) (1,924) Goodwill/Intangibles (2,404) (2,685) Total Deferred Tax Liabilities (5,923) (6,806) Net Deferred Tax Liability $ (5,271) $ (6,448) |
Leases (Tables)_2
Leases (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Leases | ||
Summary of components of lease expense | ($ in thousands) 2022 2021 2020 Lease cost Finance Lease Costs: Amortization of Right-of-Use Assets $ 675 $ 1,189 $ 1,095 Interest on Lease Liabilities 27 81 125 Operating Lease Cost 4,515 4,789 3,827 Short Term Lease Cost 1,140 — — Variable Lease Cost 1,633 869 680 Total Lease Cost $ 7,990 $ 6,928 $ 5,727 | |
Summary of other information related to leases | Three Months Ended Three Months Ended Six Months Ended Six Months Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Weighted average remaining lease term – finance leases (in Years) 1.59 1.97 1.59 1.97 Weighted average remaining lease term – Capitalized Operating leases (in Years) 1.94 2.77 1.94 2.77 Weighted average discount rate – finance leases 3.70 3.67 3.70 3.67 Weighted average discount rate – Capitalized Operating leases 4.13 4.09 4.13 4.09 | Other Information Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Operating Cash Flows from Financing Leases $ 30 $ 86 $ 125 Operating Cash Flows from Operating Leases $ 4,820 $ 4,944 $ 3,973 Financing Cash Flows from Finance Leases 1,070 1,931 1,720 Right-of Use Assets Obtained in Exchange for New Finance Lease Liabilities — — 1,561 Right-of Use Assets Obtained in Exchange for Capitalized Operating Lease Liabilities — 3,640 39 Net ROU Remeasurement (651) 841 169 Year Ended June 30, 2022 2021 2020 Weighted-Average Remaining Lease Term – Operating Leases 2.33 1.63 2.13 Weighted-Average Remaining Lease Term – Financing Leases 2.06 3.12 4.09 Weighted-Average Discount Rate – Operating Leases 4.10 3.35 3.26 Weighted-Average Discount Rate – Financing Leases 3.70 4.46 4.45 |
Summary of maturities of lease liabilities | Operating ($ in thousands) Leases 2023 4,123 2024 3,312 2025 110 2026 100 Total Lease Payments 7,655 Less Imputed Interest (271) Total $ 7,374 | Operating ($ in thousands) Leases 2023 4,403 2024 4,019 2025 1,402 2026 99 Total Lease Payments 9,923 Less Imputed Interest (606) Total $ 9,317 |
Business Acquisition (Tables)_2
Business Acquisition (Tables) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Business Acquisition | ||
Summary of revenue and earnings of business acquired included in the Company's consolidated statements of operations | Three Months Ended Six Months Ended ($ in thousands) December 31, 2022 December 31, 2022 Revenue $ 6,784 $ 10,605 Net Income 1,360 1,086 | Nine Months Ended ($ in thousands) June 30, 2021 Revenue $ 405,714 Net Income 19,567 |
Summary of acquisition date fair value of consideration transferred | Provisional Allocation of purchase price consideration ($ in thousands) Cash Acquired $ 1 Trade Receivables 3,289 Inventory 5,232 Intangibles 9,031 Other Assets 19 Accounts Payable (24,820) Total identifiable net assets (liabilities) (7,248) Goodwill 7,248 Total Consideration $ — | Cash at Close $ 71,859 Note to Seller 8,500 $ 80,359 ($ in thousands) Cash Acquired $ 6,450 Trade Receivables 48,729 Inventory 70,267 Other Assets 1,779 Accounts Payable (48,770) Accrued Expenses (734) Property and Equipment 2,638 Total Purchase Price $ 80,359 |
Summary of unaudited supplemental pro forma financial information | Year Ended ($ in thousands) June 30, 2021 June 30, 2020 Revenue $ 1,414,039 $ 1,195,005 Net Income 42,542 3,402 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Depreciation and Amortization (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Estimated useful lives of depreciable assets | |||
Depreciation and amortization expense | $ 3.1 | $ 5.6 | $ 7.1 |
Leasehold Improvements | Minimum | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 5 years | ||
Leasehold Improvements | Maximum | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 10 years | ||
Machinery and Equipment | Minimum | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 3 years | ||
Machinery and Equipment | Maximum | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 7 years | ||
Furniture and Fixtures | Minimum | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 5 years | ||
Furniture and Fixtures | Maximum | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 7 years | ||
Capitalized Software | Minimum | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 1 year | ||
Capitalized Software | Maximum | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 3 years | ||
Equipment Under Capital Leases | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 5 years | ||
Computer Equipment | Minimum | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 2 years | ||
Computer Equipment | Maximum | |||
Estimated useful lives of depreciable assets | |||
Estimated useful lives (in years) | 5 years |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Goodwill and Definite-Lived Intangible Assets, Net (Details) | 12 Months Ended |
Jun. 30, 2022 | |
Customer relationships | Minimum | |
Definite-Lived Intangible Assets, Net | |
Estimated useful lives (in years) | 10 years |
Customer relationships | Maximum | |
Definite-Lived Intangible Assets, Net | |
Estimated useful lives (in years) | 15 years |
Covenants not to compete, trade name and favorable leases | Minimum | |
Definite-Lived Intangible Assets, Net | |
Estimated useful lives (in years) | 5 years |
Covenants not to compete, trade name and favorable leases | Maximum | |
Definite-Lived Intangible Assets, Net | |
Estimated useful lives (in years) | 15 years |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Impairment of Long-Lived Assets and Advertising Costs (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Summary of Significant Accounting Policies | |||
Impairment | $ 0 | $ 0 | $ 0 |
Advertising costs, net | $ 6,500 | $ 6,100 | $ 6,500 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Foreign Currency Translation and Transactions and Segments (Details) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2022 USD ($) segment | Jun. 30, 2021 USD ($) | Jun. 30, 2020 USD ($) | |
Summary of Significant Accounting Policies | |||
Foreign currency translation income | $ | $ 7 | $ 15 | |
Foreign currency translation loss | $ | $ 318 | ||
Number of operating segments | segment | 1 | ||
Number of reportable segments | segment | 1 |
Trade Receivables, Net (Detai_2
Trade Receivables, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Trade Receivables, Net | |||
Trade receivables | $ 175,861 | $ 101,064 | $ 115,618 |
Allowances for Doubtful Accounts | (311) | (557) | (1,145) |
Sales returns reserve, net | (3,100) | (1,898) | (2,975) |
Customer Rebate and Discount Reserve | (1,599) | 90 | (166) |
Total Allowances | (5,010) | (2,366) | (4,286) |
Trade Receivables, Net | $ 170,851 | $ 98,699 | $ 111,332 |
Trade Receivables, Net - Conc_2
Trade Receivables, Net - Concentration of Credit Risk (Details) - Customer | 6 Months Ended | 12 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Revenue | Customer #1 | |||||
Concentration of Credit Risk | |||||
Concentration of credit risk (in percent) | 19.30% | 24.20% | 23.60% | 23.70% | 19.60% |
Receivables Balance | Customer #1 | |||||
Concentration of Credit Risk | |||||
Concentration of credit risk (in percent) | 14.20% | 21.40% | 12.20% | ||
Receivables Balance | Customer #2 | |||||
Concentration of Credit Risk | |||||
Concentration of credit risk (in percent) | 13.60% | 14.20% |
Inventory, Net (Details)_2
Inventory, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Inventory, Net. | |||
Inventory | $ 186,895 | $ 255,236 | $ 145,740 |
Less: Reserves | (11,573) | (5,797) | (4,079) |
Inventory, Net | $ 175,322 | $ 249,439 | $ 141,661 |
Other Current and Long-Term A_6
Other Current and Long-Term Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Other Assets - Current | |||
Prepaid Intellectual Property | $ 2,197 | $ 2,443 | $ 3,411 |
Prepaid Insurance | 639 | 431 | 2,011 |
Prepaid Acquisitions | 2,865 | 2,243 | |
Prepaid Freight | 325 | 216 | |
Prepaid Manufacturing Components | 28 | 79 | 167 |
Prepaid Maintenance | 825 | 885 | 165 |
Prepaid Shipping Supplies | 2,832 | 1,533 | |
Total Other Assets - Current | 9,431 | 9,128 | 7,287 |
Other Assets - Long Term | |||
Deposits | 305 | 3,748 | 361 |
Total Other Long-Term Assets | $ 305 | $ 3,748 | $ 361 |
Property and Equipment, Net (_3
Property and Equipment, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Property and Equipment | |||||||
Total Property and Equipment | $ 53,970 | $ 53,970 | $ 51,834 | $ 50,563 | |||
Less: Accumulated Depreciation and Amortization | (43,238) | (43,238) | (48,550) | (44,233) | |||
Total Property and Equipment, Net | 10,732 | 10,732 | 3,284 | 6,330 | |||
Depreciation and amortization expense | 500 | $ 800 | 1,138 | $ 1,792 | 3,096 | 5,623 | $ 7,124 |
Leasehold Improvements | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 1,680 | 1,680 | 1,680 | 1,597 | |||
Machinery and Equipment | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 25,430 | 25,430 | 19,440 | 19,236 | |||
Furniture and Fixtures | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 1,749 | 1,749 | 3,530 | 2,622 | |||
Capitalized Software | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 10,508 | 10,508 | 11,451 | 11,422 | |||
Equipment Under Capital Leases | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 12,488 | 12,488 | 12,917 | 12,917 | |||
Computer Equipment | |||||||
Property and Equipment | |||||||
Total Property and Equipment | 1,626 | 1,626 | 2,662 | 2,665 | |||
Construction in Progress | |||||||
Property and Equipment | |||||||
Total Property and Equipment | $ 489 | $ 489 | $ 154 | $ 104 |
Intangible Assets, Net - Intang
Intangible Assets, Net - Intangible Assets, Net (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Intangible Assets, Net | |||||
Amortization of intangible assets | $ (2,028) | $ (2,581) | $ (5,163) | $ (5,772) | $ (8,660) |
Total Identifiable Intangible Assets: | 18,764 | 23,927 | |||
Accumulated amortization | 5,163 | 6,028 | |||
Finite Lived Intangible Assets Accumulated Amortisation | $ 90,900 | 85,800 | |||
Customer relationships | |||||
Intangible Assets, Net | |||||
Estimated useful lives (in years) | 15 years | ||||
Total Identifiable Intangible Assets: | $ 10,943 | 14,633 | |||
Accumulated amortization | $ 3,690 | 4,331 | |||
Trade Name - Alliance | |||||
Intangible Assets, Net | |||||
Estimated useful lives (in years) | 10 years | ||||
Total Identifiable Intangible Assets: | $ 380 | 634 | |||
Accumulated amortization | $ 254 | 382 | |||
Covenant Not to Compete | |||||
Intangible Assets, Net | |||||
Estimated useful lives (in years) | 7 years | ||||
Total Identifiable Intangible Assets: | $ 3 | 4 | |||
Accumulated amortization | $ 1 | 1 | |||
Mecca Customer Relationships | |||||
Intangible Assets, Net | |||||
Estimated useful lives (in years) | 15 years | ||||
Total Identifiable Intangible Assets: | $ 3,357 | 3,932 | |||
Accumulated amortization | 575 | 575 | |||
Customer List | |||||
Intangible Assets, Net | |||||
Total Identifiable Intangible Assets: | 4,081 | 4,724 | |||
Accumulated amortization | $ 643 | $ 739 | |||
Customer List | Minimum | |||||
Intangible Assets, Net | |||||
Estimated useful lives (in years) | 10 years | ||||
Customer List | Maximum | |||||
Intangible Assets, Net | |||||
Estimated useful lives (in years) | 15 years |
Intangible Assets, Net - Expect
Intangible Assets, Net - Expected amortization over the next five years and thereafter (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 |
Expected amortization over the next five years and thereafter | ||
2023 | $ 2,781 | $ 4,056 |
2024 | 4,223 | 3,470 |
2025 | 3,651 | 2,898 |
2026 | 3,339 | 2,586 |
2027 | 3,289 | 2,536 |
Thereafter | 8,485 | 3,218 |
Total Expected Amortization | $ 25,768 | $ 18,764 |
Accrued Expenses (Details)_2
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Accrued Expenses | |||
Marketing Funds Accruals | $ 2,768 | $ 2,738 | $ 1,294 |
Payroll and Payroll Tax Accruals | 2,802 | 3,904 | 6,833 |
Accruals for Other Expenses | 6,848 | 4,931 | 5,428 |
Total Accrued Expenses | $ 12,418 | $ 11,573 | $ 13,555 |
Lines of Credit and Long-Term_7
Lines of Credit and Long-Term Obligation - Revolver Balance (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 |
Lines of Credit and Long-Term Obligation | |||
Debt, Current | $ 135,968 | $ 53,580 | |
Less: Deferred Finance Costs | $ (125) | (208) | (375) |
Bank of America Revolving Credit Agreement | |||
Lines of Credit and Long-Term Obligation | |||
Debt, Current | $ 136,176 | $ 53,955 |
Lines of Credit and Long-Term_8
Lines of Credit and Long-Term Obligation - Additional Information (Details) - USD ($) | 1 Months Ended | 6 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
SOFR spread | |||||
Lines of Credit and Long-Term Obligation | |||||
Basis rate | 2.11% | ||||
Line of Credit | |||||
Lines of Credit and Long-Term Obligation | |||||
Annual interest rate | 5% | ||||
Interest rate | 4.76% | 2.34% | 3.61% | 2.25% | |
Weighted average interest rate | 2.50% | 4.15% | |||
Line of Credit | Minimum | |||||
Lines of Credit and Long-Term Obligation | |||||
Maximum borrowing capacity | $ 175,000,000 | ||||
Line of Credit | Maximum | |||||
Lines of Credit and Long-Term Obligation | |||||
Maximum borrowing capacity | $ 225,000,000 | ||||
Line of Credit | Prime Rate | |||||
Lines of Credit and Long-Term Obligation | |||||
Annual interest rate | 5% | ||||
Interest rate | 3.25% | ||||
Basis rate | 1% | ||||
Line of Credit | LIBOR | |||||
Lines of Credit and Long-Term Obligation | |||||
Annual interest rate | 2% | ||||
Interest rate | 2% | 0.25% | |||
Basis rate | 2% | 2% | |||
Line of Credit | SOFR | |||||
Lines of Credit and Long-Term Obligation | |||||
Annual interest rate | 2.11% | ||||
Interest rate | 1.50% | ||||
Basis rate | 2.11% | 2.11% | |||
Line of Credit | contracted Libor | |||||
Lines of Credit and Long-Term Obligation | |||||
Interest rate | 4.25% | ||||
Seller Notes | |||||
Lines of Credit and Long-Term Obligation | |||||
Annual interest rate | 6% | ||||
Subordinated note | $ 8,500,000 | ||||
Repayments of debt | 2,500,000 | ||||
Outstanding current and long-term liabilities | $ 3,750,000 | ||||
Revolving Credit Facility | |||||
Lines of Credit and Long-Term Obligation | |||||
Outstanding balance | $ 135,968 | ||||
Commitment fee percentage | 0.25% | 0.25% | 0.25% | 0.25% | |
Commitment fee amount | $ 60,000 | $ 95,000 | $ 100,000 | $ 300,000 | |
Outstanding revolver balance | 176,700,000 | 136,000,000 | 54,000,000 | ||
Availability balance | $ 48,300,000 | $ 48,000,000 | $ 95,000,000 |
Employee Benefits (Details)_2
Employee Benefits (Details) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
AHBP | ||||
Employee Benefits | ||||
Maximum company exposure | $ 200,000 | $ 200,000 | ||
Accrued estimated run out exposure | $ 218,000 | $ 436,000 | ||
401(k) Plan | ||||
Employee Benefits | ||||
Percentage of employee contribution | 3% | 3% | ||
Matching contribution | $ 0.50 | $ 0.50 | ||
Matching contribution (in percent) | 4% | 4% | ||
Amount contributed | $ 695,000 | $ 502,000 | $ 539,000 |
Income Taxes - Domestic income
Income Taxes - Domestic income (loss) before income taxes and details of the income tax expense (benefit) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Current: | |||||||
Federal | $ 7,937 | $ 7,201 | $ (1,759) | ||||
State | 2,663 | 2,304 | 849 | ||||
Total Current | 10,599 | 9,505 | (910) | ||||
Deferred: | |||||||
Federal | (951) | 1,070 | 1,137 | ||||
State | (226) | 216 | 149 | ||||
Total Deferred | (1,177) | 1,286 | 1,286 | ||||
Income Tax Expense | $ (5,878) | $ 7,533 | $ (8,516) | $ 9,324 | $ 9,423 | $ 10,791 | $ 376 |
Income Taxes - Items accounting
Income Taxes - Items accounting for the difference between income taxes computed at the U.S. federal statutory income tax rate and the income tax expense (benefit) at the effective tax rate (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Items accounting for the difference between income taxes computed at the U.S. federal statutory income tax rate and the income tax expense (benefit) at the effective tax rate | |||||||
Federal Income Tax Provision at Statutory Rate | $ 7,484 | $ 9,444 | $ 1,205 | ||||
State Taxes, Net of Federal Benefits | 2,437 | 2,520 | 997 | ||||
Meals Entertainments | 6 | 18 | |||||
Foreign Derived Intangible Income | (618) | (802) | (598) | ||||
NOL Carryback Refund Before AMT | (1,216) | ||||||
Other | 120 | (377) | (30) | ||||
Income Tax Expense | $ (5,878) | $ 7,533 | $ (8,516) | $ 9,324 | $ 9,423 | $ 10,791 | $ 376 |
Items accounting for the difference between income taxes computed at the U.S. federal statutory income tax rate and the income tax expense (benefit) at the effective tax rate (IN PERCENT) | |||||||
Federal Income Tax Provision at Statutory Rate | 21% | 21% | 21% | ||||
State Taxes, Net of Federal Benefits | 6% | 6% | 6% | 17% | |||
Meals Entertainments | 0% | 0% | 0% | ||||
Foreign Derived Intangible Income | (2.00%) | (2.00%) | (10.00%) | ||||
NOL Carryback Refund Before AMT | 0% | 0% | (21.00%) | ||||
Debt Forgiveness and Interest Income | 0% | 0% | 0% | ||||
Other | (1.00%) | (1.00%) | (1.00%) | ||||
Income Tax Expense | 27% | 26% | 24% | 24% | 6% | ||
Income Tax benefit related to NOL Carrybacks under the provision in the CARES Act | $ 2,500 |
Income Taxes - Components of de
Income Taxes - Components of deferred taxes (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Jun. 30, 2021 |
Deferred Tax Assets: | ||
Other Deferred (ICDISC) | $ 583 | $ 245 |
Net Operating Losses | 30 | 30 |
Bad Debt | 39 | 83 |
Total Deferred Tax Assets | 652 | 358 |
Deferred Tax Liabilities: | ||
Inventory | (324) | (875) |
Accruals Not Currently Deductible | (792) | (98) |
Prepaids | (1,004) | (1,224) |
Property and Equipment | (1,399) | (1,924) |
Goodwill/Intangibles | (2,404) | (2,685) |
Total Deferred Tax Liabilities | (5,923) | (6,806) |
Net Deferred Tax Liability | $ (5,271) | $ (6,448) |
Income Taxes - Additional infor
Income Taxes - Additional information (Details) - USD ($) | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 |
Income Taxes | |||
Unrecognized tax benefits | $ 0 | $ 0 | $ 0 |
Accrued interest or penalties for unrecognized tax positions | $ 0 |
Commitments and Contingencies_3
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 | |
Commitments and Contingencies. | |||
Amount of long-term purchase commitments or arrangements | $ 0 | $ 0 | $ 0 |
Related Party Transactions (D_2
Related Party Transactions (Details - Captive Insurance Policies) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2022 USD ($) item | Jun. 30, 2021 USD ($) | Jun. 30, 2020 USD ($) | |
Related Party Transactions | |||
Number of insurance companies established by stockholders | item | 2 | ||
Annual insurance expense | $ 2,400 | ||
Total captive policy expense | 1,600 | $ 2,200 | $ 2,700 |
Total claims filed | 1,400 | 1,400 | $ 900 |
Receivables from captive insurance companies | $ 250 | $ 1,500 |
Related Party Transactions (D_3
Related Party Transactions (Details - Interest-Charge Domestic International Sales Corporation) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Related Party Transactions | |||||||
Commissions expense | $ 1,444 | $ 2,767 | $ 2,833 | $ 6,263 | $ 9,907 | $ 5,394 | $ 8,182 |
Sales to a related party company | 1,600 | 2,600 | 2,300 | 4,800 | 7,100 | 4,800 | $ 2,500 |
Costs incurred with related party company | $ 3,500 | $ 6,700 | $ 5,400 | $ 7,800 | $ 13,000 | $ 7,800 |
Leases (Details)_2
Leases (Details) | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Leases | ||
Options to renew operating lease | true | true |
Minimum | ||
Leases | ||
Renewal term of operating lease | 1 year | 1 year |
Maximum | ||
Leases | ||
Renewal term of operating lease | 13 years | 13 years |
Leases (Details - Components _2
Leases (Details - Components of lease expense) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Lease Cost | |||||||
Finance Lease Cost: Amortization of Right of Use Assets | $ 51 | $ 179 | $ 102 | $ 475 | $ 675 | $ 1,189 | $ 1,095 |
Finance Lease Costs: Interest on Lease Liabilities | 3 | 8 | 7 | 18 | 27 | 81 | 125 |
Operating Lease Cost | 1,013 | 1,132 | 2,092 | 2,263 | 4,515 | 4,789 | 3,827 |
Short Term Lease Cost | 7 | 14 | 1,140 | ||||
Variable Lease Cost | 1,633 | 869 | 680 | ||||
Total Lease Cost | $ 1,074 | $ 1,319 | $ 2,215 | $ 2,756 | $ 7,990 | $ 6,928 | $ 5,727 |
Leases (Details - Other Infor_2
Leases (Details - Other Information) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | |
Leases | |||||||
Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Operating Cash Flows from Financing Leases | $ 3 | $ 8 | $ 7 | $ 20 | $ 30 | $ 86 | $ 125 |
Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Operating Cash Flows from Operating Leases | 4,820 | 4,944 | 3,973 | ||||
Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Financing Cash Flows from Finance Leases | 53 | 289 | 105 | 778 | 1,070 | 1,931 | 1,720 |
Right-of Use Assets Obtained in Exchange for New Finance Lease Liabilities | 1,561 | ||||||
Right-of Use Assets Obtained in Exchange for Capitalized Operating Lease Liabilities | 1,105 | 1,213 | 2,264 | 2,392 | 3,640 | 39 | |
Net ROU Remeasurement | $ (9) | $ (1,298) | $ (9) | $ (1,190) | $ (651) | $ 841 | $ 169 |
Weighted-Average Remaining Lease Term - Operating Leases | 1 year 11 months 8 days | 2 years 9 months 7 days | 1 year 11 months 8 days | 2 years 9 months 7 days | 2 years 3 months 29 days | 1 year 7 months 17 days | 2 years 1 month 17 days |
Weighted-Average Remaining Lease Term - Financing Leases | 1 year 7 months 2 days | 1 year 11 months 19 days | 1 year 7 months 2 days | 1 year 11 months 19 days | 2 years 21 days | 3 years 1 month 13 days | 4 years 1 month 2 days |
Weighted-Average Discount Rate - Operating Leases | 4.13% | 4.09% | 4.13% | 4.09% | 4.10% | 3.35% | 3.26% |
Weighted-Average Discount Rate - Financing Leases | 3.70% | 3.67% | 3.70% | 3.67% | 3.70% | 4.46% | 4.45% |
Leases (Details - Maturities _2
Leases (Details - Maturities of lease liabilities) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 |
Maturities of lease liabilities, Operating leases | ||
2023 | $ 4,123 | $ 4,403 |
2024 | 3,312 | 4,019 |
2025 | 110 | 1,402 |
2026 | 100 | 99 |
Total Lease Payments | 7,655 | 9,923 |
Less Imputed Interest | (271) | (606) |
Total | $ 7,374 | $ 9,317 |
Business Acquisition (Details_2
Business Acquisition (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Jul. 01, 2022 | Sep. 30, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Business Acquisition | |||||||||
Aggregated purchase price | $ 80,400 | $ 80,359 | |||||||
Transaction Costs | $ 694 | $ 350 | $ 367 | $ 34 | $ 1,007 | $ (282) | $ (251) | $ 3,509 | |
COKeM International | |||||||||
Business Acquisition | |||||||||
Percentage of stock acquired | 100% |
Business Acquisition - Compan_2
Business Acquisition - Company's consolidated statements of operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended |
Dec. 31, 2022 | Dec. 31, 2022 | Jun. 30, 2021 | |
Business Acquisition | |||
Revenue | $ 6,784 | $ 10,605 | $ 405,714 |
Net Income | $ 1,360 | $ 1,086 | $ 19,567 |
Business Acquisition - Acquis_2
Business Acquisition - Acquisition date fair value of the consideration transferred (Details) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | |
Sep. 30, 2020 | Jun. 30, 2021 | Dec. 31, 2022 | |
Business Acquisition | |||
Cash at Close | $ 71,859 | ||
Note to Seller | 8,500 | ||
Consideration transferred | $ 80,400 | 80,359 | |
Cash Acquired | 6,450 | $ 1 | |
Trade Receivables | 48,729 | 3,289 | |
Inventory | 70,267 | 5,232 | |
Other Assets | 1,779 | 19 | |
Accounts Payable | (48,770) | (24,820) | |
Accrued Expenses | (734) | ||
Property and Equipment | 2,638 | ||
Total identifiable net assets (liabilities) | $ 80,359 | $ (7,248) |
Business Acquisition - Company
Business Acquisition - Company amended its credit line with Bank of America (Details) $ in Millions | Jun. 30, 2021 USD ($) |
COKeM International | |
Business Acquisition | |
Maximum borrowing capacity | $ 175 |
Business Acquisition - Unaudite
Business Acquisition - Unaudited supplemental pro forma financial information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Pro forma financial information | ||
Revenue | $ 1,414,039 | $ 1,195,005 |
Net Income | $ 42,542 | $ 3,402 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | |
Jul. 01, 2022 | Sep. 30, 2020 | Jun. 30, 2021 | |
Subsequent Event | |||
Aggregated purchase price | $ 80,400 | $ 80,359 | |
Subsequent Event | Toys and collectibles distribution company | |||
Subsequent Event | |||
Aggregated purchase price | $ 9,200 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash | $ 1,374,000 | |
Total Current Assets | 356,978,000 | |
Total Assets | 490,955,000 | |
Current liabilities | ||
Accrued expenses | 12,418,000 | |
Total Current Liabilities | 394,542,000 | |
Total Liabilities | 398,460,000 | |
Commitments and Contingencies | ||
Stockholders' Deficit | ||
Additional paid-in capital | 46,592,000 | |
Accumulated deficit | 48,643,000 | |
Total Stockholders' Equity | 92,495,000 | $ 109,828,000 |
Total Liabilities and Stockholders' Equity | 490,955,000 | |
ADARA ACQUISITION CORP | ||
Current assets | ||
Cash | 17,956 | 724,410 |
Prepaid expenses | 2,500 | 199,166 |
Total Current Assets | 20,456 | 923,576 |
Marketable securities held in Trust Account | 117,809,450 | 116,160,281 |
Total Assets | 117,829,906 | 117,083,857 |
Current liabilities | ||
Accrued expenses | 1,642,990 | 440,245 |
Income taxes payable | 264,485 | |
Advance from related party | 30,582 | |
Promissory note | 471,599 | |
Total Current Liabilities | 2,409,656 | 440,245 |
Warrant Liabilities | 693,900 | 4,860,800 |
Total Liabilities | 3,103,556 | 5,301,045 |
Commitments and Contingencies | ||
Stockholders' Deficit | ||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 0 shares issued or outstanding as of December 31, 2022 and 2021 | ||
Accumulated deficit | (2,414,653) | (4,367,476) |
Total Stockholders' Equity | (2,414,365) | (4,367,188) |
Total Liabilities and Stockholders' Equity | 117,829,906 | 117,083,857 |
ADARA ACQUISITION CORP | Class B common Stock | ||
Stockholders' Deficit | ||
Common Stock: No Par Value, Authorized 1000 shares Issued 957 Shares, Outstanding 900 Shares as of December 31, 2022, and June 30, 2022 | 288 | 288 |
ADARA ACQUISITION CORP | Class A common stock subject to possible redemption | ||
Current liabilities | ||
Class A common stock subject to possible redemption, $0.0001 par value; 11,500,000 shares at $10.19 and $10.10 redemption value at December 31, 2022 and 2021, respectively | $ 117,140,715 | $ 116,150,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
Common stock, shares authorized | 1,000 | |
Common stock, shares issued | 957 | |
Common stock, shares outstanding | 900 | |
ADARA ACQUISITION CORP | ||
Preferred stock, par value (per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
ADARA ACQUISITION CORP | Class A common Stock | ||
Common stock, par value (per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
ADARA ACQUISITION CORP | Class A common stock subject to possible redemption | ||
Temporary equity, par value | $ 0.0001 | $ 0.0001 |
Temporary equity, shares outstanding | 11,500,000 | 11,500,000 |
Temporary equity, redemption price per share | $ 10.19 | $ 10.10 |
ADARA ACQUISITION CORP | Class A common stock not subject to possible redemption | ||
Common stock, shares issued | 0 | 0 |
Common stock, shares outstanding | 0 | 0 |
ADARA ACQUISITION CORP | Class B common Stock | ||
Common stock, par value (per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 2,875,000 | 2,875,000 |
Common stock, shares outstanding | 2,875,000 | 2,875,000 |
CONSOLIDATED STATEMENTS OF OP_2
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
ADARA ACQUISITION CORP | ||
Operating and formation costs | $ 2,608,046 | $ 976,831 |
Loss from operations | (2,608,046) | (976,831) |
Other income (expense): | ||
Interest earned on marketable securities held in Trust Account | 1,649,169 | 10,281 |
Transaction costs incurred in connection with IPO | (86,544) | (86,544) |
Change in fair value of warrants liabilities | 4,166,900 | 4,297,300 |
Other income, net | 5,816,069 | 4,221,037 |
(Loss) Income Before Income Tax (Benefit) Expense | 3,208,023 | 3,244,206 |
Provision for income taxes | (264,485) | |
Net (Loss) Income | $ 2,943,538 | $ 3,244,206 |
ADARA ACQUISITION CORP | Class A common Stock | ||
Other income (expense): | ||
Shares Used in Computing Net Income per Share, Basic | 11,500,000 | 10,208,219 |
Shares Used in Computing Net Income per Share, Diluted | 11,500,000 | 10,208,219 |
Net (Loss) Income per Share - Basic | $ 0.20 | $ 0.25 |
Net (Loss) Income per Share - Diluted | $ 0.20 | $ 0.25 |
ADARA ACQUISITION CORP | Class B common Stock | ||
Other income (expense): | ||
Shares Used in Computing Net Income per Share, Basic | 2,875,000 | 2,831,849 |
Shares Used in Computing Net Income per Share, Diluted | 2,875,000 | 2,875,000 |
Net (Loss) Income per Share - Basic | $ 0.20 | $ 0.25 |
Net (Loss) Income per Share - Diluted | $ 0.20 | $ 0.25 |
CONSOLIDATED STATEMENTS OF CH_2
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT - USD ($) | ADARA ACQUISITION CORP Class B common Stock Common Stock [Member] | ADARA ACQUISITION CORP Additional Paid-in Capital [Member] | ADARA ACQUISITION CORP Retained Earnings [Member] | ADARA ACQUISITION CORP | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Balances at the beginning at Jun. 30, 2019 | $ 42,951,000 | $ 3,510,000 | $ 44,016,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net Income(Loss) | 5,361,000 | 5,361,000 | |||||
Balances at the end at Jun. 30, 2020 | 46,811,000 | 8,871,000 | 52,919,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net Income(Loss) | 34,178,000 | 34,178,000 | |||||
Balances at the end at Jun. 30, 2021 | 40,000,000 | 43,049,000 | 80,302,000 | ||||
Balances at the beginning at Dec. 31, 2020 | $ 288 | $ 24,712 | $ (5,476) | $ 19,524 | |||
Balance at the beginning (in shares) at Dec. 31, 2020 | 2,875,000 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Accretion for Class A common stock to redemption amount | (313,212) | (7,606,206) | (7,919,418) | ||||
Cash paid in excess of fair value of private warrants | 288,400 | 288,400 | |||||
Issuance of Representative Warrants | 100 | 100 | |||||
Net Income(Loss) | 3,244,206 | 3,244,206 | |||||
Balances at the end at Dec. 31, 2021 | $ 288 | (4,367,476) | (4,367,188) | 40,000,000 | 72,575,000 | 109,828,000 | |
Balance at the end (in shares) at Dec. 31, 2021 | 2,875,000 | ||||||
Balances at the beginning at Jun. 30, 2021 | 40,000,000 | 43,049,000 | 80,302,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net Income(Loss) | 29,526,000 | 29,526,000 | |||||
Balances at the end at Dec. 31, 2021 | $ 288 | (4,367,476) | (4,367,188) | 40,000,000 | 72,575,000 | 109,828,000 | |
Balance at the end (in shares) at Dec. 31, 2021 | 2,875,000 | ||||||
Balances at the beginning at Jun. 30, 2021 | 40,000,000 | 43,049,000 | 80,302,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net Income(Loss) | 28,619,000 | 28,619,000 | |||||
Balances at the end at Jun. 30, 2022 | 40,000,000 | 71,668,000 | 108,928,000 | ||||
Balances at the beginning at Sep. 30, 2021 | 40,000,000 | 48,721,000 | 85,974,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net Income(Loss) | 23,854,000 | 23,854,000 | |||||
Balances at the end at Dec. 31, 2021 | $ 288 | (4,367,476) | (4,367,188) | 40,000,000 | 72,575,000 | 109,828,000 | |
Balance at the end (in shares) at Dec. 31, 2021 | 2,875,000 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Accretion for Class A common stock to redemption amount | (990,715) | (990,715) | |||||
Net Income(Loss) | 2,943,538 | 2,943,538 | |||||
Balances at the end at Dec. 31, 2022 | $ 288 | 0 | (2,414,653) | (2,414,365) | 46,592,000 | 48,643,000 | 92,495,000 |
Balance at the end (in shares) at Dec. 31, 2022 | 2,875,000 | ||||||
Balances at the beginning at Jun. 30, 2022 | 40,000,000 | 71,668,000 | 108,928,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net Income(Loss) | (23,025,000) | (23,025,000) | |||||
Balances at the end at Dec. 31, 2022 | $ 288 | 0 | (2,414,653) | (2,414,365) | 46,592,000 | 48,643,000 | 92,495,000 |
Balance at the end (in shares) at Dec. 31, 2022 | 2,875,000 | ||||||
Balances at the beginning at Sep. 30, 2022 | 40,000,000 | 64,158,000 | 101,418,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net Income(Loss) | (15,515,000) | ||||||
Balances at the end at Dec. 31, 2022 | $ 288 | $ 0 | $ (2,414,653) | $ (2,414,365) | $ 46,592,000 | $ 48,643,000 | $ 92,495,000 |
Balance at the end (in shares) at Dec. 31, 2022 | 2,875,000 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Net Cash Provided by (Used in) Operating Activities [Abstract] | ||||
Net income | $ (23,025,000) | $ 29,526,000 | ||
Changes in operating assets and liabilities: | ||||
Accrued expenses | 12,088,000 | 2,497,000 | ||
Net Cash Used in Operating Activities | (40,660,000) | 65,606,000 | ||
Cash Flows from Investing Activities: | ||||
Net Cash Provided by Investing Activities | 1,000 | 1,000 | ||
Cash Flows from Financing Activities: | ||||
Net Cash Provided by Financing Activities | 40,564,000 | 63,371,000 | ||
Cash, Beginning of the Period | 1,469,000 | 4,028,000 | $ 1,794,000 | |
Cash, End of the Period | 1,374,000 | 1,794,000 | 1,374,000 | $ 1,794,000 |
ADARA ACQUISITION CORP | ||||
Net Cash Provided by (Used in) Operating Activities [Abstract] | ||||
Net income | 2,943,538 | 3,244,206 | ||
Adjustments to Reconcile Net (Loss) Income to Net Cash Used In Operating Activities: | ||||
Change in fair value of warrant liabilities | (4,166,900) | (4,297,300) | ||
Transaction costs incurred in connection with IPO | 86,544 | 86,544 | ||
Interest earned on marketable securities held in Trust Account | (1,649,169) | (10,281) | ||
Changes in operating assets and liabilities: | ||||
Prepaid expenses | 196,666 | 200,834 | ||
Income taxes payable | 264,485 | |||
Accrued expenses | 1,202,745 | 435,363 | ||
Net Cash Used in Operating Activities | (1,208,635) | (340,634) | ||
Cash Flows from Investing Activities: | ||||
Investment of cash in Trust Account | (116,150,000) | |||
Net Cash Provided by Investing Activities | (116,150,000) | |||
Cash Flows from Financing Activities: | ||||
Proceeds from sale of Units, net of underwriting discounts paid | 114,000,000 | |||
Proceeds from sale of Private Placements Warrants | 4,120,000 | |||
Proceeds from sale of Unit Purchase Option | 100 | |||
Proceeds from Advances from related party | 30,582 | |||
Proceeds from promissory note | 471,599 | |||
Repayment of promissory note - related party | (600,000) | |||
Payment of offering costs | (407,352) | |||
Net Cash Provided by Financing Activities | 502,181 | 117,112,748 | ||
Net Change in Cash | (706,454) | 622,114 | ||
Cash, Beginning of the Period | 724,410 | 102,296 | ||
Cash, End of the Period | $ 17,956 | $ 724,410 | $ 17,956 | $ 724,410 |
DESCRIPTION OF ORGANIZATION AND
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | 12 Months Ended |
Dec. 31, 2022 | |
ADARA ACQUISITION CORP | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ALLIANCE ENTERTAINMENT HOLDING CORP. (F/K/A ADARA ACQUISITION CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2022 NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Adara Acquisition Corp. (now known as Alliance Entertainment Holding Corp.) (the “Company” or “Alliance”) was incorporated in Delaware on August 5, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all the risks associated with early stage and emerging growth companies. Business Combination On February 10, 2023 (the “Closing Date”), Alliance, Adara Acquisition Corp., a Delaware corporation (“Adara”), and Adara Merger Sub, Inc., a Delaware corporation (“Merger Sub”), consummated the closing of the transactions (the “Closing”) contemplated by the Business Combination Agreement, dated June 22, 2022, by and among Alliance, Adara and Merger Sub (the “Business Combination Agreement”), following their approval at a special meeting of the stockholders of Adara held on January 18, 2023 (the “Special Meeting”). Business Prior to the Business Combination As of December 31, 2022, the Company had not commenced any operations. All activity for the period from August 5, 2020 (inception) through December 31, 2022 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the marketable securities held in the Trust Account (as defined below). On June 22, 2022, the Company, Adara Merger Sub Inc., a wholly owned subsidiary of the Company (“Merger Sub”), and Alliance Entertainment Holding Corporation (“Alliance”) entered into a Business Combination Agreement (“BCA”) related to a proposed Business Combination. The registration statement for the Company’s Initial Public Offering was declared effective on February 8, 2021. On February 11, 2021, the Company consummated the Initial Public Offering of 11,500,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 Units, at $10.00 per Unit, generating gross proceeds of $115,000,000 which is described in Note 3. Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,120,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Adara Sponsor LLC (the “Sponsor”), generating gross proceeds of $4,120,000, which is described in Note 4. Transaction costs amounted to $1,529,462, consisting of $1,000,000 in cash underwriting fees, net of reimbursement, and $529,462 of other offering costs. Following the closing of the Initial Public Offering on February 11, 2021, an amount of $116,150,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), located in the United States and will be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below. NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (continued) On February 10, 2023, Alliance, Adara, and Merger Sub Following the consummation of the Merger on the Closing Date, Adara changed its name from Adara Acquisition Corp. to Alliance Entertainment Holding Corporation. In connection with the Special Meeting and the Business Combination, holders of 11,332,830 shares of Adara Class A common stock, par value $0.0001 per share (“ Adara Common Stock outstanding Conversion and Exchange of Equity in the Business Combination Pursuant to the Business Combination Agreement, at the effective time of the Business Combination, Adara issued (i) 47,500,000 shares of Class A common stock of Adara (“ Company Common Stock Alliance Common Stock Company Class E Common Stock Liquidity Capital Resources and Going Concern As of December 31, 2022, the Company had cash of $17,956 not held in the Trust Account and available for working capital purposes and working capital deficit of $1,720,465. As of December 31, 2022, liquidity concerns were present. On February 10, 2023, the Company closed its Business Combination with Alliance Entertainment Holding Corporation which historically has not presented a going concern issue. Accordingly, as a result of the merger, the going concern has been alleviated. |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2022 | |
ADARA ACQUISITION CORP | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Emerging Growth Company The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. The warrants liabilities are the Company’s most significant estimate. Accordingly, the actual results could differ significantly from those estimates. Offering Costs Offering costs consist of legal, accounting, underwriting fees and other costs incurred through the consolidated balance sheet date that are directly related to the Initial Public Offering. Offering costs associated with the Class A common stock issued were initially charged to temporary equity and then accreted to common stock subject to redemption upon the completion of the Initial Public Offering. Offering costs amounting to $1,442,918 were charged to stockholders’ deficit upon the completion of the Initial Public Offering, and $86,544 of the offering costs was related to the warrant liabilities and charged to the consolidated statements of operations. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Class A Common Stock Subject to Possible Redemption The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity”. Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2022 and 2021, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s consolidated balance sheets. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. At December 31, 2022 and 2021, the Class A common stock reflected in the consolidated balance sheets is reconciled in the following table: Gross proceeds $ 115,000,000 Less: Proceeds allocated to Public Warrants (5,290,000) Class A common stock issuance at cost (1,479,418) Plus: Accretion of carrying value to redemption value 7,919,418 Class A common stock subject to possible redemption, December 31, 2021 116,150,000 Plus: Accretion of carrying value to redemption value 990,715 Class A common stock subject to possible redemption, December 31, 2022 $ 117,140,715 Warrant Liabilities The Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each consolidated balance sheet date until exercised, and any change in fair value is recognized in the consolidated statements of operations. The Private Warrants, Public Warrants, and the Representative Warrants for periods where no observable traded price was available are valued using a lattice model, specifically a binomial lattice. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value for the Public and the Private Warrants as of each relevant date. The Representative Warrants used the binomial lattice model as of each relevant date. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the consolidated financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of December 31, 2022 and 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. ASC 740- 270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in interim periods under ASC 740-270-30-5. The Company’s effective tax rate was 8.24% ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s consolidated financial statements and prescribes a recognition threshold and measurement process for consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2022 and 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company has identified the United States as its only “major” tax jurisdiction. The Company has been subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. Net Income per Common Share The Company complies with accounting and disclosure requirements of Financial Accounting Standards Board (“FASB”) ASC Topic 260, “Earnings Per Share”. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common stock outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 9,870,000 shares of Class A common stock in the aggregate. As of December 31, 2022 and 2021, the Company did not have any other dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted net income (loss) per share of common stock is the same as basic net income (loss) per common share for the periods presented. The following tables reflect the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts): Years Ended December 31, 2022 2021 Class A Class B Class A Class B Basic net income per common share Numerator: Allocation of net income, as adjusted $ 2,354,830 $ 588,708 $ 2,539,677 $ 704,529 Denominator: Basic weighted average shares outstanding 11,500,000 2,875,000 10,208,219 2,831,849 Basic net income per common share $ 0.20 $ 0.20 $ 0.25 $ 0.25 Years Ended December 31, 2022 2021 Class A Class B Class A Class B Diluted net income per common share Numerator: Allocation of net income, as adjusted $ 2,354,830 $ 588,708 $ 2,539,677 $ 704,529 Denominator: Basic weighted average shares outstanding 11,500,000 2,875,000 10,208,219 2,875,000 Basic net income per common share $ 0.20 $ 0.20 $ 0.25 $ 0.25 Concentration of Credit Risk The Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows. Fair Value of Financial Instruments The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying consolidated balance sheets, primarily due to their short-term nature, except for the warrant liabilities (see Note 10). NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Recent Accounting Standards In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”), to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. As a smaller reporting company, ASU 2020-06 is effective January 1, 2024 for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows. The Company has not adopted this guidance as of December 31, 2022. Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements. Derivative Financial Instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the consolidated balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the consolidated balance sheet date. |
INITIAL PUBLIC OFFERING
INITIAL PUBLIC OFFERING | 12 Months Ended |
Dec. 31, 2022 | |
ADARA ACQUISITION CORP | |
INITIAL PUBLIC OFFERING | NOTE 3. INITIAL PUBLIC OFFERING Pursuant to the Initial Public Offering, the Company sold 11,500,000 Units, inclusive of 1,500,000 Units sold to the underwriters on February 11, 2021 upon the underwriters’ election to fully exercise their over-allotment option, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one |
PRIVATE PLACEMENT
PRIVATE PLACEMENT | 12 Months Ended |
Dec. 31, 2022 | |
ADARA ACQUISITION CORP | |
PRIVATE PLACEMENT | NOTE 4. PRIVATE PLACEMENT Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 4,120,000 Placement Warrants at a price of $1.00 per Placement Warrant, for an aggregate purchase price of $4,120,000 from the Company in a private placement. Each Placement Warrant will be exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 10). The proceeds from the sale of the Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Placement Warrants will expire worthless. |
RELATED PARTY TRANSACTIONS_2_3
RELATED PARTY TRANSACTIONS | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2022 | Jun. 30, 2022 | |
RELATED PARTY TRANSACTIONS | Note 13: Related Party Transactions Interest-Charge Domestic International Sales Corporation (“IC-DISC”) The Company has an affiliate, My Worldwide Market Place, Inc. which is an IC-DISC and was established February 12, 2013. The IC-DISC is owned by the Company Stockholders. Effective December 31, 2022, IC-DISC was discontinued as a result there will be no future accruals or commissions paid out. The IC-DISC is organized to manage sales to certain qualified customers and receive commissions from the Company for this activity. The commissions expenses were $1.4 million and $2.8 million for the three months ended December 31, 2022 and 2021, and $2.8 million and $6.3 million for the six months ended December 31, 2022, and 2021 respectively. The commission is determined under formulas and rules defined in the law and regulations of the US tax code, and under these regulations, the commission is deductible by the Company and results in a specified profit to the IC-DISC. This net profit is not subject to federal income tax. The IC-DISC distributes the profit to its stockholders, who are taxed on the income as a dividend. The owners of the IC-DISC elected to forgive the commissions earned for the twelve months ended December 31, 2022. The forgiveness of $6.6 million was recorded as a deemed capital contribution by the Company Stockholders. Captive Insurance Policies Bruce Ogilvie, Executive Chairman and a principal stockholder of Alliance, and Jeff Walker, Chief executive Office, a director, and a principal stockholder of Alliance, established two insurance companies; Guard Yourself Insurance Company, Ltd. and Super O Insurance Company, Ltd., replaced effective April 1, 2018, with the current new insurance companies, Airlie Protection Ins. Co., Inc. and Protection for You Ins. Co., Inc. These insurance companies additionally insure the general assets, liabilities and claims of Alliance through March 30, 2022, and were not renewed for future periods. Premium payments are allowed based on the Loan Agreement dated February 21, 2017. The Company is not a guarantor and does not have exposure in the event of a loss. Total captive policy expense for the three months December 31, 2022 and 2021, were $0.0 million and $0.54 million respectively and for the six months ended December 31, 2022, and December 31, 2021, were $0.0 and $1.09 million respectively, which are included in related party receivables on the consolidated balance sheets. Captive Claims receivables for six months ended December 31, 2022, and December 31, 2021, was $0.0 and $0.9 million respectively. Other Related Party Transactions During the three months December 31, 2022 and 2021, and the six-month periods ended December 31, 2022, and 2021, the Company had sales to a related party company owned by the Company’s shareholders of $1.6 million, 2.6 million, $2.3 million, and $4.8 million, respectively. Also, during the same periods, the Company had costs incurred with another related party company in the amount of $3.5 million, $6.7 million, $5.4 million and $7.8 million, respectively. | Note 12: Related Party Transactions Captive Insurance Policies In addition to insurance policies as required by the Company’s loan agreement, which insure certain assets, liabilities and general operations of the Company, the Stockholders of the Company established two insurance companies; Guard Yourself Insurance Company, Ltd. and Super O Insurance Company, Ltd., replaced effective April 1, 2018, with the current new insurance companies, Airlie Protection Ins. Co., Inc. and Protection for You Ins. Co., Inc. These insurance companies additionally insure the general assets, liabilities and claims of the Company through March 30, 2022, and were not renewed for future periods. The entities are known as captive insurance companies. New policies cover the period of March 31, 2021, to March 30, 2022, and will incur an annual expense of $2.4 million. Premium payments are allowed based on the Loan Agreement dated February 21, 2017. The Company is not a guarantor and does not have exposure in the event of a loss. Total captive policy expense for years ending June 30, 2022, 2021, and 2020 was $1.6 million, $2.2 million, and $2.7 million, respectively. Total claims filed for the years ended June 30, 2022, 2021, and 2020 were $1.4 million, $1.4 million, and $0.9 million respectively. On June 30, 2022, and 2021, receivables from the captive insurance companies were $0.25 million and $1.5 million, respectively, which are included in related party receivables on the consolidated balance sheets. Interest-Charge Domestic International Sales Corporation The Company has an affiliate, My Worldwide Market Place, Inc. which is an IC-DISC and was established February 12, 2013. The IC-DISC is owned by the Company Stockholders. The IC-DISC is organized to manage sales to certain qualified customers and receive commissions from the Company for this activity. The commissions expense ($9.9 million, $5.4 million, and $8.2 million for the years ended June 30, 2022, 2021, and 2020, respectively) was determined under formulas and rules defined in the law and regulations of the US tax code. Under these regulations, the commission is deductible by the Company and results in a specified profit to the IC-DISC. This net profit is not subject to Federal income tax. The IC-DISC distributes the profit to its Stockholders, who are taxed on the income as a dividend. During the years ended June 30, 2022, 2021 and 2020, the Company had sales to a related party company owned by the Company’s shareholders of $7.1 million, $5.3 $3.0 | |
ADARA ACQUISITION CORP | |||
RELATED PARTY TRANSACTIONS | NOTE 5. RELATED PARTY TRANSACTIONS Founder Shares In August 2020, the Sponsor purchased 2,875,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. The Founder Shares included an aggregate of up to 375,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the number of Founder Shares will equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding shares of common stock after the Initial Public Offering. As a result of the underwriters’ election to fully exercise their over-allotment option, no Founder Shares are currently subject to forfeiture. The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property. Advances from Related Party As of December 31, 2022, Blystone & Donaldson, LLC advanced the Company $30,582. Promissory Note — Related Party On August 5, 2020, the Sponsor issued an unsecured promissory note to the Company, which was amended and restated on November 18, 2020 (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $600,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) March 31, 2021 or (ii) the consummation of the Initial Public Offering. As of December 31, 2021, there was no amounts outstanding under the Promissory Note. No future borrowings are permitted. On June 22, 2022, Blystone & Donaldson, LLC issued an unsecured promissory note to the Company, pursuant to which the Company may borrow up to an aggregate principal amount of $250,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) closing of the Merger as described in the BCA or (ii) February 11, 2023. As December 31, 2022, $250,000 was outstanding under the Promissory Note. On June 22, 2022, Thomas Finke, LLC issued an unsecured promissory note to the Company, pursuant to which the Company may borrow up to an aggregate principal amount of $250,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) closing of the Merger as described in the Business Combination Agreement (“BCA”) dated as of June 22, 2022 by and among Thomas Finke, the Company, and Adara Merger Sub Inc. and Alliance Entertainment Holding Corporation as defined therein or (ii) February 11, 2023. As December 31, 2022, $221,599 was outstanding under the Promissory Note. NOTE 5. RELATED PARTY TRANSACTIONS (continued) Related Party Loans In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Placement Warrants. As of December 31, 2022 and 2021, there were no amounts outstanding under the Working Capital Loans. Administrative Support Agreements The Company entered into an agreement, commencing on February 11, 2021, through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay Adara Sponsor LLC, a total of $10,000 per month for office space and administrative support services. The agreement was terminated with Adara Sponsor LLC, when they moved out of the office space on June 2022. For the years ended December 31, 2022 and 2021, the Company incurred and paid $50,000 and $105,000 in fees for these services, respectively. |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2022 | Jun. 30, 2022 | |
COMMITMENTS AND CONTINGENCIES | Note 12: Commitments and Contingencies Commitments The Company enters into various agreements with suppliers for the products it distributes. The Company had no long-term purchase commitments or arrangements with its suppliers as of December 31, 2022, and June 30, 2022. Litigation, Claims and Assessments We are exposed to claims, litigation and/or cyber-attacks of varying degrees arising in the ordinary course of business and use various methods to resolve these matters. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. | Note 11: Commitments and Contingencies Commitments The Company enters into various agreements with suppliers for the products it distributes. The Company had no long-term purchase commitments or arrangements with its suppliers as of June 30, 2022 or 2021. Litigation, Claims and Assessments We are exposed to claims, litigation and/or cyber-attacks of varying degrees arising in the ordinary course of business and use various methods to resolve these matters. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. | |
ADARA ACQUISITION CORP | |||
COMMITMENTS AND CONTINGENCIES | NOTE 6. COMMITMENTS AND CONTINGENCIES Risks and Uncertainties Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy is not determinable as of the date of these consolidated financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these consolidated financial statements. Inflation Reduction Act of 2022 On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. NOTE 6. COMMITMENTS AND CONTINGENCIES (continued) Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination. The Company is permitted to use interest earned on the proceeds placed in the trust account to pay taxes, which could include any excise tax due under the IR Act on any redemptions or stock buybacks by Adara. Registration Rights Pursuant to a registration rights agreement entered into on February 8, 2021, the holders of the Founder Shares, Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements. Business Combination Agreement On February 10, 2023, Alliance, Adara, and Merger Sub, consummated the closing of the transactions contemplated by the Business Combination Agreement, dated June 22, 2022, by and among Alliance, Adara and Merger Sub, following their approval at a special meeting of the stockholders of Adara held on January 18, 2023. On June 22, 2022, the Company, Merger Sub and Alliance entered into the Business Combination Agreement, pursuant to which the Company and Alliance will consummate the Business Combination. The Business Combination Agreement contains customary representations and warranties, covenants, closing conditions, termination fee provisions and other terms relating to the Merger and the other transactions contemplated thereby. Pursuant to the BCA, Merger Sub will merge with and into Alliance, with Alliance being the surviving entity (the “Merger”). The Merger is to become effective by the filing of a certificate of merger with the Secretary of State of the State of Delaware, in accordance with the relevant provisions of the Delaware General Corporation Law and mutually agreed by the parties and will be effective immediately upon such filing or upon such later time as may be agreed by the parties and specified in such certificate of merger (such time, “Effective Time”). The parties will hold the closing immediately prior to such filing of a certificate of merger, on the closing date. The Effective Time shall occur as promptly as practicable but in no event later than three business days after the satisfaction or, if permissible, waiver of the conditions to the completion of the Business Combination set forth in the BCA (other than those conditions that by their nature are to be satisfied at closing, provided that the occurrence of the closing shall remain subject to the satisfaction or, if permissible, waiver at the closing). NOTE 6. COMMITMENTS AND CONTINGENCIES (continued) At the Effective Time, by virtue of the Merger and without any action on the part of Adara, Merger Sub, Alliance or the holders of any of Alliance’s securities: Ø Each share of Alliance common stock issued and outstanding immediately prior to the Effective Time will be cancelled and automatically converted into the right to receive the number of shares of the Company surviving the Business Combination (the “Combined Company Common Stock”) equal to the Exchange Ratio and Ø No certificates or scrip or shares representing fractional shares of Combined Company Common Stock shall be issued upon the exchange of Alliance common stock and such fractional share interests will not entitle the owner thereof to vote or to have any rights of a stockholder of Adara or a holder of shares of Combined Company Common Stock. In lieu of any fractional share of Combined Company Common Stock to which each holder of Alliance common stock would otherwise be entitled, the fractional share shall be rounded up or down to the nearest whole share of Combined Company Common Stock, with a fraction of 0.5 rounded up. No cash settlements shall be made with respect to fractional shares eliminated by rounding. At the closing, the Company will also issue to the Alliance stockholders shares of a to be formed Class E Common Stock (the “Contingent Consideration Shares”) which shall be placed into an escrow account pursuant to the Contingent Consideration Shares Agreement and shall not be released from escrow over a ten-year period unless and until they are earned as a result of the occurrence of the applicable triggering event as follows: 20,000,000 Contingent Consideration Shares will be earned upon the occurrence of triggering event I prior to the five-year anniversary of the closing; 20,000,000 Contingent Consideration Shares will be earned upon the occurrence of triggering event II prior to the seven-year anniversary of the closing; and 20,000,000 Contingent Consideration Shares will be earned upon the occurrence of triggering event III prior to the ten-year anniversary of the closing. Upon the occurrence of a triggering event, the Contingent Consideration Shares released from the escrow shall automatically convert into an equal number of shares of Combined Company Common Stock. Pursuant to a letter agreement dated March 17, 2022, as amended, ThinkEquity, an Adara Initial Stockholder, will receive a financial advisory fee for serving as Adara’s financial advisor in connection with the Business Combination in an amount equal to 3.5% of the net funds held in the Trust Account after giving effect to redemptions by Adara Public Stockholders, which shall be due and payable in immediately available funds on the closing date. |
STOCKHOLDERS' DEFICIT
STOCKHOLDERS' DEFICIT | 12 Months Ended |
Dec. 31, 2022 | |
ADARA ACQUISITION CORP | |
STOCKHOLDERS' DEFICIT | NOTE 7. STOCKHOLDERS’ DEFICIT Preferred Stock Class A Common Stock Class B Common Stock Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders except as otherwise required by law. NOTE 7. STOCKHOLDERS’ DEFICIT (continued) The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination, any private placement-equivalent warrants and their underlying securities issued to the Sponsor or its affiliates upon conversion of loans made to the Company). The Company cannot determine at this time whether a majority of the holders of its Class B common stock at the time of any future issuance would agree to waive such adjustment to the conversion ratio. |
WARRANT LIABILITIES
WARRANT LIABILITIES | 12 Months Ended |
Dec. 31, 2022 | |
ADARA ACQUISITION CORP | |
WARRANT LIABILITIES | NOTE 8. WARRANT LIABILITIES Warrants — The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the foregoing, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. NOTE 8. WARRANT LIABILITIES (continued) Once the warrants become exercisable, the Company may redeem for cash the outstanding Public Warrants: Ø in whole and not in part; Ø at a price of $0.01 per Public Warrant; Ø upon not less than 30 days ’ prior written notice of redemption given after the warrants become exercisable to each warrant holder; and Ø if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 -trading day period commencing once the warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders. If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price. The Placement Warrants were identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Placement Warrants and the Class A common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. NOTE 8. WARRANT LIABILITIES (continued) Representative Warrants The Company issued 50,000 warrants (the “Representative Warrants”), for minimal consideration, to ThinkEquity (“ThinkEquity”), a division of Fordham Financial Management, Inc. (and/or its designees), in a private placement simultaneously with the closing of Initial Public Offering. The Company accounted for the Representative Warrants as an expense of the Initial Public Offering, with a corresponding credit to stockholders’ equity. The Representative Warrants are identical to the Public Warrants except that each Representative Warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment, and so long as the Representative Warrants are held by ThinkEquity (and/or its designees) or its permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A common stock issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of a Business Combination, (iii) may be exercised by the holders on a cashless basis, (iv) will be entitled to registration rights and (v) for so long as they are held by ThinkEquity (and/or its designees), will not be exercisable more than five years from the effective date of the Initial Public Offering in accordance with FINRA Rule 5110(f)(2)(G)(i). The Representative Warrants and the underlying Class A common stock have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness of Initial Public Offering pursuant to FINRA Rule 5110(g)(1). |
INCOME TAXES_2_3
INCOME TAXES | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2022 | Jun. 30, 2022 | |
INCOME TAXES | Note 11: Income Taxes The effective tax rate was 27% for the six months ended December 31,2022, compared to 26% for the same periods of 2021. State tax rates vary among states and average approximately 6.0% although some state rates are higher, and a small number of states do not impose an income tax. For the six months ended December 31, 2022, and 2021, the difference between the Company’s effective tax rate and the federal statutory rate primarily resulted from state income taxes. | Note 10: Income Taxes The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns as well as tax credits carry forward. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax laws or rates. Valuation allowances are established as necessary to reduce deferred tax assets to the amount more likely than not to be realized. The Company’s policy on income statement classification of interest and penalties related to income tax obligations is to include such items as part of total interest expense and other expense, respectively. As of June 30, 2022, and 2021, the Company did not have any material uncertain tax positions and thus has not recognized any interest or penalties in these consolidated financial statements. Domestic income (loss) before income taxes and details of the income tax expense (benefit) are as follows: Year Ended June 30 (In thousands) 2022 2021 2020 Income Tax Expense (Benefit): Current: Federal $ 7,937 $ 7,201 $ (1,759) State 2,663 2,304 849 Total Current $ 10,599 $ 9,505 $ (910) Deferred: Federal (951) 1,070 1,137 State (226) 216 149 Total Deferred (1,177) 1,286 1,286 Income Tax Expense $ 9,423 $ 10,791 $ 376 The items accounting for the difference between income taxes computed at the U.S. federal statutory income tax rate and the income tax expense (benefit) at the effective tax rate for each of the years are as follows: Year Ended June 30 (In thousands) 2022 2021 2020 Federal Income Tax Provision at Statutory Rate $ 7,484 21 % $ 9,444 21 % $ 1,205 21 % State Taxes, Net of Federal Benefits 2,437 6 % 2,520 6 % 997 17 % Meals Entertainments — 0 % 6 0 % 18 0 % Foreign Derived Intangible Income (618) -2 % (802) -2 % (598) -10 % NOL Carryback Refund Before AMT — 0 % — 0 % (1,216) -21 % Debt Forgiveness and Interest Income — 0 % — 0 % — 0 % Other 120 -1 % (377) -1 % (30) -1 % Income Tax Expense $ 9,423 24 % $ 10,791 24 % $ 376 6 % In year ended June 30, 2020 the company recorded an Income Tax benefit of $2.5 million related to NOL Carrybacks under the provision in the CARES Act. Deferred income taxes reflect the net tax effects of temporary differences between the amount of assets and liabilities for accounting purposes and the amounts used for tax purposes. The components of deferred taxes consist of the following (amounts in thousands): Year Ended June 30 (In thousands) 2022 2021 Deferred Tax Assets: Other Deferred (ICDISC) $ 583 $ 245 Net Operating Losses 30 30 Bad Debt 39 83 Total Deferred Tax Assets 652 358 Deferred Tax Liabilities: Inventory (324) (875) Accruals Not Currently Deductible (792) (98) Prepaids (1,004) (1,224) Property and Equipment (1,399) (1,924) Goodwill/Intangibles (2,404) (2,685) Total Deferred Tax Liabilities (5,923) (6,806) Net Deferred Tax Liability $ (5,271) $ (6,448) As of June 30, 2022, 2021 and 2020, the Company had recorded no unrecognized tax benefits and, therefore, no accrued interest or penalties for unrecognized tax positions as of fiscal year ended June 30, 2022. In addition, the Company is under examination by Internal Revenue Service and Florida tax authorities. These proceedings may lead to adjustments or proposed adjustments to their taxes or provisions for uncertain tax provisions. The Company believes that it would prevail under such examination and, accordingly, has not recorded a provision for uncertain tax positions. The Company evaluates deferred tax assets each period for recoverability. The Company records a valuation allowance for assets that do not meet the threshold of “more likely than not” to be realized in the future. To make that determination, the Company evaluates the likelihood of realization based on the weight of all positive and negative evidence available. As of June 30, 2022, and 2021, the Company has not recorded a valuation allowance. The Company will reevaluate this determination quarterly and record a tax expense if and when future evidence requires a valuation allowance. The Company’s tax years after fiscal year 2018 remain open for federal purposes and fiscal year 2016 for certain state taxes. In addition, due to the Florida tax examination, tax years 2008 through 2016 also remain open. | |
ADARA ACQUISITION CORP | |||
INCOME TAXES | NOTE 9. INCOME TAXES The Company’s net deferred tax assets are as follows: Years Ended December 2022 2021 Deferred tax assets Net operating loss carryforward $ — $ 39,841 Start-up/organization expenses 686,083 181,309 Total deferred tax assets 686,083 221,150 Valuation allowance (686,083) (221,150) Deferred tax assets, net of allowance $ — $ — The income tax provision for the years ended December 31, 2022 and 2021 consisted of the following: Years Ended December 2022 2021 Federal Current $ 264,485 $ — Deferred (464,933) (221,150) State Current — — Deferred — — Change in valuation allowance 464,933 221,150 Income tax provision $ 264,485 $ — As of December 31, 2022 and 2021, the Company did not have any U.S. federal and state net operating loss carryovers available to offset future taxable income. NOTE 9. INCOME TAXES (continued) In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended December 31, 2022 and 2021, the change in the valuation allowance was $464,933 and $221,150, respectively. A reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows: Years Ended December 2022 2021 Statutory federal income tax rate 21.0 % 21.0 % State taxes, net of federal tax benefit 0.0 % 0.0 % Deferred tax liability change in rate 0.0 % 0.0 % Change in fair value of warrant liabilities (27.3) % (27.8) % Change in valuation allowance 14.5 % 6.8 % Income tax provision 8.2 % — % The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing authorities. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2022 | |
ADARA ACQUISITION CORP | |
FAIR VALUE MEASUREMENTS | NOTE 10. FAIR VALUE MEASUREMENTS The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities and Level 2: Quoted prices in markets that are not active or financial instruments for which significant inputs to models are observable (including but not limited to quoted prices for similar securities, interest rates, foreign exchange rates, volatility and credit risk), either directly or indirectly; Level 3: Prices or valuations that require significant unobservable inputs (including the Management’s assumptions in determining fair value measurement). At December 31, 2022, marketable securities held in the Trust Account were comprised of $117,809,450 in money market funds which are invested primarily in U.S. Treasury Securities. At December 31, 2021, marketable securities held in the Trust Account were comprised of $116,160,281 in money market funds which are invested primarily in U.S. Treasury Securities. NOTE 10. FAIR VALUE MEASUREMENTS (continued) The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2022 and 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. December 31, December 31, Description Level 2022 2021 Assets: Marketable Securities held in Trust Account – U.S. Treasury Securities Money Market Fund 1 $ 117,809,450 $ 116,160,281 Liabilities: Warrant Liabilities – Public Warrants 1 $ 402,500 $ 2,817,500 Warrant Liabilities – Private Placement Warrants 2 284,900 1,994,300 Warrant Liabilities – Representative Warrants 3 6,500 49,000 The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Company’s accompanying December 31, 2022 and 2021 consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the consolidated statements of operations. The Company utilizes a lattice model, specifically a binomial lattice model, to value the Representative Warrants at each reporting period, with changes in fair value recognized in the consolidated statement of operations. The estimated fair value of the representative warrant liabilities are determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its shares of common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The Public Warrants were initially valued using a lattice model, specifically a binomial lattice model. As of December 31, 2022 and 2021, the Public Warrants were valued using the instrument’s publicly listed trading price as of the consolidated balance sheet date, which is considered to be a Level 1 measurement due to the use of an observable market quote in an active market. As of December 31, 2022 and 2021, the fair value of the Private Warrants was the equivalent to that of the Public Warrants as they had substantially the same terms; however, they are not actively traded, as such are listed as a Level 2 in the fair value hierarchy table above. The key inputs into the binomial lattice model for the Warrants were as follows: February 11, 2021 December 31, December 31, (Initial Measurement) 2021 2022 Public Private Representative Representative Representative Input Warrants Warrants Warrants Warrants Warrants Market price of public stock $ 9.54 $ 9.54 $ 9.54 $ 9.79 $ 10.18 Term (in years) 5.00 5.00 5.00 5.00 5.00 Volatility 17.1 % 17.1 % 17.1 % 10.9 % 1.8 % Risk-free rate 0.52 % 0.52 % 0.36 % 1.18 % 4.25 % Dividend yield 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Exercise price $ 11.50 $ 11.50 $ 11.50 $ 11.50 $ 11.50 Effective expiration date 6/26/26 6/26/26 5/11/25 6/23/26 8/09/25 One-touch hurdle $ 18.15 $ — $ — $ — $ — NOTE 10. FAIR VALUE MEASUREMENTS (continued) The following tables presents the changes in the fair value of Level 3 warrant liabilities: Private Placement Public Representative Warrant Liabilities Fair value as of January 1, 2021 $ — $ — $ — $ — Initial measurement on February 11, 2021 3,785,100 5,290,000 36,500 9,111,600 Change in valuation inputs or other assumptions (1,587,300) (1,437,500) 12,500 (3,012,300) Transfer to Level 1 — (3,852,500) — (3,852,500) Transfer to Level 2 (2,197,800) — — (2,197,800) Fair value as of December 31, 2021 $ — $ — $ 49,000 $ 49,000 Representative Warrant Liabilities Fair value as of January 1, 2022 $ 49,000 $ 49,000 Change in fair value (42,500) (42,500) Fair value as of December 31, 2022 $ 6,500 $ 6,500 Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 during the year ended December 31, 2021 was $3,852,500. The estimated fair value of the Private Placement Warrants transferred from a Level 3 measurement to a Level 2 measurement during the year ended December 31, 2021 was $2,197,800. There were no transfers from Level 3 to Level 1 or Level 2 during the year ended December 31, 2022. |
SUBSEQUENT EVENTS_2_3
SUBSEQUENT EVENTS | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2022 | Jun. 30, 2022 | |
SUBSEQUENT EVENTS | Note 18: Subsequent Events On February 10, 2023, Alliance, Adara Acquisition Corp. (“Adara”) and a Merger Sub consummated the closing of the transactions contemplated by a Business Combination Agreement. Pursuant to the terms of the Business Combination Agreement, a business combination of Alliance and Adara was affected by the merger of Merger Sub with and into Alliance (the “Merger”), with Alliance surviving the Merger as a wholly-owned subsidiary of Adara Following the consummation of the Merger on the closing date of the Business Combination, Adara changed its name from Adara Acquisition Corp. to Alliance Entertainment Holding Corporation). of Adara Following the consummation of the Merger on the closing date of the Business Combination, Adara changed its name from Adara Acquisition Corp. to Alliance Entertainment Holding Corporation). | Note 16: Subsequent Events On July 1, 2022 the company completed the acquisition of a toys and collectibles distribution company for an aggregated purchase price of approximately $9.2 million. Due to the limited amount of time since this acquisition, the initial purchase accounting for it is incomplete. Subsequent events have been evaluated through October 17, 2022, the date these financial statements were available to be issued. | |
ADARA ACQUISITION CORP | |||
SUBSEQUENT EVENTS | NOTE 11. SUBSEQUENT EVENTS The Company evaluated subsequent events and transactions that occurred after the consolidated balance sheets date up to the date that the consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements, other than what is disclosed below. On February 10, 2023, the Company completed its Business Combination with Alliance Entertainment Holding Corp, which is described in Note 6 above. |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | |
Dec. 31, 2022 | Jun. 30, 2022 | |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include management’s estimates of doubtful accounts, sales returns, rebates, defective products, and inventory recoverability. On an ongoing basis, management evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. | |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash equivalents include all investments with original maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company complies with ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles and expands disclosure requirements about fair value measurements. Under ASC 820, there are three categories for the classification and measurement of assets and liabilities carried at fair value: Level 1: Valuation based on quoted market prices in active markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Examples include publicly traded equity securities and publicly traded mutual funds that are actively traded on a major exchange or over-the- counter market. Level 2: Valuation based on quoted market prices of investments that are not actively traded or for which certain significant inputs are not observable, either directly or indirectly. Examples include municipal bonds, where fair value is estimated using recently executed transactions, bid asked prices and pricing models that factor in, where applicable, interest rates, bond spreads and volatility. Level 3: Valuation based on inputs that are unobservable and reflect management’s best estimate of what market participants would use as fair value. Examples include limited partnerships and private equity investments. Cash, trade accounts receivable, accounts payable, accrued expenses and other current liabilities estimated fair values approximate carrying amounts as of June 30, 2022 and 2021, based on the short-term nature and maturity of these instruments. The estimated fair value of debt and the credit facility is based on Level 2 inputs, which consist of interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities. As of June 30, 2022, 2021 and 2020 the estimated fair value of the Company’s short and long-term debt approximates it carrying value due to market interest rates charged on such debt or their short-term maturities. The estimated fair value of the tangible and intangible assets acquired, and the liabilities assumed in connection with the acquisition of COKeM were measured using Level 2 and Level 3 inputs. | |
Recent Accounting Standards | Accounting Pronouncements Recently issued and adopted accounting pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which was issued to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This ASU also clarifies and simplifies other aspects of the accounting for income taxes. This update is effective for fiscal years beginning after December 15, 2020, and early adoption is permitted. The company adopted the new standard on July 1, 2021. The adoption of this standard did not have a material impact on the company’s consolidated financials statements. In June 2016, the FASB issued ASU 2016-13, Financials Instruments — Credit Losses (Topic 848): Measurement of Credit Losses on Financials Instruments to amend the current accounting guidance which requires an incurred loss model for recognizing credit losses. Under the new guidance, the Company now measures all expected losses based on a forward-looking expected loss model which reflects probable losses based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted the new standard on July 1, 2020. The adoption of this standard did not have a material impact on the company’s consolidated financial statements. Recently issued but not yet adopted accounting pronouncements In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The new guidance provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. The provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. The Company is currently evaluating the impact that adopting this guidance may have on its consolidated financial statements. In October 2021, The FASB issued ASU No. 2021-08, Accounting for contract Assets and Contract Liabilities from contracts with customers (Topic 805) (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. ASU 2021-08 is effective for annual periods beginning December 15, 2022, including interim periods within those fiscal years. Adoption of SU 2021-08 should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption. The Company is currently evaluating the impact of ASU 2021-08 on its consolidated financial statements. | |
ADARA ACQUISITION CORP | ||
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. | |
Emerging Growth Company | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Emerging Growth Company The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. | |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. The warrants liabilities are the Company’s most significant estimate. Accordingly, the actual results could differ significantly from those estimates. | |
Offering Costs | Offering Costs Offering costs consist of legal, accounting, underwriting fees and other costs incurred through the consolidated balance sheet date that are directly related to the Initial Public Offering. Offering costs associated with the Class A common stock issued were initially charged to temporary equity and then accreted to common stock subject to redemption upon the completion of the Initial Public Offering. Offering costs amounting to $1,442,918 were charged to stockholders’ deficit upon the completion of the Initial Public Offering, and $86,544 of the offering costs was related to the warrant liabilities and charged to the consolidated statements of operations. | |
Class A Common Stock Subject to Possible Redemption | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Class A Common Stock Subject to Possible Redemption The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity”. Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2022 and 2021, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s consolidated balance sheets. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. At December 31, 2022 and 2021, the Class A common stock reflected in the consolidated balance sheets is reconciled in the following table: Gross proceeds $ 115,000,000 Less: Proceeds allocated to Public Warrants (5,290,000) Class A common stock issuance at cost (1,479,418) Plus: Accretion of carrying value to redemption value 7,919,418 Class A common stock subject to possible redemption, December 31, 2021 116,150,000 Plus: Accretion of carrying value to redemption value 990,715 Class A common stock subject to possible redemption, December 31, 2022 $ 117,140,715 | |
Warrant Liabilities | Warrant Liabilities The Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each consolidated balance sheet date until exercised, and any change in fair value is recognized in the consolidated statements of operations. The Private Warrants, Public Warrants, and the Representative Warrants for periods where no observable traded price was available are valued using a lattice model, specifically a binomial lattice. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value for the Public and the Private Warrants as of each relevant date. The Representative Warrants used the binomial lattice model as of each relevant date. | |
Net Income (Loss) per Common Share | Net Income per Common Share The Company complies with accounting and disclosure requirements of Financial Accounting Standards Board (“FASB”) ASC Topic 260, “Earnings Per Share”. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common stock outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 9,870,000 shares of Class A common stock in the aggregate. As of December 31, 2022 and 2021, the Company did not have any other dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted net income (loss) per share of common stock is the same as basic net income (loss) per common share for the periods presented. The following tables reflect the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts): Years Ended December 31, 2022 2021 Class A Class B Class A Class B Basic net income per common share Numerator: Allocation of net income, as adjusted $ 2,354,830 $ 588,708 $ 2,539,677 $ 704,529 Denominator: Basic weighted average shares outstanding 11,500,000 2,875,000 10,208,219 2,831,849 Basic net income per common share $ 0.20 $ 0.20 $ 0.25 $ 0.25 Years Ended December 31, 2022 2021 Class A Class B Class A Class B Diluted net income per common share Numerator: Allocation of net income, as adjusted $ 2,354,830 $ 588,708 $ 2,539,677 $ 704,529 Denominator: Basic weighted average shares outstanding 11,500,000 2,875,000 10,208,219 2,875,000 Basic net income per common share $ 0.20 $ 0.20 $ 0.25 $ 0.25 | |
Concentration of Credit Risk | Concentration of Credit Risk The Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows. | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying consolidated balance sheets, primarily due to their short-term nature, except for the warrant liabilities (see Note 10). NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) | |
Recent Accounting Standards | Recent Accounting Standards In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”), to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. As a smaller reporting company, ASU 2020-06 is effective January 1, 2024 for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows. The Company has not adopted this guidance as of December 31, 2022. Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements. | |
Derivative Financial Instruments | Derivative Financial Instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the consolidated balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the consolidated balance sheet date. |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) - ADARA ACQUISITION CORP | 12 Months Ended |
Dec. 31, 2022 | |
Schedule Of Class A common stocks reflected in the condensed balance sheets are reconciled | At December 31, 2022 and 2021, the Class A common stock reflected in the consolidated balance sheets is reconciled in the following table: Gross proceeds $ 115,000,000 Less: Proceeds allocated to Public Warrants (5,290,000) Class A common stock issuance at cost (1,479,418) Plus: Accretion of carrying value to redemption value 7,919,418 Class A common stock subject to possible redemption, December 31, 2021 116,150,000 Plus: Accretion of carrying value to redemption value 990,715 Class A common stock subject to possible redemption, December 31, 2022 $ 117,140,715 |
Schedule of basic and diluted net income (loss) per common share | Years Ended December 31, 2022 2021 Class A Class B Class A Class B Basic net income per common share Numerator: Allocation of net income, as adjusted $ 2,354,830 $ 588,708 $ 2,539,677 $ 704,529 Denominator: Basic weighted average shares outstanding 11,500,000 2,875,000 10,208,219 2,831,849 Basic net income per common share $ 0.20 $ 0.20 $ 0.25 $ 0.25 Years Ended December 31, 2022 2021 Class A Class B Class A Class B Diluted net income per common share Numerator: Allocation of net income, as adjusted $ 2,354,830 $ 588,708 $ 2,539,677 $ 704,529 Denominator: Basic weighted average shares outstanding 11,500,000 2,875,000 10,208,219 2,875,000 Basic net income per common share $ 0.20 $ 0.20 $ 0.25 $ 0.25 |
INCOME TAXES (Tables)_2
INCOME TAXES (Tables) | 12 Months Ended | |
Dec. 31, 2022 | Jun. 30, 2022 | |
Schedule of net deferred tax assets | Year Ended June 30 (In thousands) 2022 2021 Deferred Tax Assets: Other Deferred (ICDISC) $ 583 $ 245 Net Operating Losses 30 30 Bad Debt 39 83 Total Deferred Tax Assets 652 358 Deferred Tax Liabilities: Inventory (324) (875) Accruals Not Currently Deductible (792) (98) Prepaids (1,004) (1,224) Property and Equipment (1,399) (1,924) Goodwill/Intangibles (2,404) (2,685) Total Deferred Tax Liabilities (5,923) (6,806) Net Deferred Tax Liability $ (5,271) $ (6,448) | |
Income tax provision | Year Ended June 30 (In thousands) 2022 2021 2020 Income Tax Expense (Benefit): Current: Federal $ 7,937 $ 7,201 $ (1,759) State 2,663 2,304 849 Total Current $ 10,599 $ 9,505 $ (910) Deferred: Federal (951) 1,070 1,137 State (226) 216 149 Total Deferred (1,177) 1,286 1,286 Income Tax Expense $ 9,423 $ 10,791 $ 376 | |
Schedule of reconciliation of the federal statutory tax rate to our effective tax rate | Year Ended June 30 (In thousands) 2022 2021 2020 Federal Income Tax Provision at Statutory Rate $ 7,484 21 % $ 9,444 21 % $ 1,205 21 % State Taxes, Net of Federal Benefits 2,437 6 % 2,520 6 % 997 17 % Meals Entertainments — 0 % 6 0 % 18 0 % Foreign Derived Intangible Income (618) -2 % (802) -2 % (598) -10 % NOL Carryback Refund Before AMT — 0 % — 0 % (1,216) -21 % Debt Forgiveness and Interest Income — 0 % — 0 % — 0 % Other 120 -1 % (377) -1 % (30) -1 % Income Tax Expense $ 9,423 24 % $ 10,791 24 % $ 376 6 % | |
ADARA ACQUISITION CORP | ||
Schedule of net deferred tax assets | Years Ended December 2022 2021 Deferred tax assets Net operating loss carryforward $ — $ 39,841 Start-up/organization expenses 686,083 181,309 Total deferred tax assets 686,083 221,150 Valuation allowance (686,083) (221,150) Deferred tax assets, net of allowance $ — $ — | |
Income tax provision | Years Ended December 2022 2021 Federal Current $ 264,485 $ — Deferred (464,933) (221,150) State Current — — Deferred — — Change in valuation allowance 464,933 221,150 Income tax provision $ 264,485 $ — | |
Schedule of reconciliation of the federal statutory tax rate to our effective tax rate | Years Ended December 2022 2021 Statutory federal income tax rate 21.0 % 21.0 % State taxes, net of federal tax benefit 0.0 % 0.0 % Deferred tax liability change in rate 0.0 % 0.0 % Change in fair value of warrant liabilities (27.3) % (27.8) % Change in valuation allowance 14.5 % 6.8 % Income tax provision 8.2 % — % |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) - ADARA ACQUISITION CORP | 12 Months Ended |
Dec. 31, 2022 | |
Schedule of company's assets that are measured at fair value on a recurring basis | December 31, December 31, Description Level 2022 2021 Assets: Marketable Securities held in Trust Account – U.S. Treasury Securities Money Market Fund 1 $ 117,809,450 $ 116,160,281 Liabilities: Warrant Liabilities – Public Warrants 1 $ 402,500 $ 2,817,500 Warrant Liabilities – Private Placement Warrants 2 284,900 1,994,300 Warrant Liabilities – Representative Warrants 3 6,500 49,000 |
Schedule of quantitative information regarding Level 3 fair value measurements inputs | February 11, 2021 December 31, December 31, (Initial Measurement) 2021 2022 Public Private Representative Representative Representative Input Warrants Warrants Warrants Warrants Warrants Market price of public stock $ 9.54 $ 9.54 $ 9.54 $ 9.79 $ 10.18 Term (in years) 5.00 5.00 5.00 5.00 5.00 Volatility 17.1 % 17.1 % 17.1 % 10.9 % 1.8 % Risk-free rate 0.52 % 0.52 % 0.36 % 1.18 % 4.25 % Dividend yield 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Exercise price $ 11.50 $ 11.50 $ 11.50 $ 11.50 $ 11.50 Effective expiration date 6/26/26 6/26/26 5/11/25 6/23/26 8/09/25 One-touch hurdle $ 18.15 $ — $ — $ — $ — |
Schedule of change in the fair value of the warrant liabilities | The following tables presents the changes in the fair value of Level 3 warrant liabilities: Private Placement Public Representative Warrant Liabilities Fair value as of January 1, 2021 $ — $ — $ — $ — Initial measurement on February 11, 2021 3,785,100 5,290,000 36,500 9,111,600 Change in valuation inputs or other assumptions (1,587,300) (1,437,500) 12,500 (3,012,300) Transfer to Level 1 — (3,852,500) — (3,852,500) Transfer to Level 2 (2,197,800) — — (2,197,800) Fair value as of December 31, 2021 $ — $ — $ 49,000 $ 49,000 Representative Warrant Liabilities Fair value as of January 1, 2022 $ 49,000 $ 49,000 Change in fair value (42,500) (42,500) Fair value as of December 31, 2022 $ 6,500 $ 6,500 |
DESCRIPTION OF ORGANIZATION A_2
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (Details) - USD ($) | 12 Months Ended | |||||
Feb. 11, 2021 | Aug. 11, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Common stock, shares issued | 957 | 957 | 957 | |||
Common stock, shares outstanding | 900 | 900 | 900 | |||
Private Placement | ||||||
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Sale of Private Placement Warrants (in shares) | 4,120,000 | |||||
ADARA ACQUISITION CORP | ||||||
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Cash | $ 17,956 | |||||
Working capital deficit | 1,720,465 | |||||
Proceeds from sale of Private Placements Warrants | $ 4,120,000 | |||||
Transaction Costs | 1,529,462 | |||||
Underwriting fees | 1,000,000 | |||||
Other offering costs | $ 529,462 | |||||
Payments for investment of cash in Trust Account | $ 116,150,000 | |||||
ADARA ACQUISITION CORP | Adara Common Stock | ||||||
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Redemption price | $ 10.22 | |||||
Aggregate redemption amount | $ 116,581,703 | |||||
Common stock, shares issued | 167,170 | |||||
Common stock, shares outstanding | 167,170 | |||||
ADARA ACQUISITION CORP | Alliance Entertainment Holding Corporation | ||||||
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Business combination shares issued | 11,332,830 | |||||
Business acquisition, share price | $ 0.0001 | |||||
ADARA ACQUISITION CORP | Alliance Entertainment Holding Corporation | Adara Common Stock | ||||||
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Percentage of business combination shares with redemption rights | 99.10% | |||||
Aggregate redemption amount | $ 1,719,690.75 | |||||
ADARA ACQUISITION CORP | Alliance Entertainment Holding Corporation | Company Common Stock | ||||||
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Business combination shares issued | 47,500,000 | |||||
ADARA ACQUISITION CORP | Alliance Entertainment Holding Corporation | Company Class E Common Stock | ||||||
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Business combination shares issued | 60,000,000 | |||||
ADARA ACQUISITION CORP | Initial Public Offering | ||||||
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Sale of units, net of underwriting discounts (in shares) | 11,500,000 | 11,500,000 | ||||
Purchase price, per unit | $ 10.10 | $ 10 | ||||
Gross proceeds from sale of units | $ 115,000,000 | |||||
Payments for investment of cash in Trust Account | $ 116,150,000 | |||||
Investments maximum maturity term | 185 days | |||||
ADARA ACQUISITION CORP | Private Placement | ||||||
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Price of warrant (in dollars per share) | $ 1 | |||||
Proceeds from sale of Private Placements Warrants | $ 4,120,000 | |||||
ADARA ACQUISITION CORP | Over-allotment option | ||||||
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | ||||||
Sale of units, net of underwriting discounts (in shares) | 1,500,000 | 1,500,000 | ||||
Purchase price, per unit | $ 10 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - ADARA ACQUISITION CORP - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Offering costs were related to the warrant liabilities | $ 1,442,918 | |
Transaction costs incurred in connection with IPO | $ 86,544 | $ 86,544 |
Number of shares excluded from the calculation of income per share because their inclusion would be anti-dilutive | 9,870,000 |
SUMMARY OF SIGNIFICANT ACCOU_13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - USD ($) | 6 Months Ended | 12 Months Ended | |||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Jun. 30, 2020 | |
Effective tax rate (as a percent) | 27% | 26% | 24% | 24% | 6% | ||
Statutory tax rate (as a percent) | 21% | 21% | 21% | ||||
Unrecognized tax benefits | $ 0 | $ 0 | $ 0 | ||||
Unrecognized tax benefits accrued for interest and penalties | $ 0 | ||||||
ADARA ACQUISITION CORP | |||||||
Effective tax rate (as a percent) | 8.20% | 0% | |||||
Statutory tax rate (as a percent) | 21% | 21% |
SUMMARY OF SIGNIFICANT ACCOU_14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Basic and diluted net income (loss) per common share (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Jun. 30, 2020 | |
Denominator: | |||||||||
Basic weighted average shares outstanding | 900 | 900 | 900 | 900 | 900 | 900 | 900 | ||
Diluted weighted average shares outstanding | 900 | 900 | 900 | 900 | 900 | 900 | 900 | ||
Net Income per Share - Basic | $ (17.24) | $ 26.50 | $ (25.58) | $ 32.81 | $ 31.80 | $ 37.98 | $ 5.96 | ||
Net Income per Share - Diluted | $ (17.24) | $ 26.50 | $ (25.58) | $ 32.81 | $ 31.80 | $ 37.98 | $ 5.96 | ||
ADARA ACQUISITION CORP | Common Class A [Member] | |||||||||
Numerator: | |||||||||
Allocation of net income, as adjusted (Basic) | $ 2,354,830 | $ 2,539,677 | |||||||
Allocation of net income, as adjusted (Diluted) | $ 2,354,830 | $ 2,539,677 | |||||||
Denominator: | |||||||||
Basic weighted average shares outstanding | 11,500,000 | 10,208,219 | |||||||
Diluted weighted average shares outstanding | 11,500,000 | 10,208,219 | |||||||
Net Income per Share - Basic | $ 0.20 | $ 0.25 | |||||||
Net Income per Share - Diluted | $ 0.20 | $ 0.25 | |||||||
ADARA ACQUISITION CORP | Class B common Stock | |||||||||
Numerator: | |||||||||
Allocation of net income, as adjusted (Basic) | $ 588,708 | $ 704,529 | |||||||
Allocation of net income, as adjusted (Diluted) | $ 588,708 | $ 704,529 | |||||||
Denominator: | |||||||||
Basic weighted average shares outstanding | 2,875,000 | 2,831,849 | |||||||
Diluted weighted average shares outstanding | 2,875,000 | 2,875,000 | |||||||
Net Income per Share - Basic | $ 0.20 | $ 0.25 | |||||||
Net Income per Share - Diluted | $ 0.20 | $ 0.25 |
SUMMARY OF SIGNIFICANT ACCOU_15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Common class A subject to redemption (Details) - ADARA ACQUISITION CORP - Class A common stock subject to possible redemption - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Gross proceeds | $ 115,000,000 | |
Proceeds allocated to Public Warrants | (5,290,000) | |
Class A common stock issuance at cost | (1,479,418) | |
Accretion of carrying value to redemption value | $ 990,715 | 7,919,418 |
Class A common stock subject to possible redemption | $ 117,140,715 | $ 116,150,000 |
INITIAL PUBLIC OFFERING (Detail
INITIAL PUBLIC OFFERING (Details) - ADARA ACQUISITION CORP - $ / shares | Feb. 11, 2021 | Aug. 11, 2020 |
Initial Public Offering | ||
INITIAL PUBLIC OFFERING | ||
Number of units sold | 11,500,000 | 11,500,000 |
Purchase price, per unit | $ 10.10 | $ 10 |
Initial Public Offering | Class A common Stock | ||
INITIAL PUBLIC OFFERING | ||
Number of shares in a unit | 1 | |
Initial Public Offering | Public Warrants | ||
INITIAL PUBLIC OFFERING | ||
Number of warrants in a unit | 0.5 | |
Initial Public Offering | Public Warrants | Class A common Stock | ||
INITIAL PUBLIC OFFERING | ||
Number of shares issuable per warrant | 1 | |
Exercise price of warrants | $ 11.50 | |
Over-allotment option | ||
INITIAL PUBLIC OFFERING | ||
Number of units sold | 1,500,000 | 1,500,000 |
Purchase price, per unit | $ 10 |
PRIVATE PLACEMENT (Details)
PRIVATE PLACEMENT (Details) - ADARA ACQUISITION CORP - USD ($) | 12 Months Ended | ||
Aug. 11, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | |
PRIVATE PLACEMENT | |||
Aggregate purchase price | $ 4,120,000 | ||
Private Placement | |||
PRIVATE PLACEMENT | |||
Price of warrant (in dollars per share) | $ 1 | ||
Aggregate purchase price | $ 4,120,000 | ||
Private Placement | Private Placement Warrants | |||
PRIVATE PLACEMENT | |||
Number of shares per warrant | 4,120,000 | ||
Price of warrant (in dollars per share) | $ 1 | ||
Number of shares in a unit | 1 | ||
Aggregate purchase price | $ 4,120,000 | ||
Private Placement | Private Placement Warrants | Class A common Stock | |||
PRIVATE PLACEMENT | |||
Exercise price of warrant (in dollars per share) | $ 11.50 |
RELATED PARTY TRANSACTIONS - Fo
RELATED PARTY TRANSACTIONS - Founder Shares (Details) - ADARA ACQUISITION CORP - Sponsor - Class B common Stock - USD ($) | 1 Months Ended | 12 Months Ended |
Aug. 31, 2020 | Dec. 31, 2022 | |
RELATED PARTY TRANSACTIONS | ||
Stock price trigger to transfer, assign or sell any shares or warrants of the company, after the completion of the initial business combination (in dollars per share) | $ 12 | |
Threshold trading days for transfer, assign or sale of shares or warrants, after the completion of the initial business combination | 20 days | |
Threshold consecutive trading days for transfer, assign or sale of shares or warrants, after the completion of the initial business combination | 30 days | |
Threshold period after the business combination in which the 20 trading days within any 30 trading day period commences | 150 days | |
Founder shares | ||
RELATED PARTY TRANSACTIONS | ||
Number of shares issued | 2,875,000 | |
Aggregate price of shares | $ 25,000 | |
Shares subject to forfeiture | 375,000 | |
Percentage of issued and outstanding shares after the Initial Public Offering collectively held by initial stockholders | 20% |
RELATED PARTY TRANSACTIONS - Ad
RELATED PARTY TRANSACTIONS - Additional Information (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 22, 2022 | Aug. 05, 2020 | |
RELATED PARTY TRANSACTIONS | ||||||||
Expenses incurred and paid | $ 1,400,000 | $ 2,800,000 | $ 2,800,000 | $ 6,300,000 | ||||
ADARA ACQUISITION CORP | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Advance from related party | 30,582 | 30,582 | $ 30,582 | |||||
Amount outstanding under the promissory note | 471,599 | 471,599 | 471,599 | |||||
ADARA ACQUISITION CORP | Blystone & Donaldson, LLC | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Advance from related party | 30,582 | 30,582 | 30,582 | |||||
ADARA ACQUISITION CORP | Promissory Note with Related Party | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Maximum borrowing capacity of related party promissory note | $ 600,000 | |||||||
Outstanding balance | 0 | 0 | $ 0 | |||||
ADARA ACQUISITION CORP | Promissory Note with Related Party | Thomas Finke, LLC | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Maximum borrowing capacity of related party promissory note | $ 250,000 | |||||||
Amount outstanding under the promissory note | 221,599 | 221,599 | 221,599 | |||||
ADARA ACQUISITION CORP | Promissory Note with Related Party | Blystone & Donaldson, LLC | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Maximum borrowing capacity of related party promissory note | $ 250,000 | |||||||
Amount outstanding under the promissory note | 250,000 | 250,000 | 250,000 | |||||
ADARA ACQUISITION CORP | Administrative Support Agreement | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Expenses per month | 10,000 | |||||||
Expenses incurred and paid | 50,000 | 105,000 | ||||||
ADARA ACQUISITION CORP | Related Party Loans | Working capital loans warrant | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Outstanding balance | 0 | $ 0 | 0 | $ 0 | 0 | $ 0 | ||
Loan conversion agreement warrant | $ 1,500,000 | $ 1,500,000 | $ 1,500,000 | |||||
Price of warrant (in dollars per share) | $ 1 | $ 1 | $ 1 |
COMMITMENTS AND CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Details) - ADARA ACQUISITION CORP | Jun. 22, 2022 USD ($) shares | Mar. 17, 2022 | Dec. 31, 2022 item |
COMMITMENTS AND CONTINGENCIES | |||
Maximum number of demands for registration of securities | item | 3 | ||
Business Combination Agreement | |||
COMMITMENTS AND CONTINGENCIES | |||
Fraction round up for Combined Company Common Stock | 0.5 | ||
Cash settlement for fractional shares | $ | $ 0 | ||
Escrow period for Contingent Consideration Shares | 10 years | ||
Advisory fees as percentage of funds | 0.035% | ||
Business Combination Agreement | Triggering event I prior to the five-year anniversary of the closing | |||
COMMITMENTS AND CONTINGENCIES | |||
Contingent Consideration Shares earned upon on the occurrence of triggering event | 20,000,000 | ||
Business Combination Agreement | Triggering event II prior to the seven-year anniversary of the closing | |||
COMMITMENTS AND CONTINGENCIES | |||
Contingent Consideration Shares earned upon on the occurrence of triggering event | 20,000,000 | ||
Business Combination Agreement | Triggering event III prior to the ten-year anniversary of the closing | |||
COMMITMENTS AND CONTINGENCIES | |||
Contingent Consideration Shares earned upon on the occurrence of triggering event | 20,000,000 |
STOCKHOLDERS' DEFICIT- Preferre
STOCKHOLDERS' DEFICIT- Preferred Stock Shares (Details) - ADARA ACQUISITION CORP - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
Preferred shares, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, par value (per share) | $ 0.0001 | $ 0.0001 |
Preferred shares, shares issued | 0 | 0 |
Preferred shares, shares outstanding | 0 | 0 |
STOCKHOLDERS' DEFICIT - Common
STOCKHOLDERS' DEFICIT - Common Stock Shares (Details) | 12 Months Ended | |||
Dec. 31, 2022 Vote $ / shares shares | Jun. 30, 2022 shares | Dec. 31, 2021 Vote $ / shares shares | Jun. 30, 2021 shares | |
STOCKHOLDERS' DEFICIT | ||||
Common stock, shares authorized | 1,000 | 1,000 | 1,000 | |
Common stock, shares issued | 957 | 957 | 957 | |
Common stock, shares outstanding | 900 | 900 | 900 | |
ADARA ACQUISITION CORP | Class A common Stock | ||||
STOCKHOLDERS' DEFICIT | ||||
Common stock, shares authorized | 100,000,000 | 100,000,000 | ||
Common shares, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | ||
Common shares, votes per share | Vote | 1 | 1 | ||
ADARA ACQUISITION CORP | Class A common stock subject to possible redemption | ||||
STOCKHOLDERS' DEFICIT | ||||
Temporary equity common shares issued | 11,500,000 | 11,500,000 | ||
Temporary equity, shares outstanding | 11,500,000 | 11,500,000 | ||
ADARA ACQUISITION CORP | Class B common Stock | ||||
STOCKHOLDERS' DEFICIT | ||||
Common stock, shares authorized | 10,000,000 | 10,000,000 | ||
Common shares, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | ||
Common shares, votes per share | Vote | 1 | 1 | ||
Common stock, shares issued | 2,875,000 | 2,875,000 | ||
Common stock, shares outstanding | 2,875,000 | 2,875,000 | ||
Ratio to be applied to the stock in the conversion | 20 |
WARRANT LIABILITIES (Details)
WARRANT LIABILITIES (Details) - ADARA ACQUISITION CORP | 12 Months Ended | |
Dec. 31, 2022 D $ / shares shares | Dec. 31, 2021 shares | |
Private Placement Warrants | ||
WARRANT LIABILITIES | ||
Warrants outstanding | 4,120,000 | 4,120,000 |
Restrictions on transfer period of time after business combination completion | 30 days | |
Public Warrants | ||
WARRANT LIABILITIES | ||
Warrants outstanding | 5,750,000 | 5,750,000 |
Warrant exercise period condition one | 30 days | |
Warrant exercise period condition two | 12 months | |
Public Warrants expiration term | 5 years | |
Maximum period after business combination in which to file registration statement | 15 days | |
Period of time within which registration statement is expected to become effective | 60 days | |
Redemption price per public warrant (in dollars per share) | $ / shares | $ 0.01 | |
Minimum threshold written notice period for redemption of public warrants | 30 days | |
Warrant redemption condition minimum share price | $ / shares | $ 18 | |
Number of trading days on which fair market value of shares is reported | D | 20 | |
Percentage of gross new proceeds to total equity proceeds used to measure dilution of warrant | 60% | |
Trading period after business combination used to measure dilution of warrant | D | 20 | |
Warrant exercise price adjustment multiple | 9.20 | |
Adjustment one of redemption price of stock based on market value and newly issued price (as a percent) | 115% | |
Multiplier used in calculating warrant exercise price | 180% | |
Threshold number of business days before sending notice of redemption to warrant holders | D | 3 | |
Warrant redemption price adjustment multiple | 18 | |
Public Warrants | Class A common Stock | ||
WARRANT LIABILITIES | ||
Redemption price per public warrant (in dollars per share) | $ / shares | $ 9.20 | |
Period of time after which warrant holder may do cashless exercise | 30 days | |
Representative Warrants | ||
WARRANT LIABILITIES | ||
Warrants outstanding | 50,000 | 50,000 |
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 50,000 | |
Number of shares in a unit | 1 | |
Share price trigger used to measure dilution of warrant | $ / shares | $ 11.50 | |
Redemption period | 30 days | |
Lock up period | 180 days |
INCOME TAXES - Deferred tax ass
INCOME TAXES - Deferred tax assets, net (Details) - USD ($) | Dec. 31, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | Jun. 30, 2021 |
Deferred tax assets | ||||
Net operating loss carryforward | $ 30,000 | $ 30,000 | ||
Total deferred tax assets | $ 652,000 | $ 358,000 | ||
ADARA ACQUISITION CORP | ||||
Deferred tax assets | ||||
Net operating loss carryforward | $ 39,841 | |||
Startup/Organization Expenses | $ 686,083 | 181,309 | ||
Total deferred tax assets | 686,083 | 221,150 | ||
Valuation allowance | $ (686,083) | $ (221,150) |
INCOME TAXES - Income tax provi
INCOME TAXES - Income tax provision (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Jun. 30, 2020 | |
Federal | |||||||||
Current | $ 7,937,000 | $ 7,201,000 | $ (1,759,000) | ||||||
Deferred | (951,000) | 1,070,000 | 1,137,000 | ||||||
State | |||||||||
Current | 2,663,000 | 2,304,000 | 849,000 | ||||||
Deferred | (226,000) | 216,000 | 149,000 | ||||||
Income Tax (Benefit) Expense | $ (5,878,000) | $ 7,533,000 | $ (8,516,000) | $ 9,324,000 | $ 9,423,000 | $ 10,791,000 | $ 376,000 | ||
ADARA ACQUISITION CORP | |||||||||
Federal | |||||||||
Current | $ 264,485 | ||||||||
Deferred | (464,933) | $ (221,150) | |||||||
State | |||||||||
Change in valuation allowance | 464,933 | 221,150 | |||||||
Income Tax (Benefit) Expense | 264,485 | ||||||||
Net operating loss carryovers | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |
INCOME TAXES - Reconciliation o
INCOME TAXES - Reconciliation of the federal statutory tax rate to our effective tax rate (Details) | 6 Months Ended | 12 Months Ended | |||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Jun. 30, 2020 | |
Statutory tax rate (as a percent) | 21% | 21% | 21% | ||||
State taxes, net of federal tax benefit | 6% | 6% | 6% | 17% | |||
Income Tax Expense | 27% | 26% | 24% | 24% | 6% | ||
ADARA ACQUISITION CORP | |||||||
Statutory tax rate (as a percent) | 21% | 21% | |||||
State taxes, net of federal tax benefit | 0% | 0% | |||||
Deferred tax liability change in rate | 0% | 0% | |||||
Change in fair value of warrants liabilities | (27.30%) | (27.80%) | |||||
Change in valuation allowance | 14.50% | 6.80% | |||||
Income Tax Expense | 8.20% | 0% |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - ADARA ACQUISITION CORP - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Assets: | |||
Marketable securities held in Trust Account | $ 117,809,450 | $ 116,160,281 | |
Public Warrants | |||
Liabilities: | |||
Warrant Liabilities | $ 0 | ||
Private Placement Warrants | |||
Liabilities: | |||
Warrant Liabilities | 0 | ||
Representative Warrants | |||
Liabilities: | |||
Warrant Liabilities | 6,500 | 49,000 | $ 0 |
Level 1 | Recurring | Public Warrants | |||
Liabilities: | |||
Warrant Liabilities | 402,500 | 2,817,500 | |
Level 1 | U.S. Treasury Securities | Recurring | |||
Assets: | |||
Marketable securities held in Trust Account | 117,809,450 | 116,160,281 | |
Level 2 | Recurring | Private Placement Warrants | |||
Liabilities: | |||
Warrant Liabilities | 284,900 | 1,994,300 | |
Level 3 | Recurring | Representative Warrants | |||
Liabilities: | |||
Warrant Liabilities | $ 6,500 | $ 49,000 |
FAIR VALUE MEASUREMENTS - Level
FAIR VALUE MEASUREMENTS - Level 3 Fair Value Measurements Inputs (Details) - ADARA ACQUISITION CORP | Dec. 31, 2022 Y $ / shares | Dec. 31, 2021 Y $ / shares | Feb. 11, 2021 Y $ / shares |
Public Warrants | Market price of public stock | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 9.54 | ||
Public Warrants | Term (in years) | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | Y | 5 | ||
Public Warrants | Volatility | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 0.171 | ||
Public Warrants | Risk-free rate | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 0.0052 | ||
Public Warrants | Dividend Yield | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 0 | ||
Public Warrants | Exercise price | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 11.50 | ||
Public Warrants | One-touch hurdle | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 18.15 | ||
Private Placement Warrants | Market price of public stock | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 9.54 | ||
Private Placement Warrants | Term (in years) | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | Y | 5 | ||
Private Placement Warrants | Volatility | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 0.171 | ||
Private Placement Warrants | Risk-free rate | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 0.0052 | ||
Private Placement Warrants | Dividend Yield | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 0 | ||
Private Placement Warrants | Exercise price | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 11.50 | ||
Representative Warrants | Market price of public stock | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 10.18 | 9.79 | 9.54 |
Representative Warrants | Term (in years) | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | Y | 5 | 5 | 5 |
Representative Warrants | Volatility | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 0.018 | 0.109 | 0.171 |
Representative Warrants | Risk-free rate | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 0.0425 | 0.0118 | 0.0036 |
Representative Warrants | Dividend Yield | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 0 | 0 | 0 |
Representative Warrants | Exercise price | |||
FAIR VALUE MEASUREMENTS | |||
Derivative liability, measurement input | 11.50 | 11.50 | 11.50 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Change in the Fair Value of the Warrant Liabilities (Details) - ADARA ACQUISITION CORP - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Change in valuation inputs or other assumptions | $ (4,166,900) | $ (4,297,300) |
Private Placement Warrants | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Fair value - Beginning | 0 | |
Initial measurement on February 11th, 2021 | 3,785,100 | |
Change in valuation inputs or other assumptions | (1,587,300) | |
Transfer to Level 2 | (2,197,800) | |
Public Warrants | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Fair value - Beginning | 0 | |
Initial measurement on February 11th, 2021 | 5,290,000 | |
Change in valuation inputs or other assumptions | (1,437,500) | |
Transfer to Level 1 | (3,852,500) | |
Representative Warrants | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Fair value - Beginning | 49,000 | 0 |
Initial measurement on February 11th, 2021 | 36,500 | |
Change in valuation inputs or other assumptions | 12,500 | |
Change in fair value | (42,500) | |
Fair value - Ending | 6,500 | 49,000 |
Warrant Liabilities | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Fair value - Beginning | 49,000 | 0 |
Initial measurement on February 11th, 2021 | 9,111,600 | |
Change in valuation inputs or other assumptions | (3,012,300) | |
Transfer to Level 1 | (3,852,500) | |
Transfer to Level 2 | (2,197,800) | |
Change in fair value | (42,500) | |
Fair value - Ending | $ 6,500 | $ 49,000 |
FAIR VALUE MEASUREMENTS - Addit
FAIR VALUE MEASUREMENTS - Additional information (Details) - ADARA ACQUISITION CORP - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
FAIR VALUE MEASUREMENTS | ||
Transfers out of Level 3 | $ 0 | |
Public Warrants | ||
FAIR VALUE MEASUREMENTS | ||
Transfer to Level 1 | $ 3,852,500 | |
Private Placement Warrants | ||
FAIR VALUE MEASUREMENTS | ||
Transfer to Level 2 | $ 2,197,800 |