Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
1.GENERAL
GrowGeneration Corp (the “Company”, "we", or "our") is the largest chain of hydroponic garden centers in North America and is a leading marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting, ventilation systems and accessories for hydroponic gardening. Currently, the Company owns and operates a chain of fifty-eight (58) retail hydroponic/gardening stores across 12 states, an online e-commerce platform, and proprietary businesses that market grow solutions through our platforms and other wholesale customers. The Company’s plan is to continue to acquire, open and operate hydroponic/gardening stores and related businesses throughout the United States.
Basis of Presentation
The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The results of operations for our interim periods are not necessarily indicative of results for the full fiscal year.
All amounts included in the accompanying footnotes to the consolidated financial statements, except per share data, is in thousands (000).
Risk and Uncertainties
The COVID-19 pandemic has created significant public health concerns as well as economic disruption, uncertainty, and volatility which may negatively affect our business operations. As a result, if the pandemic persists or worsens, our accounting estimates and assumptions could be impacted in subsequent interim reports and upon final determination at year-end, and it is reasonably possible such changes could be significant (although the potential effects cannot be estimated at this time). The Company has experienced minimal business interruption as a result of the COVID-19 pandemic. We have been deemed an “essential” business by state and local authorities in the areas in which we operate and as such have not been subject to business closures. The COVID-19 pandemic to date has resulted in temporary supply chain delays of our inventory. As events surrounding the COVID-19 pandemic can change rapidly we cannot predict how it may disrupt our operations or the full extent of the disruption.
New Accounting Policies Adopted During the Six Months Ended June 30, 2021
Securities
The Company classifies its commercial paper and debt securities as marketable securities. Marketable securities with available fair market values are stated at fair market values. Unrealized gains and unrealized losses on these marketable securities are reported, net of applicable income taxes, in other comprehensive income. Realized gains or losses on sale of marketable securities are computed using primarily the moving average cost and reported in net income. For the six months ended June 30, 2021, there were no significant unrealized gains or losses recorded.
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
2.FAIR VALUE MEASUREMENTS
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
•Level 1—Quoted prices in active markets for identical assets or liabilities.
•Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The carrying amounts of cash and cash equivalents, accounts receivable, available for sales securities, accounts payable and all other current liabilities approximate fair values due to their short-term nature. The fair value of notes receivable approximates the outstanding balance and are reviewed for impairment at least annually. The fair value of impaired notes receivable is determined based on estimated future payments discounted back to present value using the notes effective interest rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
|
|
June 30,
2021
|
|
December 31,
2020
|
Cash equivalents
|
2
|
|
$
|
67,155
|
|
|
$
|
177,912
|
|
Marketable securities
|
2
|
|
$
|
57,357
|
|
|
$
|
—
|
|
Notes receivable
|
2
|
|
$
|
5,906
|
|
|
$
|
2,937
|
|
Notes receivable impaired
|
3
|
|
$
|
—
|
|
|
$
|
875
|
|
Accounts receivable
|
2
|
|
$
|
4,377
|
|
|
$
|
3,901
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
3.RECENT ACCOUNTING PRONOUNCEMENTS
New Accounting Pronouncements
From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification ("ASC") are communicated through issuance of an Accounting Standards Update (“ASU”). We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements. We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position or results of operations.
As an emerging growth company, the Company is permitted to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies. The Company has chosen to take advantage of the extended transition period for complying with new or revised accounting standards.
Refer to Note 3 to the Consolidated Financial Statements reported in Form 10-K for the year ended December 31, 2020 for recently issued accounting pronouncements that are pending adoption.
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this new guidance, effective January 1, 2020, did not have a material impact on our Financial Statements.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The standard was effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those periods. There was no material impact on our consolidated financial statements and related disclosures as a result of adopting this standard.
4.REVENUE RECOGNITION
The following table disaggregates revenue by source:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2021
|
|
Three Months Ended
June 30, 2020
|
|
Six Months Ended June 30, 2021
|
|
Six Months Ended June 30, 2020
|
Sales at company owned stores
|
$
|
108,911
|
|
|
$
|
40,128
|
|
|
$
|
190,138
|
|
|
$
|
71,912
|
|
Distribution
|
4,988
|
|
|
—
|
|
|
7,823
|
|
|
—
|
|
E-commerce sales
|
11,986
|
|
|
3,323
|
|
|
17,946
|
|
|
4,521
|
|
Total Revenues
|
$
|
125,885
|
|
|
$
|
43,451
|
|
|
$
|
215,907
|
|
|
$
|
76,433
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
4.REVENUE RECOGNITION, continued
The opening and closing balances of the Company’s customer trade receivables and customer deposit liability are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
Customer Deposit Liability
|
Opening balance, January 1, 2021
|
$
|
7,713
|
|
|
$
|
5,155
|
|
Closing balance, June 30, 2021
|
10,283
|
|
|
6,793
|
|
Increase (decrease)
|
$
|
2,570
|
|
|
$
|
1,638
|
|
|
|
|
|
Opening balance, January 1, 2020
|
$
|
4,455
|
|
|
$
|
2,504
|
|
Closing balance, June 30, 2020
|
3,609
|
|
|
2,335
|
|
Increase (decrease)
|
$
|
(846)
|
|
|
$
|
(169)
|
|
Of the total amount of customer deposit liability as of January 1, 2021, $2,873 was reported as revenue during the six months ended June 30, 2021. Of the total amount of customer deposit liability as of January 1, 2020, $1,599 was reported as revenue during the six months ended June 30, 2020.
The Company also has customer trade receivables under longer term financing arrangements at interest rates ranging from 9% to 12% with repayment terms ranging for 12 to 18 months. Long term trade receivables as of June 30, 2021 and December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Note receivable
|
$
|
6,172
|
|
|
$
|
4,104
|
|
Allowance for losses
|
(266)
|
|
|
(292)
|
|
Notes receivable, net
|
$
|
5,906
|
|
|
3,812
|
|
The following table summarizes changes in notes receivable balances that have been deemed impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Note receivable
|
$
|
266
|
|
|
$
|
1,166
|
|
Allowance for losses
|
(266)
|
|
|
(292)
|
|
Notes receivable, net
|
$
|
—
|
|
|
874
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
5.INVESTMENTS
Marketable securities have maturities of less than one year as of June 30, 2021. There were no significant realized or unrealized gains or losses for the six months ended June 30, 2021.
The components of investments, available for sales securities, as of June 30, 2021 were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Level
|
|
Adjusted Cost Basis
|
|
Unrealized Gain (Loss)
|
|
Recorded
Basis
|
Commercial paper
|
Level 2
|
|
$
|
9,994
|
|
|
$
|
—
|
|
|
$
|
9,994
|
|
Corporate notes and bonds
|
Level 2
|
|
47,363
|
|
|
—
|
|
|
47,363
|
|
Marketable securities
|
|
|
$
|
57,357
|
|
|
$
|
—
|
|
|
$
|
57,357
|
|
6.NOTES RECEIVABLE
Notes receivable include customer trade receivables under long term financing arrangements and other note receivables not associated with customer transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Trade receivables under longer term financing arrangements
|
$
|
5,906
|
|
|
$
|
3,812
|
|
Note receivable, non-customer related
|
—
|
|
|
—
|
|
Subtotal
|
5,906
|
|
|
3,812
|
|
Less, current portion
|
(4,535)
|
|
|
(2,612)
|
|
Notes receivable, noncurrent
|
$
|
1,371
|
|
|
1,200
|
|
7.PROPERTY AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Vehicles
|
$
|
2,256
|
|
|
$
|
1,342
|
|
Building
|
1,107
|
|
|
477
|
|
Leasehold improvements
|
3,381
|
|
|
1,988
|
|
Furniture, fixtures and equipment
|
8,223
|
|
|
5,739
|
|
Total property and equipment, gross
|
14,967
|
|
|
9,546
|
|
Accumulated depreciation and amortization
|
(4,512)
|
|
|
(3,071)
|
|
Property and equipment, net
|
$
|
10,455
|
|
|
$
|
6,475
|
|
Depreciation expense for the three and six months ended June 30, 2021 was $782 thousand and $1.4 million, respectively. Depreciation expense for the three and six months ended June 30, 2020 was $374 thousand and $705 thousand, respectively.
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
8.GOODWILL AND INTANGIBLE ASSETS
The changes in goodwill are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31,
2020
|
Balance, beginning of period
|
$
|
62,951
|
|
|
$
|
17,799
|
|
Goodwill additions and measurement period adjustments
|
45,789
|
|
|
45,152
|
|
Balance, end of period
|
$
|
108,740
|
|
|
$
|
62,951
|
|
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
Tradenames
|
$
|
24,184
|
|
|
$
|
(2,298)
|
|
|
$
|
13,923
|
|
|
$
|
(398)
|
|
Patents, trademarks
|
100
|
|
|
(35)
|
|
|
100
|
|
|
(9)
|
|
Customer relationships
|
18,372
|
|
|
(1,260)
|
|
|
6,297
|
|
|
(138)
|
|
Non-competes
|
1,115
|
|
|
(118)
|
|
|
796
|
|
|
(22)
|
|
Intellectual property
|
2,065
|
|
|
(138)
|
|
|
—
|
|
|
—
|
|
Capitalized software
|
2,762
|
|
|
(470)
|
|
|
1,163
|
|
|
(222)
|
|
|
$
|
48,598
|
|
|
$
|
(4,319)
|
|
|
$
|
22,279
|
|
|
$
|
(789)
|
|
Amortization expense for the six months ended June 30, 2021 and 2020 was $2,135 and $3,530, respectively.
|
|
|
|
|
|
Future amortization expense is as follows:
|
|
2021, remainder
|
$
|
4,714
|
|
2022
|
9,525
|
|
2023
|
9,164
|
|
2024
|
8,817
|
|
2025
|
8,283
|
|
Thereafter
|
3,776
|
|
Total
|
$
|
44,279
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
9.LONG-TERM DEBT
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Long term debt is as follows:
|
|
|
|
Wells Fargo Equipment Finance, interest at 3.5% per annum, payable in monthly installments of $518.96 beginning April 2016 through March 2021, secured by warehouse equipment with a book value of $25
|
$
|
—
|
|
|
$
|
1
|
|
|
|
|
|
Notes payable issued in connection with seller financing of assets acquired, interest at 8.125%, payable in 60 installments of $8,440.00, Due August 2023
|
189
|
|
|
240
|
|
|
$
|
189
|
|
|
$
|
241
|
|
Less Current Maturities
|
(83)
|
|
|
(83)
|
|
Total Long-Term Debt
|
$
|
106
|
|
|
$
|
158
|
|
Interest expense for the three months ended June 30, 2021 and 2020 was $4 thousand and $13 thousand, respectively.
Interest expense for the six months ended June 30, 2021 and 2020 was $6 thousand and $20 thousand, respectively.
10.LEASES
We determine if a contract contains a lease at inception. Our material operating leases consist of retail and warehouse locations as well as office space. Our leases generally have remaining terms of 1-5 years, most of which include options to extend the leases for additional 3 to 5-year periods. Generally, the lease term is the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Right to use assets, operating lease assets
|
$
|
31,661
|
|
|
$
|
12,088
|
|
|
|
|
|
Current lease liability
|
$
|
5,464
|
|
|
$
|
3,001
|
|
Non-current lease liability
|
27,427
|
|
|
9,479
|
|
|
$
|
32,891
|
|
|
$
|
12,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
June 30,
2020
|
Weighted average remaining lease term
|
7.17 years
|
|
3.44 years
|
Weighted average discount rate
|
6.0
|
%
|
|
7.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
Operating lease costs
|
$
|
3,548
|
|
|
$
|
1,714
|
|
Short-term lease costs
|
1,109
|
|
|
31
|
|
Total operating lease costs
|
$
|
4,657
|
|
|
$
|
1,745
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
10.LEASES, continued
The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2021:
|
|
|
|
|
|
2021 (remainder of the year)
|
$
|
3,769
|
|
2022
|
6,720
|
|
2023
|
6,021
|
|
2024
|
4,884
|
|
2025
|
4,246
|
|
Thereafter
|
15,170
|
|
Total lease payments
|
40,810
|
|
Less: Imputed interest
|
(7,919)
|
|
Lease Liability at June 30, 2021
|
$
|
32,891
|
|
11.SHARE BASED PAYMENTS
The Company maintains long-term incentive plans for employee, non-employee members of our Board of Directors and consultants. The plans allows us to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, or a combination of awards (collectively, share-based awards).
The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based payment awards made to employees and directors of the Company, including stock options and restricted shares. The Company also issues share based payments in the form of common stock warrants to non-employees.
The following table presents share-based payment expense for the six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
2021
|
|
2020
|
Restricted stock
|
$
|
1,935
|
|
|
$
|
3,316
|
|
Stock options
|
559
|
|
|
1,986
|
|
Warrants
|
747
|
|
|
—
|
|
Total
|
$
|
3,241
|
|
|
$
|
5,302
|
|
As of June 30, 2021, the Company had approximately $10.4 million of unamortized share-based compensation for option awards and restricted stock awards, which is expected to be recognized over a weighted average period of approximately 3.3 years. As of June 30, 2021, the Company also had approximately $3.3 million of unamortized share-based compensation for common stock warrants issued to consultants, which is expected to be recognized over a weighted average period of 2.5 years.
Restricted Stock
The Company issues shares of restricted stock to eligible employees, which are subject to forfeiture until the end of an applicable vesting period. The awards generally vest on the second or third anniversary of the date of grant, subject to the employee’s continuing employment as of that date.
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
11.SHARE BASED PAYMENTS AND STOCK OPTIONS, continued
Restricted stock activity for the six months ended June 30, 2021 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
Nonvested, December 31, 2020
|
630
|
|
|
$
|
4.15
|
|
Granted
|
201
|
|
|
$
|
45.56
|
|
Vested
|
(291)
|
|
|
$
|
4.39
|
|
Forfeited
|
(9)
|
|
|
$
|
18.54
|
|
Nonvested, June 30, 2021
|
531
|
|
|
$
|
20.40
|
|
The table below summarizes all option activity under all plans during the six months ended June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Shares
|
|
Weight -
Average
Exercise
Price
|
|
Weighted -
Average
Remaining
Contractual
Term
|
|
Weighted -
Average
Grant Date
Fair Value
|
Outstanding at December 31, 2020
|
|
1,803
|
|
|
$
|
3.92
|
|
|
3.47
|
|
$
|
2.38
|
|
Granted
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Exercised
|
|
(753)
|
|
|
3.05
|
|
|
|
|
1.65
|
|
Forfeited or expired
|
|
(50)
|
|
|
4.16
|
|
|
—
|
|
|
2.28
|
|
Outstanding at June 30, 2021
|
|
1,000
|
|
|
$
|
4.56
|
|
|
3.31
|
|
$
|
2.46
|
|
Options vested at June 30, 2021
|
|
774
|
|
|
$
|
4.29
|
|
|
2.80
|
|
$
|
3.31
|
|
A summary of the status of the Company’s outstanding stock purchase warrants for the six months ended June 30, 2021 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
Weighted Average
Exercise Price
|
Outstanding at December 31, 2020
|
1,393
|
|
|
$
|
7.49
|
|
Issued
|
—
|
|
|
|
Exercised
|
(968)
|
|
|
$
|
2.84
|
|
Forfeited
|
—
|
|
|
|
Outstanding at June 30, 2021
|
425
|
|
|
$
|
17.25
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
12.EARNINGS PER SHARE
The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computation for the three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
June 30,
2021
|
|
June 30,
2020
|
Net income
|
$
|
6,713
|
|
|
$
|
2,574
|
|
Weighted average shares outstanding, basic
|
59,061
|
|
|
38,617
|
|
Effect of dilution
|
1,162
|
|
|
2,399
|
|
Adjusted weighted average shares outstanding, dilutive
|
60,223
|
|
|
41,016
|
|
Basic earnings per shares
|
$
|
0.11
|
|
|
$
|
0.07
|
|
Dilutive earnings per share
|
$
|
0.11
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
June 30,
2021
|
|
June 30,
2020
|
Net income
|
$
|
12,860
|
|
|
$
|
480
|
|
Weighted average shares outstanding, basic
|
58,588
|
|
|
38,224
|
|
Effect of dilution
|
1,206
|
|
|
2,017
|
|
Adjusted weighted average shares outstanding, dilutive
|
59,794
|
|
|
40,241
|
|
Basic earnings per shares
|
$
|
0.22
|
|
|
$
|
0.01
|
|
Dilutive earnings per share
|
$
|
0.22
|
|
|
$
|
0.01
|
|
13.ACQUISITIONS
Our acquisition strategy is to acquire (i) well established profitable hydroponic garden centers in markets where the Company does not have a market presence or in markets where it is increasing its market presence; and (ii) proprietary brands and private label brands. The Company accounts for acquisitions in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed are recorded in the accompanying consolidated balance sheets at their estimated fair values, as of the acquisition date. For all acquisitions, the preliminary allocation of the purchase price was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period as valuations are finalized. The Company has made adjustments to the preliminary valuations of the acquisition based on valuation analysis prepared by independent third-party valuation consultants. All acquisition costs are expensed as incurred and recorded in general and administrative expenses in the consolidated statements of operations.
Acquisitions during the six months ended June 30, 2021.
On January 25, 2021, the Company purchased the assets of Indoor Garden & Lighting, Inc, a two-store chain of hydroponic and equipment and indoor gardening supply stores serving the Seattle and Tacoma, Washington area. The total consideration for the purchase of Garden & Lighting was approximately $1.7 million, including $1.2 million in cash and common stock valued at approximately $0.5 million. Acquired goodwill of approximately $0.8 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On February 1, 2021, the Company purchased the assets of J.A.R.B., Inc d/b/a Grow Depot Maine, a two-store chain in Auburn and Augusta, Maine. The total consideration for the purchase of Grow Depot Maine was approximately $2.1 million, including $1.7 million in cash and common stock valued at approximately $0.4 million. Acquired goodwill of approximately $1.3 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
13.ACQUISITIONS, continued
On February 15, 2021, the Company purchased the assets of Grow Warehouse LLC, a four-store chain of hydroponic and organic garden stores in Colorado (3) and Oklahoma (1). The total consideration for the purchase of Grow Warehouse LLC was approximately $17.8 million, including $8.1 million in cash and common stock valued at approximately $9.7 million. Acquired goodwill of approximately $11.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On February 22, 2021, the Company purchased the assets of San Diego Hydroponics & Organics, a four-store chain of hydroponic and organic garden stores in San Diego, CA. The total consideration for the purchase of San Diego Hydroponics was approximately $9.3 million, including $4.8 million in cash and common stock valued at approximately $4.5 million. Acquired goodwill of approximately $5.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On March 12, 2021, the Company purchased the assets of Charcoir Corporation, who sells an RHP-certified growing medium made from the highest-grade coconut fiber. The total consideration for the purchase of Charcoir was approximately $16.4 million, including $9.9 million in cash and common stock valued at approximately $6.5 million. Acquired goodwill of approximately $6.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established distribution market for the Company of a proprietary brand.
On March 15, 2021, the Company purchased the assets of 55 Hydroponics, a hydroponic and organic superstore located in Santa Ana, CA. The total consideration for the purchase of 55 Hydroponics was approximately $6.5 million, including $5.4 million in cash and common stock valued at approximately $1.1 million. Acquired goodwill of approximately $3.9 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On March 15, 2021, the Company purchased the assets of Aquarius, a hydroponic and organic garden store in Springfield, MA. The total consideration for the purchase of Aquarius was approximately $3.6 million, including $2.4 million in cash and common stock valued at approximately $1.2 million. Acquired goodwill of approximately $1.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On March 19, 2021, the Company purchased the assets of Agron, LLC, an online seller of growing equipment. The total consideration for the purchase of Agron was approximately $11.3 million, including $6 million in cash and common stock valued at approximately $5.3 million. Acquired goodwill of approximately $8.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established e-commerce market for the Company targeting the commercial customer.
On April 19, 2021, the Company purchased the assets of Grow Depot LLC ("Down River Hydro"), a hydroponic and indoor gardening supply store in Brownstown, MI. The total consideration for the purchase of Down River Hydro was approximately $4.4 million, including approximately $3.2 million in cash and common stock valued at approximately $1.2 million. Acquired goodwill of approximately $2.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company.
On May 24, 2021, the Company purchased the assets of The Harvest company ("Harvest"), a northern California-based hydroponic supply center and cultivation design innovator with stores in Redding and Trinity County. The total consideration for the purchase if Harvest was approximately $8.3 million, including approximately $5.6 million in cash and common stock valued at approximately $2.8 million. Acquired goodwill of approximately $4.6 million represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company.
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
13.ACQUISITIONS, continued
The table below represents the allocation of the purchase price to the acquired net assets during the six months ended June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agron
|
|
Aquarius
|
|
55 Hydro
|
|
Charcoir
|
|
San Diego Hydro
|
|
Inventory
|
$
|
—
|
|
|
$
|
957
|
|
|
$
|
780
|
|
|
$
|
839
|
|
|
$
|
1,400
|
|
|
Prepaids and other current assets
|
29
|
|
|
12
|
|
|
29
|
|
|
534
|
|
|
36
|
|
|
Furniture and equipment
|
46
|
|
|
63
|
|
|
50
|
|
|
—
|
|
|
315
|
|
|
Liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Operating lease right to use asset
|
87
|
|
|
—
|
|
|
853
|
|
|
—
|
|
|
970
|
|
|
Operating lease liability
|
(87)
|
|
|
—
|
|
|
(853)
|
|
|
—
|
|
|
(970)
|
|
|
Customer relationships
|
832
|
|
|
339
|
|
|
809
|
|
|
5,712
|
|
|
605
|
|
|
Trade name
|
1,530
|
|
|
485
|
|
|
870
|
|
|
1,099
|
|
|
1,192
|
|
|
Non-compete
|
139
|
|
|
—
|
|
|
26
|
|
|
—
|
|
|
6
|
|
|
Intellectual property
|
—
|
|
|
—
|
|
|
—
|
|
|
2,065
|
|
|
—
|
|
|
Goodwill
|
8,673
|
|
|
1,702
|
|
|
3,915
|
|
|
6,119
|
|
|
5,728
|
|
|
Total
|
$
|
11,249
|
|
|
$
|
3,558
|
|
|
$
|
6,479
|
|
|
$
|
16,368
|
|
|
$
|
9,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grow Warehouse
|
|
Grow Depot Maine
|
|
Indoor Garden
|
|
Down River Hydro
|
|
Harvest
|
|
Total
|
Inventory
|
|
$
|
2,448
|
|
|
$
|
326
|
|
|
$
|
372
|
|
|
$
|
824
|
|
|
$
|
1,204
|
|
|
$
|
9,150
|
|
Prepaids and other current assets
|
|
30
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
7
|
|
|
683
|
|
Furniture and equipment
|
|
250
|
|
|
25
|
|
|
94
|
|
|
50
|
|
100
|
|
|
993
|
|
Liabilities
|
|
(169)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(169)
|
|
Operating lease right to use asset
|
|
94
|
|
|
91
|
|
|
129
|
|
|
—
|
|
|
—
|
|
|
2,224
|
|
Operating lease liability
|
|
(94)
|
|
|
(91)
|
|
|
(129)
|
|
|
—
|
|
|
—
|
|
|
(2,224)
|
|
Customer relationships
|
|
1,256
|
|
|
549
|
|
|
210
|
|
|
634
|
|
|
1,016
|
|
|
11,962
|
|
Trade name
|
|
2,748
|
|
|
344
|
|
|
353
|
|
|
698
|
|
|
1,392
|
|
|
10,711
|
|
Non-compete
|
|
94
|
|
|
36
|
|
|
2
|
|
|
16
|
|
|
—
|
|
|
319
|
|
Intellectual property
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,065
|
|
Goodwill
|
|
11,122
|
|
|
866
|
|
|
661
|
|
|
2,126
|
|
|
4,606
|
|
|
45,518
|
|
Total
|
|
17,779
|
|
|
2,149
|
|
|
1,692
|
|
|
$
|
4,351
|
|
|
$
|
8,325
|
|
|
$
|
81,232
|
|
The table below represents the consideration paid for the net assets acquired in business combinations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agron
|
|
Aquarius
|
|
55 Hydro
|
|
Charcoir
|
|
San Diego Hydro
|
Cash
|
$
|
5,973
|
|
|
$
|
2,331
|
|
|
$
|
5,347
|
|
|
$
|
9,902
|
|
|
$
|
4,751
|
|
Common stock
|
5,276
|
|
|
1,227
|
|
|
1,132
|
|
|
6,466
|
|
|
4,531
|
|
Total
|
$
|
11,249
|
|
|
$
|
3,558
|
|
|
$
|
6,479
|
|
|
$
|
16,368
|
|
|
$
|
9,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grow Warehouse
|
|
Grow
Depot Maine
|
|
Indoor Garden
|
|
Down River Hydro
|
|
Harvest
|
|
Total
|
Cash
|
$
|
8,100
|
|
|
$
|
1,738
|
|
|
$
|
1,165
|
|
|
$
|
3,177
|
|
|
$
|
5,561
|
|
|
$
|
48,045
|
|
Common stock
|
9,679
|
|
|
411
|
|
|
527
|
|
|
1,174
|
|
|
2,764
|
|
|
33,187
|
|
Total
|
$
|
17,779
|
|
|
$
|
2,149
|
|
|
$
|
1,692
|
|
|
$
|
4,351
|
|
|
$
|
8,325
|
|
|
$
|
81,232
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
The following table discloses the date of the acquisitions noted above and the revenue and earnings included in the consolidated income statement for the period ended June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agron
|
|
Aquarius
|
|
55 Hydro
|
|
Charcoir
|
|
San Diego Hydro
|
|
Acquisition date
|
3/19/2021
|
|
3/15/2021
|
|
3/15/2021
|
|
3/12/2021
|
|
2/22/2021
|
|
Revenue
|
$
|
6,105
|
|
|
$
|
2,684
|
|
|
$
|
2,222
|
|
|
$
|
1,880
|
|
|
$
|
3,446
|
|
|
Net Income
|
$
|
324
|
|
|
$
|
365
|
|
|
$
|
314
|
|
|
$
|
518
|
|
|
$
|
547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grow Warehouse
|
|
Grow Depot Maine
|
|
Indoor Garden
|
|
Down River Hydro
|
|
Harvest
|
|
Total
|
Acquisition date
|
2/15/2021
|
|
2/1/2021
|
|
1/25/2021
|
|
4/19/2021
|
|
5/24/21
|
|
|
Revenue
|
$
|
6,753
|
|
|
$
|
2,779
|
|
|
$
|
2,308
|
|
|
$
|
1,200
|
|
|
$
|
1,489
|
|
|
$
|
5,986
|
|
Net Income
|
$
|
1,297
|
|
|
$
|
555
|
|
|
$
|
433
|
|
|
$
|
176
|
|
|
$
|
268
|
|
|
$
|
905
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
13.ACQUISITIONS, continued
The following represents the pro forma consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the entire period for the quarter ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30, 2021
(Unaudited)
|
|
June 30, 2021
(Unaudited)
|
|
Revenue
|
$
|
130,504
|
|
|
$
|
229,599
|
|
|
Net income
|
$
|
12,446
|
|
|
$
|
19,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30, 2020
(Unaudited)
|
|
June 30, 2020
(Unaudited)
|
|
Revenue
|
$
|
40,501
|
|
|
$
|
90,126
|
|
|
Net income
|
$
|
1,849
|
|
|
$
|
2,352
|
|
|
Acquisitions during the six months ended June 30, 2020.
On February 26, 2020 we acquired certain assets of Health & Harvest LLC in a transaction valued at approximately $2.85 million. Acquired goodwill of approximately $1.1 million represented the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. Cash consideration was funded from the Company’s existing working capital.
On June 16, 2020 we acquired certain assets of H2O Hydroponics, LLC in a transaction valued at approximately $2.0 million. Acquired goodwill of approximately $1.0 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. Cash consideration was funded from the Company's existing working capital.
The table below represents the allocation of the purchase price to the acquired net assets during the six months ended June 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
H2O Hydroponics LLC
|
Health & Harvest LLC
|
Total
|
Inventory
|
$
|
498
|
|
$
|
1,054
|
|
$
|
1,552
|
|
Prepaids and other current assets
|
4
|
|
—
|
|
4
|
|
Furniture and equipment
|
50
|
|
51
|
|
101
|
|
Right to use asset
|
902
|
|
192
|
|
1,094
|
|
Lease liability
|
(902)
|
|
(192)
|
|
(1,094)
|
|
Customer relationships
|
150
|
|
255
|
|
405
|
|
Trade name
|
234
|
|
357
|
|
591
|
|
Non-compete
|
43
|
|
6
|
|
49
|
|
Goodwill
|
1,008
|
|
1,130
|
|
2,138
|
|
Total
|
$
|
1,987
|
|
$
|
2,853
|
|
$
|
4,840
|
|
The table below represents the consideration paid for the net assets acquired in business combinations.
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
H2O Hydroponics LLC
|
Health & Harvest LLC
|
Total
|
Cash
|
$
|
1,282
|
|
$
|
1,750
|
|
$
|
3,032
|
|
Common stock
|
705
|
|
1,103
|
|
1,808
|
|
Total
|
$
|
1,987
|
|
$
|
2,853
|
|
$
|
4,840
|
|
The following table discloses the date of the acquisitions noted above and the revenue and earnings included in the consolidated income statement from the date of acquisition to the period ended June 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
H2O Hydroponics LLC
|
Health & Harvest LLC
|
Total
|
Acquisition date
|
6/26/20
|
2/26/2020
|
|
Revenue
|
$
|
227
|
|
$
|
2,300
|
|
$
|
2,527
|
|
Earnings
|
$
|
28
|
|
$
|
462
|
|
$
|
490
|
|
The following represents the pro forma consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the entire period for the six months ended June 30, 2020 and 2019.
Pro forma consolidated income statement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30, 2019
|
|
June 30, 2019
|
|
Revenue
|
$
|
21,759
|
|
|
$
|
37,122
|
|
|
Earnings
|
$
|
1,149
|
|
|
$
|
1,465
|
|
|
14.RELATED PARTIES
The Company has engaged with a firm that employs an immediate family member of an officer of the Company as partner. The firm provides certain legal services. Amounts paid for to that firm in total was approximately $0.2 million and $0.4 million for the three and six months ended June 30, 2021, respectively. As of June 30, 2021, there was no outstanding balance due.
15.SUBSEQUENT EVENTS
The Company has evaluated events and transaction occurring subsequent to June 30, 2021 up to the date of this filing of these consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation.
For all acquisitions subsequent to the end of the quarter, the Company’s initial accounting for the business combination has not been completed because the valuations have not yet been received from the Company’s independent valuation firm.
On July 1, 2021, the Company purchased the assets of Aqua Serene, an indoor/outdoor garden center with stores in Eugene and Ashland, Oregon. The total consideration for the purchase was $10.0 million, including approximately $7.7 million in cash and 46,554 shares of common stock valued at approximately $2.3 million.
On July 3, 2021, the Company purchased the assets of Mendocino Greenhouse & Garden Supply, Inc, a Northern California-based hydroponic garden center located in Mendocino, California. The total consideration for the purchase was approximately $4.0 million.
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
On July 27, 2021, the Company entered into a series of asset purchase agreements (the “Purchase Agreements”) through its wholly-owned subsidiary, GrowGeneration Michigan Corp., to purchase the assets from subsidiaries of HGS Hydro (“HGS Hydro”) with six stores across the State of Michigan and a seventh store to open in the fall of 2021. This acquisition is expected to close before the end of 2021 fiscal year-end. As consideration for the assets, the Company agreed to pay HGS Hydro an aggregate purchase price of approximately $72.2 million which includes $55.2 million in cash and approximately $17.0 million in shares of the Company's restricted common stock.