The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 2021
GrowGeneration Corp (the “Company”)
was incorporated on March 6, 2014 in Colorado under the name of Easylife Corp and changed its name to GrowGeneration Corp. It maintains
its principal office in Denver, Colorado.
GrowGeneration 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-three (53) 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 and Canada.
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 accruals) 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).
New Accounting Policies Adopted
During the Quarter Ended March 31, 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 three months ended March 31, 2021, there were no significant gains or losses
recorded.
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 very 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 only 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.
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 2021
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
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Cash equivalents
|
|
2
|
|
$
|
110,414
|
|
|
$
|
163,418
|
|
Marketable securities
|
|
2
|
|
$
|
41,077
|
|
|
$
|
-
|
|
Notes receivable
|
|
2
|
|
$
|
4,786
|
|
|
$
|
2,937
|
|
Notes receivable impaired
|
|
3
|
|
$
|
|
|
|
$
|
875
|
|
Accounts receivable
|
|
2
|
|
$
|
4,276
|
|
|
$
|
3,901
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 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 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.
Disaggregation of Revenues
The following table disaggregates revenue
by source:
|
|
Three Months
Ended
March 31,
2021
|
|
|
Three Months
Ended
March 31,
2020
|
|
Sales at company owned stores
|
|
$
|
82,790
|
|
|
$
|
31,037
|
|
Distribution
|
|
|
2,835
|
|
|
|
-
|
|
E-commerce sales
|
|
|
4,397
|
|
|
|
1,945
|
|
Total Revenues
|
|
$
|
90,022
|
|
|
$
|
32,982
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 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, 1/1/2021
|
|
$
|
7,713
|
|
|
$
|
5,155
|
|
Closing balance, 3/31/2021
|
|
|
7,562
|
|
|
|
9,939
|
|
Increase (decrease)
|
|
$
|
(151
|
)
|
|
$
|
4,784
|
|
|
|
|
|
|
|
|
|
|
Opening balance, 1/1/2020
|
|
$
|
4,455
|
|
|
$
|
2,504
|
|
Closing balance, 3/31/2020
|
|
|
4,575
|
|
|
|
3,555
|
|
Increase (decrease)
|
|
$
|
120
|
|
|
$
|
1,051
|
|
Of the total amount of customer deposit
liability as of January 1, 2021, $5,155, $2,083 was reported as revenue during the three months ended March 31, 2021. Of the total amount
of customer deposit liability as of January 1, 2020, $2,504, $1,599 was reported as revenue during the three months ended March 31, 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 March 31, 2021 and December 31, 2020 are as follows:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Note receivable
|
|
$
|
3,286
|
|
|
$
|
4,104
|
|
Allowance for losses
|
|
|
-
|
|
|
|
(292
|
)
|
Notes receivable, net
|
|
$
|
3,286
|
|
|
|
3,812
|
|
The following table summarizes changes
in notes receivable balances that have been deemed impaired.
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Note receivable
|
|
$
|
-
|
|
|
$
|
1,166
|
|
Allowance for losses
|
|
|
-
|
|
|
|
(292
|
)
|
Notes receivable, net
|
|
$
|
-
|
|
|
|
874
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 2021
Marketable securities have maturities
of less than one year as of March 31, 2021. There were no significant realized or unrealized gains or losses for the three months ended
March 31, 2021.
The components of investments, available
for sales securities, as of March 31, 2021 were as follows:
|
|
Fair Value Level
|
|
|
Adjusted Cost Basis
|
|
|
Unrealized Gain (Loss)
|
|
|
Recorded Basis
|
|
Commercial paper
|
|
|
Level 2
|
|
|
$
|
15,000
|
|
|
$
|
-
|
|
|
$
|
15,000
|
|
Corporate notes and bonds
|
|
|
Level 2
|
|
|
|
26,077
|
|
|
|
-
|
|
|
|
26,077
|
|
Marketable securities
|
|
|
|
|
|
$
|
41,077
|
|
|
$
|
-
|
|
|
$
|
41,077
|
|
Notes receivable include customer trade receivables
under long terms financing arrangements and other note receivable not associated with customer transactions.
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Trade receivables under longer term financing arrangements
|
|
$
|
3,286
|
|
|
$
|
3,812
|
|
Note receivable, non-customer related
|
|
|
1,500
|
|
|
|
-
|
|
Subtotal
|
|
|
4,786
|
|
|
|
3,812
|
|
Less, current portion
|
|
|
(3,905
|
)
|
|
|
(2,612
|
)
|
Notes receivable, noncurrent
|
|
$
|
881
|
|
|
|
1,200
|
|
7.
|
PROPERTY AND EQUIPMENT
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Vehicle
|
|
$
|
1,495
|
|
|
$
|
1,342
|
|
Building
|
|
|
477
|
|
|
|
477
|
|
Leasehold improvements
|
|
|
2,810
|
|
|
|
1,988
|
|
Furniture, fixtures and equipment
|
|
|
7,286
|
|
|
|
5,739
|
|
Total property and equipment, gross
|
|
|
12,068
|
|
|
|
9,546
|
|
Accumulated depreciation and amortization
|
|
|
(3,730
|
)
|
|
|
(3,071
|
)
|
Property and equipment, net
|
|
$
|
8,338
|
|
|
$
|
6,475
|
|
Depreciation expense for the three
months ended March 31, 2021 and 2020 was $659 and $331, respectively.
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 2021
8.
|
GOODWILL AND INTANGIBLE ASSETS
|
The changes in goodwill are as follows:
|
|
March 31, 2021
|
|
|
December 31,
2020
|
|
Balance, beginning of period
|
|
$
|
62,951
|
|
|
$
|
17,799
|
|
Goodwill additions
|
|
|
38,092
|
|
|
|
45,152
|
|
Balance, end of period
|
|
$
|
101,043
|
|
|
$
|
62,951
|
|
Intangible assets on the Company’s consolidated
balance sheets consist of the following:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
Tradenames
|
|
$
|
25,348
|
|
|
$
|
(1,260
|
)
|
|
$
|
13,923
|
|
|
$
|
(398
|
)
|
Patents, trademarks
|
|
|
100
|
|
|
|
(16
|
)
|
|
|
100
|
|
|
|
(9
|
)
|
Customer relationships
|
|
|
16,466
|
|
|
|
(492
|
)
|
|
|
6,297
|
|
|
|
(138
|
)
|
Non-competes
|
|
|
1,198
|
|
|
|
(67
|
)
|
|
|
796
|
|
|
|
(22
|
)
|
Capitalized software
|
|
|
1,843
|
|
|
|
(349
|
)
|
|
|
1,163
|
|
|
|
(222
|
)
|
|
|
$
|
44,955
|
|
|
$
|
(2,184
|
)
|
|
$
|
22,279
|
|
|
$
|
(789
|
)
|
Amortization expense for the three months ended March 31, 2021 and
2020 was $1,395 and $28, respectively.
Future amortization expense is as follows:
|
|
|
|
2021, remainder
|
|
$
|
6,465
|
|
2022
|
|
|
8,295
|
|
2023
|
|
|
8,295
|
|
2024
|
|
|
8,295
|
|
2025
|
|
|
7,706
|
|
Thereafter
|
|
|
3,715
|
|
Total
|
|
$
|
42,771
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 2021
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
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 $25,437
|
|
$
|
-
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
Notes payable issued in connection with seller financing of assets acquired, interest at 8.125%, payable in 60 installments of $8,440, due August 2023
|
|
|
214
|
|
|
|
240
|
|
|
|
$
|
214
|
|
|
$
|
241
|
|
Less Current Maturities
|
|
|
(83
|
)
|
|
|
(83
|
)
|
Total Long-Term Debt
|
|
$
|
131
|
|
|
$
|
158
|
|
Interest expense for the three months
ended March 31, 2021 and 2020 was $2 and $7, respectively.
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.
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Right to use assets, operating lease assets
|
|
$
|
14,389
|
|
|
$
|
12,088
|
|
|
|
|
|
|
|
|
|
|
Current lease liability
|
|
$
|
3,870
|
|
|
$
|
3,001
|
|
Non-current lease liability
|
|
|
10,824
|
|
|
|
9,479
|
|
|
|
$
|
14,694
|
|
|
$
|
12,480
|
|
|
|
March 31,
2021
|
|
|
March 31,
2020
|
|
Weighted average remaining lease term
|
|
|
3.34 years
|
|
|
|
3.24 years
|
|
Weighted average discount rate
|
|
|
6.0
|
%
|
|
|
7.6
|
%
|
|
|
Three
Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Operating lease costs
|
|
$
|
1,541
|
|
|
$
|
925
|
|
Short-term lease costs
|
|
|
141
|
|
|
|
16
|
|
Total operating lease costs
|
|
$
|
1,682
|
|
|
$
|
941
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 2021
The following table presents the maturity of the Company’s operating
lease liabilities as of March 31, 2021:
2021 (remainder of the year)
|
|
$
|
4,005
|
|
2022
|
|
|
4,564
|
|
2023
|
|
|
3,850
|
|
2024
|
|
|
2,713
|
|
2025
|
|
|
2,256
|
|
Thereafter
|
|
|
3,106
|
|
Total lease payments
|
|
|
20,494
|
|
Less: Imputed interest
|
|
|
(5,800
|
)
|
Lease Liability at March 31, 2021
|
|
$
|
14,694
|
|
11.
|
SHARE BASED PAYMENTS AND STOCK OPTIONS
|
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 three months ended March 31, 2021 and 2020.
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Restricted stock
|
|
$
|
645
|
|
|
$
|
2,619
|
|
Stock options
|
|
|
308
|
|
|
|
1,496
|
|
Warrants
|
|
|
374
|
|
|
|
-
|
|
Total
|
|
$
|
1,327
|
|
|
$
|
4,115
|
|
As
of March 31, 2021, the Company had approximately $2.6 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 1.75 years. As of March 31, 2021, the
Company also had approximately $3.6 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 2.75 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
March 31, 2021
11.
|
SHARE BASED PAYMENTS AND STOCK OPTIONS, continued
|
Restricted stock activity for the
three months ended March 31, 2021 is presented in the following table:
|
|
Shares
|
|
|
Weighted Average Grant Date Fair Value
|
|
Nonvested, December 31, 2020
|
|
|
630
|
|
|
$
|
4.51
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
Vested
|
|
|
(291
|
)
|
|
$
|
4.39
|
|
Forfeited
|
|
|
(9
|
)
|
|
$
|
18.54
|
|
Nonvested, March 31, 2021
|
|
|
330
|
|
|
$
|
4.24
|
|
The table below summarizes all option
activity under all plans during the three months ended March 31, 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
|
|
|
(6
|
)
|
|
|
4.63
|
|
|
|
|
|
|
|
2.75
|
|
Forfeited or expired
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at March 31, 2021
|
|
|
1,797
|
|
|
$
|
3.92
|
|
|
|
2.47
|
|
|
$
|
2.19
|
|
Options vested at March 31, 2021
|
|
|
1,361
|
|
|
$
|
3.61
|
|
|
|
2.28
|
|
|
$
|
2.02
|
|
A summary of the status of the Company’s
outstanding stock purchase warrants for the three months ended March 31, 2021 is as follows:
|
|
Warrants
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
|
1,393
|
|
|
$
|
7.49
|
|
Issued
|
|
|
-
|
|
|
|
|
|
Exercised
|
|
|
(617
|
)
|
|
$
|
3.45
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
Outstanding at March 31, 2021
|
|
|
776
|
|
|
$
|
10.71
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 2021
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 months
ended March 31, 2021 and 2020.
|
|
Three months ended
|
|
|
|
March 31,
2021
|
|
|
March 31,
2020
|
|
Net income (loss)
|
|
$
|
6,147
|
|
|
$
|
(2,094
|
)
|
Weighted average shares outstanding, basic
|
|
|
58,394
|
|
|
|
37,823
|
|
Effect of dilutive outstanding warrants and stock options
|
|
|
1,923
|
|
|
|
-
|
|
Adjusted weighted average shares outstanding, dilutive
|
|
|
60,317
|
|
|
|
37,823
|
|
Basic income per shares
|
|
$
|
.11
|
|
|
$
|
(.06
|
)
|
Dilutive income per share
|
|
$
|
.10
|
|
|
$
|
(.06
|
)
|
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 any adjustments to the preliminary valuations on four of the eight acquisition based on valuation analysis prepared
by independent third-party valuation consultants. The acquisitions for which an independent third-party valuation analysis has been competed
includes Agron, LLC, Charcoir, Grow Warehouse and San Diego Hydro. The remaining four valuations, Aquarius, 55 Hydro, Grow Depot Maine
and Indoor Garden, are expected to be completed by June 30, 2021. Any changes to these estimates may have a material impact on the Company’s
operating results or financial position. All acquisition costs are expensed as incurred and recorded in general and administrative expenses
in the consolidated statements of operations.
Acquisitions during the three months
ended March 31, 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
March 31, 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 $9.6 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 $5.6 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 $7.1 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 $3.8 million represents the value expected to rise from organic
growth and an opportunity to expand into a well-established market for the Company.
On 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 $1.6 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
$8.3 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.
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 2021
13.
|
ACQUISITIONS, continued
|
The table below represents the allocation
of the purchase price to the acquired net assets during the three months ended March 31, 2021.
|
|
Agron
|
|
|
Aquarius
|
|
|
55 Hydro
|
|
|
Charcoir
|
|
|
San Diego Hydro
|
|
|
Grow Warehouse
|
|
|
Grow Depot Maine
|
|
|
Indoor Garden
|
|
|
Total
|
|
Inventory
|
|
$
|
-
|
|
|
$
|
957
|
|
|
$
|
780
|
|
|
$
|
839
|
|
|
$
|
1,400
|
|
|
$
|
2,448
|
|
|
$
|
326
|
|
|
$
|
372
|
|
|
$
|
7,122
|
|
Prepaids and other current assets
|
|
|
29
|
|
|
|
12
|
|
|
|
29
|
|
|
|
534
|
|
|
|
36
|
|
|
|
30
|
|
|
|
3
|
|
|
|
-
|
|
|
|
673
|
|
Furniture and equipment
|
|
|
46
|
|
|
|
63
|
|
|
|
50
|
|
|
|
-
|
|
|
|
315
|
|
|
|
250
|
|
|
|
25
|
|
|
|
94
|
|
|
|
843
|
|
Liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(169
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(169
|
)
|
Operating lease right to use asset
|
|
|
87
|
|
|
|
-
|
|
|
|
853
|
|
|
|
|
|
|
|
970
|
|
|
|
94
|
|
|
|
91
|
|
|
|
129
|
|
|
|
2,224
|
|
Operating lease liability
|
|
|
(87
|
)
|
|
|
-
|
|
|
|
(853
|
)
|
|
|
|
|
|
|
(970
|
)
|
|
|
(94
|
)
|
|
|
(91
|
)
|
|
|
(129
|
)
|
|
|
(2,224
|
)
|
Customer relationships
|
|
|
858
|
|
|
|
356
|
|
|
|
453
|
|
|
|
6,454
|
|
|
|
533
|
|
|
|
1,136
|
|
|
|
215
|
|
|
|
163
|
|
|
|
10,168
|
|
Trade name
|
|
|
1,824
|
|
|
|
498
|
|
|
|
1,296
|
|
|
|
1,466
|
|
|
|
1,412
|
|
|
|
4,393
|
|
|
|
301
|
|
|
|
235
|
|
|
|
11,425
|
|
Non-compete
|
|
|
160
|
|
|
|
36
|
|
|
|
65
|
|
|
|
-
|
|
|
|
5
|
|
|
|
94
|
|
|
|
21
|
|
|
|
21
|
|
|
|
402
|
|
Goodwill
|
|
|
8,332
|
|
|
|
1,636
|
|
|
|
3,806
|
|
|
|
7,075
|
|
|
|
5,581
|
|
|
|
9,597
|
|
|
|
1,258
|
|
|
|
807
|
|
|
|
38,092
|
|
Total
|
|
$
|
11,249
|
|
|
$
|
3,558
|
|
|
$
|
6,479
|
|
|
$
|
16,368
|
|
|
$
|
9,282
|
|
|
$
|
17,779
|
|
|
$
|
2,149
|
|
|
$
|
1,692
|
|
|
$
|
68,556
|
|
The table below represents the consideration
paid for the net assets acquired in business combinations.
|
|
Agron
|
|
|
Aquarius
|
|
|
55 Hydro
|
|
|
Charcoir
|
|
|
San Diego Hydro
|
|
|
Grow Warehouse
|
|
|
Grow
Depot Maine
|
|
|
Indoor Garden
|
|
|
Total
|
|
Cash
|
|
$
|
5,973
|
|
|
$
|
2,331
|
|
|
$
|
5,347
|
|
|
$
|
9,902
|
|
|
$
|
4,751
|
|
|
$
|
8,100
|
|
|
$
|
1,738
|
|
|
$
|
1,165
|
|
|
$
|
39,307
|
|
Common stock
|
|
|
5,276
|
|
|
|
1,227
|
|
|
|
1,132
|
|
|
|
6,466
|
|
|
|
4,531
|
|
|
|
9,679
|
|
|
|
411
|
|
|
|
527
|
|
|
|
29,249
|
|
Total
|
|
$
|
11,249
|
|
|
$
|
3,558
|
|
|
$
|
6,479
|
|
|
$
|
16,368
|
|
|
$
|
9,282
|
|
|
$
|
17,779
|
|
|
$
|
2,149
|
|
|
$
|
1,692
|
|
|
$
|
68,556
|
|
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 March 31, 2021.
|
|
Agron
|
|
|
Aquarius
|
|
|
55 Hydro
|
|
|
Charcoir
|
|
|
San Diego Hydro
|
|
|
Grow Warehouse
|
|
|
Grow Depot Maine
|
|
|
Indoor Garden
|
|
|
Total
|
|
Acquisition date
|
|
|
3/19/2021
|
|
|
|
3/15/2021
|
|
|
|
3/15/2021
|
|
|
|
3/12/2021
|
|
|
|
2/22/2021
|
|
|
|
2/15/2021
|
|
|
|
2/1/2021
|
|
|
|
1/25/2021
|
|
|
|
|
|
Revenue
|
|
$
|
230
|
|
|
$
|
185
|
|
|
$
|
328
|
|
|
$
|
276
|
|
|
$
|
1,001
|
|
|
$
|
2,168
|
|
|
$
|
993
|
|
|
$
|
805
|
|
|
$
|
5,986
|
|
Net Income
|
|
$
|
22
|
|
|
$
|
16
|
|
|
$
|
32
|
|
|
$
|
101
|
|
|
$
|
117
|
|
|
$
|
294
|
|
|
$
|
205
|
|
|
$
|
118
|
|
|
$
|
905
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 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 March 31, 2021 and 2020.
|
|
March 31, 2021
(Unaudited)
|
|
|
March 31, 2020
(Unaudited)
|
|
Revenue
|
|
$
|
99,095
|
|
|
$
|
49,625
|
|
Net income
|
|
$
|
7,403
|
|
|
$
|
503
|
|
Acquisitions during the three months
ended March 31, 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.
The table below represents the allocation
of the purchase price to the acquired net assets during the three months ended March 31, 2020.
|
|
Health & Harvest LLC
|
|
Inventory
|
|
$
|
1,054
|
|
Furniture and equipment
|
|
|
51
|
|
Right to use asset
|
|
|
192
|
|
Lease liability
|
|
|
(192
|
)
|
Customer relationships
|
|
|
246
|
|
Trade name
|
|
|
431
|
|
Non-compete
|
|
|
6
|
|
Goodwill
|
|
|
1,065
|
|
Total
|
|
$
|
2,853
|
|
The table below represents the consideration
paid for the net assets acquired in business combinations.
|
|
Health & Harvest LLC
|
|
Cash
|
|
$
|
1,750
|
|
Common stock
|
|
|
1,103
|
|
Total
|
|
$
|
2,853
|
|
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 March 31, 2020.
|
|
Health & Harvest LLC
|
|
Acquisition date
|
|
|
2/26/2020
|
|
Revenue
|
|
$
|
559
|
|
Earnings
|
|
$
|
112
|
|
GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial
Statements
March 31, 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 three months ended March 31, 2020 and 2019.
Pro forma consolidated income statement:
|
|
March 31, 2020
|
|
|
March 31,
2019
|
|
Revenue
|
|
$
|
34,076
|
|
|
$
|
14,579
|
|
Earnings
|
|
$
|
(1,873
|
)
|
|
$
|
688
|
|
The Company has evaluated events and
transaction occurring subsequent to March 31, 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 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 25,895 shares of common stock valued at approximately $1.2 million.