GrowGeneration Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

ACQUISITIONS

ACQUISITIONS

6 Months Ended

Jun. 30, 2021

Business Combination and Asset Acquisition [Abstract]

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.

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.

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

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

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.


	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

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