Annual report pursuant to Section 13 and 15(d)

ACQUISITIONS

v3.22.0.1
ACQUISITIONS
 12 Months Ended
Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract]  
ACQUISITIONS ACQUISITIONS
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. Any changes to these estimates may have a material impact on the Company’s operating results or financial position. The Company has made adjustments to the preliminary valuations of the acquisition based on valuation analysis prepared by independent third-party valuation consultants. During the year ended December 31, 2021, our measurement period adjustments included reducing intangible assets by $1.0 million and increasing goodwill by the same amount. As a result of these measurement period adjustments, we made an insignificant reduction in amortization expense which is included in the income statement. All acquisition costs are expensed as incurred and recorded in general and administrative expenses in the consolidated statements of operations. Acquisition costs were approximately $0.7 million, $0.2 million, and $0.1 million for the years ended December 31, 2021, 2020, and 2019.
2021 Acquisitions
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 approximately $1.2 million in cash and common stock valued at approximately $0.5 million. Acquired goodwill 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 approximately $1.7 million in cash and common stock valued at approximately $0.4 million. Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
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 approximately $8.1 million in cash and common stock valued at approximately $9.7 million. Acquired goodwill 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, California. The total consideration for the purchase of San Diego Hydroponics was approximately $9.3 million, including approximately $4.8 million in cash and common stock valued at approximately $4.5 million. Acquired goodwill of approximately 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, which 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 approximately $9.9 million in cash and common stock valued at approximately $6.5 million. Acquired goodwill 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, California. The total consideration for the purchase of 55 Hydroponics was approximately $6.5 million, including approximately $5.3 million in cash and common stock valued at approximately $1.1 million. Acquired goodwill 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 Hydroponics, a hydroponic and organic garden store in Springfield, Massachusetts. The total consideration for the purchase of Aquarius was approximately $3.6 million, including approximately $2.3 million in cash and common stock valued at approximately $1.2 million. Acquired goodwill 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 $11.2 million, including approximately $6.0 million in cash and common stock valued at approximately $5.3 million. Acquired goodwill 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, Michigan. 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 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 Counties. The total consideration for the purchase of Harvest was approximately $8.3 million, including approximately $5.6 million in cash and common stock valued at approximately $2.8 million. Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On July 19, 2021, the Company purchased the assets of Aqua Serene, Inc., ("Aqua Serene"), an Oregon corporation which consists of an indoor/outdoor garden center with stores in Eugene and Ashland, Oregon. The total consideration for the purchase was approximately $11.7 million, including approximately $9.9 million in cash and common stock valued at approximately $1.8 million. Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
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 purchase agreement was modified on July 19, 2021 to amend the purchase price. The total consideration for the purchase was approximately $4.0 million in cash. This acquisition allows the Company to expand its footprint in the Northern California. Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company.
On August 24, 2021, the Company purchased the assets of Commercial Grow Supply, Inc. ("CGS"), a hydroponic superstore located in Santa Clarita, California. The total consideration for the purchase was approximately $7.2 million, including approximately $6.0 million in cash and common stock valued at approximately $1.3 million. Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On August 23, 2021 the Company purchased the assets of Hoagtech Hydroponics, Inc. ("Hoagtech"), a Washington -based corporation consisting of a hydroponic and garden supply center serving the Bellingham, Washington area. The total consideration for the purchase was approximately $3.9 million in cash. The Asset Purchase Agreement contains a contingent payment equal to approximately $0.6 million to be settled in common stock of the Company if this garden supply center reaches $8.0 million in revenue within a 12-month calendar period from the date of close. The Company used a third-party specialist to value this contingent consideration. The probability that the target will be reached was determined to be 5% which resulted in a value of approximately $28.5 thousand of contingent consideration which was added to goodwill. This acquisition expands our footprint in the Pacific Northwest. Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On October 15, 2021, the Company purchased the assets of Indoor Store, LLC ("All Seasons Gardening"), an indoor-outdoor garden supply center specializing in hydroponics systems, lighting, and nutrients. All Seasons Gardening is the largest hydroponics retailer in New Mexico. The total consideration for the purchase was approximately $0.9 million, including approximately $0.7 million in cash and common stock valued at approximately $0.2 million. Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On December 31, 2021, the Company purchased the assets of Mobile Media, Inc and MMI Agriculture ("MMI"), a mobile shelving design and build facility. The total consideration for the purchase was approximately $9.1 million, including approximately $8.3 million in cash and common stock valued at approximately $0.8 million. Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. The measurement of the intangible assets for MMI is still provisional and may be subject to future adjustments as the Company obtains additional information to finalize the accounting for the acquisition.
The table below represents the allocation of the purchase price to the acquired net assets during the year ended December 31, 2021:
Agron Aquarius 55 Hydro Charcoir San Diego Hydro Grow Warehouse Grow Depot Maine Indoor Garden Downriver
Inventory $ —  $ 957  $ 780  $ 839  $ 1,400  $ 2,450  $ 326  $ 372  $ 824 
Prepaids and other current assets 46  12  29  534  36  30  3  —  3 
Furniture and equipment 29  63  50  —  315  250  25  94  50
Liabilities —  —  —  —  —  (169) —  —  — 
Operating lease right to use asset 98  108  861  —  1,079  641  92  137  273 
Operating lease liability (98) (108) (861) —  (1,079) (641) (92) (137) (273)
Customer relationships 832  339  809  5,712  605  1,256  549  210  634 
Trade name 1,530  485  870  1,099  1,192  2,748  344  353  698 
Non-compete 139  —  26  —  6  94  36  2  16 
Intellectual property —  —  —  2,065  —  —  —  —  — 
Goodwill 8,673  1,702  3,915  6,119  5,728  11,120  866  661  2,126 
Total $ 11,249  $ 3,558  $ 6,479  $ 16,368  $ 9,282  $ 17,779  $ 2,149  $ 1,692  $ 4,351 
Harvest Aquaserene Mendocino CGS Hoagtech All Seasons MMI Total
Inventory $ 1,204  1,696  753  875  751  100  3,530  $ 16,857 
Prepaids and other current assets 7  2  1  1  37  1  —  742 
Furniture and equipment 100  500  160  100  144  25  328  2,233 
Liabilities —  —  —  —  (29) —  (250) (448)
Operating lease right to use asset 3,782  1,177  408  746  1,569  37  2,332  13,340 
Operating lease liability (3,782) (1,177) (408) (746) (1,569) (37) (2,332) (13,340)
Customer relationships 1,016  1,235  575  1,382  493  154  2,964  18,765 
Trade name 1,392  1,231  414  852  428  117  1,039  14,792 
Non-compete —  11  6  11  3  —  238  588 
Intellectual property —  —  —  —  —  —  —  2,065 
Goodwill 4,606  6,976  2,091  4,027  2,105  545  1,202  62,462 
Total $ 8,325  11,651  4,000  $ 7,248  3,932  942  $ 9,051  $ 118,056 
The table below represents the consideration paid for the net assets acquired in business combinations during 2021:
Agron Aquarius 55 Hydro Charcoir San Diego Hydro Grow Warehouse Grow Depot Maine Indoor Garden Downriver
Cash $ 5,973  $ 2,331  $ 5,347  $ 9,902  $ 4,751  $ 8,100  $ 1,738  $ 1,165  $ 3,177 
Common stock 5,276  1,227  1,132  6,466  4,531  9,679  411  527  1,174 
Total $ 11,249  $ 3,558  $ 6,479  $ 16,368  $ 9,282  $ 17,779  $ 2,149  $ 1,692  $ 4,351 
Harvest Aquaserene Mendocino CGS Hoagtech All Seasons MMI Total
Cash $ 5,561  $ 9,860  $ 4,000  $ 5,976  $ 3,932  $ 701  $ 8,270  $ 80,784 
Common stock 2,764  1,791  —  1,272  —  241  781  37,272 
Total $ 8,325  $ 11,651  $ 4,000  $ 7,248  $ 3,932  $ 942  $ 9,051  $ 118,056 
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 December 31, 2021.
Agron Aquarius 55 Hydro Charcoir San Diego Hydro Grow Warehouse Grow Depot Maine Indoor Garden Downriver
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 3/31/2021
Revenue $ 14,403  $ 9,640  $ 6,017  $ 6,840  $ 7,173  $ 13,147  $ 6,655  $ 6,265  $ 3,663 
Net Income (loss) $ (305) $ 1,679  $ 399  $ 1,039  $ 906  $ 2,175  $ 1,132  $ 1,088  $ 297 
Harvest Aquaserene Mendocino CGS Hoagtech All Seasons MMI Total
Acquisition date
 5/3/21 7/19/21 7/19/21 8/24/21 8/23/21 10/15/21 12/31/21
Revenue
 $ 6,706  $ 2,742  $ 1,455  $ 1,534  $ 1,564  $ 187  $ —  $ 87,991 
Net Income (loss) $ 924  $ 445  $ 106  $ 15  $ 141  $ 52  $ —  $ 10,093 
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 years ended December 31, 2021, 2020, and 2019.
December 31,
2021 (Unaudited)		 December 31,
2020 (Unaudited)		 December 31,
2019 (Unaudited)
Revenue $ 452,126  $ 310,947  $ 197,315 
Net income $ 13,511  $ 18,480  $ 14,475 
2020 Acquisitions
On February 26, 2020, the Company purchased the assets of Health & Harvest LLC. The total consideration for the purchase was approximately $2.9 million, including approximately $1.8 million in cash and common stock valued at approximately $1.1 million. Acquired goodwill represents the value expected to rise from organic growth and the opportunity to expand into a well-established market for the Company.
On June 16, 2020, we acquired certain assets of H2O Hydroponics, LLC (“H2O Hydro”). The total consideration for the purchase was approximately $2.0 million, including approximately $1.3 million in cash and common stock valued at approximately $0.7 million. Acquired goodwill represents the value expected to rise from organic growth and the opportunity to expand into a well-established market for the Company.
On August 10, 2020, we acquired certain assets of Benzakry Family Corp, d/b/a Emerald City Garden (“Emerald City”). The total consideration for the purchase was approximately $1.0 million. Acquired goodwill represents the value expected to rise from organic growth and the opportunity to expand into a well-established market for the Company.
On October 12, 2020, the Company acquired the assets of Hydroponics Depot, LLC (“Hydro Depot”), a single store located in Phoenix, AZ. The total consideration for the purchase was approximately $1.5 million, including approximately $1.0 million in cash and common stock valued at approximately $0.5 million. Acquired goodwill represents the value expected to rise from organic growth and the opportunity to expand into a well-established market for the Company.
On October 20, 2020 the Company acquired the assets of Big Green Tomato (“BGT”), a two-store chain in Battle Creek and Taylor, Michigan. The total consideration was approximately $9.0 million, including approximately $6.0 million in cash and shares of common stock valued at approximately $3.1 million. Acquired goodwill of approximately $4.0 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On November 17, 2020, the Company acquired the assets of The GrowBiz (“GrowBiz”), a five-store chain with four stores in California and one store in Oregon. The total consideration for the purchase of GrowBiz was approximately $44.8 million, including approximately $17.5 million in cash and common stock valued at approximately $27.3 million. Acquired goodwill of approximately $28.5 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On December 14, 2020, the Company acquired the assets of Grassroots Hydroponics, Inc., a three-store chain in California. The total consideration for the purchase of Grassroots was approximately $10.0 million, approximately $7.5 million in cash and common stock valued at approximately $2.5 million. Acquired goodwill of approximately $4.5 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
On December 23, 2020, the Company acquired the assets of Canopy Crop Management (“Canopy”) and its complete portfolio of products including the Power SI brand of silicic acid-enriched fertilizers. The total consideration for the purchase of Canopy Crop was approximately $9.2 million, including approximately $5.4 million in cash and common stock valued at approximately $3.8 million. Acquired goodwill of approximately $4.9 million represents the value
expected to rise from organic growth and an opportunity to expand into a well-established product distribution market for the Company.
The table below represents the allocation of the purchase price to the acquired net assets during the year ended December 31, 2020:
Canopy Grassroots GrowBiz BGT Hydro Depot Emerald
City		 H2O
Hydro
LLC		 Health &
Harvest
LLC		 Total
Inventory $ 899  $ 2,348  $ 6,286  $ 1,595  $ 333  $ 150  $ 498  $ 1,054  $ 13,163 
Prepaids and other current assets —  —  —  —  —  —  4  —  4 
Building —  —  —  477  —  —  0  —  477 
Furniture and equipment —  150  200  250  25  10  50  51  736 
Operating lease right to use asset —  1,437  3,641  246  —  140  906  324  6,694 
Operating lease liability —  (1,437) (3,641) (246) —  (140) (906) (324) (6,694)
Customer relationships 2,274  768  1,969  634  148  212  150  255  6,410 
Trade name 1,094  2,140  7,483  1,953  212  —  234  357  13,473 
Non-compete 113  133  372  96  19  14  43  6  796 
Goodwill 4,860  4,461  28,476  4,039  799  614  1,008  1,131  45,388 
Total $ 9,240  $ 10,000  $ 44,786  $ 9,044  $ 1,536  $ 1,000  $ 1,987  $ 2,854  $ 80,447 
The table below represents the consideration paid for the net assets acquired in business combinations during 2020:
Canopy Grassroots GrowBiz BGT Hydro Depot Emerald
City		 H2O
Hydro
LLC		 Health &
Harvest
LLC		 Total
Cash $ 5,424  $ 7,499  $ 17,487  $ 5,972  $ 988  $ 1,000  $ 1,282  $ 1,750  $ 41,402 
Common stock 3,816  2,501  27,299  3,072  548  —  705  1,104  39,045 
Total $ 9,240  $ 10,000  $ 44,786  $ 9,044  $ 1,536  $ 1,000  $ 1,987  $ 2,854  $ 80,447 
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 December 31, 2020:
Canopy Grassroots GrowBiz BGT Hydro Depot Emerald
City		 H2O
Hydro
LLC		 Health &
Harvest
LLC		 Total
Acquisition date 12/23/2020 12/14/2020 11/17/2020 10/20/2020 10/12/2020 8/10/2020 6/16/2020 2/26/2020
Revenue $ 301  $ 532  $ 3,852  $ 1,859  $ 1,245  $ 5,635  $ 2,418  $ 8,995  $ 24,837 
Net Income $ 141  $ 74  $ 736  $ 188  $ 149  $ 1,005  $ 562  $ 1,066  $ 3,921 
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 years ended December 31, 2020 and 2019.
December 31,
2020 (Unaudited)		 December 31,
2019 (Unaudited)
Revenue $ 309,486  $ 195,854 
Earnings $ 18,308  $ 14,302 
The table below represents the allocation of the purchase price to the acquired net assets during the year ended December 31, 2019:

Grow
World
LLC		 Grand
Rapids
Hydro		 Green
Life
Garden		 Chlorophyll Reno
Hydroponics		 Palm
Springs
Hydroponics		 Total
Inventory
 $ 554  $ 1,453  $ 1,039  $ 1,441  $ 238  $ 466  $ 5,191 
Prepaids and other current assets
 —  14  22  —  36 
Furniture and equipment
 35  50  100  100  25  25  335 
Goodwill
 697  2,377  2,306  2,596  516  554  9,046 
Total
 $ 1,286  $ 3,880  $ 3,459  $ 4,159  $ 779  $ 1,045  $ 14,608 

The table below represents the consideration paid for the net assets acquired in business combinations.

Grow
World
LLC		 Grand
Rapids
Hydro		 Green
Life
Garden		 Chlorophyll Reno Hydroponics Palm
Springs
Hydroponics		 Total
Cash $ 1,000  $ 2,350  $ 2,648  $ 3,659  $ 525  $ 800  $ 10,982 
Common stock 286  1,530  811  500  254  245  3,626 
Total $ 1,286  $ 3,880  $ 3,459  $ 4,159  $ 779  $ 1,045  $ 14,608 

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
Grow
World
LLC		 Grand
Rapids
Hydro		 Green
Life
Garden		 Chlorophyll Reno
Hydroponics		 Palm
Springs
Hydroponics		 Total
Acquisition date 12/16/19 09/03/19 05/14/19 01/21/19 02/11/19 02/07/19
Revenue $ 154  $ 2,413  $ 4,830  $ 6,031  $ 2,107  $ 3,075  $ 18,610 
Earnings $ 6  $ 445  $ 999  $ 937  $ 367  $ 651  $ 3,405 
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 years ended:
December 31, 2019 (Unaudited) December 31,
2018 (Unaudited)
Revenue $ 31,300  $ 59,651 
Earnings $ 4,751  $ (2,088)