Annual report pursuant to Section 13 and 15(d)

Acquisitions

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Acquisitions
12 Months Ended
Dec. 31, 2017
Acquisitions [Abstract]  
ACQUISITIONS
13. 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. Results of operations are included in the Company’s financial statements from the date of acquisition. For the acquisitions noted below, the Company used the income approach to determine the fair value of the customer relationships, the relief from royalty method to determine the fair value of trademarks and the comparison of economic income using the with/without approach to determine the fair value of non-compete agreements. The Company used Level 3 inputs to determine the fair value of all these intangible assets.

 

On February 8, 2017, through its wholly-owned subsidiary, GrowGeneration California Corp. (“GrowGeneration California”), the Company purchased certain assets of Sonoma Hydro, a retail hydroponic and garden supply business located in Santa Rosa, CA.

 

The assets purchased included inventories, fixed assets, tangible personal property, intangible personal property, receivables and a customer list. In addition to the cash consideration for the purchase of such assets, GrowGeneration California also agreed to make certain cash payments and 25,000 shares of common stock of the Company to the Seller contingent on the achievement of revenue goals by the Business in 2017, 2018 and 2019.

 

The total purchase price including contingent purchase obligation earned by the seller was $641,589. The purchase price was allocated as follows:

 

  Inventory   $ 272,089  
  Furniture and equipment     50,000  
  Goodwill     319,500  
  Total   $ 641,589