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ACQUISITIONS | 6 Months Ended
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Jun. 30, 2021
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS | 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. 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 |
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 |  |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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