Quarterly report pursuant to Section 13 or 15(d)

ACQUISITIONS (Tables)

v3.22.2.2
ACQUISITIONS (Tables)
 9 Months Ended
Sep. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
Schedule of Business Acquisitions, by Acquisition
The Company had the following acquisitions during the nine months ended September 30, 2022: (i) Apothecarium; and (ii) NuLeaf (each as defined below). The following table summarizes the preliminary purchase price allocations as of their respective acquisition dates:
NuLeaf Apothecarium Total
Assets Acquired:
Cash and cash equivalents $ 618  $ 25  $ 643 
Prepaids and other assets 273  32  305 
Accounts receivable, net 39  —  39 
Inventory 5,791  699  6,490 
Indemnification assets (1)
4,145  —  4,145 
Property, plant and equipment 5,513  498  6,011 
Right-of-use assets - finance lease 4,598  2,553  7,151 
Right-of-use assets - operating lease 1,067  —  1,067 
Intangible assets (2)
17,440  8,200  25,640 
Deposits 110  301  411 
Total assets acquired $ 39,594  $ 12,308  $ 51,902 
Liabilities Assumed:
Accounts payable and accrued liabilities $ 604  $ 502  $ 1,106 
Finance lease obligations 4,598  2,544  7,142 
Operating lease obligations 1,067  —  1,067 
Deferred tax liabilities 10,247  2,601  12,848 
Total liabilities assumed $ 16,516  $ 5,647  $ 22,163 
Net assets acquired $ 23,078  $ 6,661  $ 29,739 
Goodwill (3)
27,262  8,472  35,734 
Total $ 50,340  $ 15,133  $ 65,473 
Consideration:
Consideration paid in cash, as adjusted for working capital adjustments $ 14,918  $ 6,617  $ 21,535 
Consideration payable in cash (customary hold back liability) 1,000  —  1,000 
Consideration paid in promissory notes (fair value) (4)
12,860  6,922  19,782 
Consideration paid in shares 13,573  1,594  15,167 
Contingent consideration 7,989  —  7,989 
Fair value of consideration $ 50,340  $ 15,133  $ 65,473 
(1)As part of the NuLeaf acquisition agreement, the sellers contractually agreed to indemnify the Company for certain amounts that may become payable, including for taxes that relate to periods prior to the date of acquisition. Accordingly, the Company recorded indemnification assets and corresponding estimated accrued tax liabilities, at fair value, for a total of $4,145 as of the date of the acquisition. Subsequent changes in the amounts recognized for the indemnification assets may occur in relation to the provision for the corresponding tax liabilities, according to changes in the range of outcomes or the assumptions used to develop the estimates of the liabilities at the time of the acquisition
(2)Included licenses acquired of $14,700 and $8,200 for NuLeaf and Apothecarium, respectively, which have indefinite useful lives. The estimated fair values of the licenses were determined using the multi-period excess earnings method under the income approach based on projections extended to 2036.
(3)The goodwill recognized from the acquisitions is attributable to synergies expected from integrating the acquired businesses into the Company’s existing business. The goodwill acquired is not deductible for tax purposes.
(4)Refer to “Acquisition-Related Promissory Notes” in Note 10 - Debt for details on the seller notes.
The Company had the following acquisitions during the year ended December 31, 2021: (i) Nature’s Remedy; (ii) OSD; (iii) OhiGrow; and (iv) Grover Beach (each as defined below). The following table summarizes the purchase price allocations as of their respective acquisition dates:
Business Combinations Asset Acquisitions
Nature’s Remedy OSD OhiGrow Grover Beach Total
Assets Acquired:
Cash and cash equivalents $ 3,195  $ 259  $ —  $ —  $ 3,454 
Prepaids 325  53  —  —  378 
Accounts receivable, net 263  —  —  —  263 
Inventory 15,882  184  —  —  16,066 
Indemnification assets (1)
1,322  1,411  —  —  2,733 
Property, plant and equipment 19,470  —  3,165  269  22,904 
Right-of-use assets - finance leases 27,305  —  —  2,050  29,355 
Right-of-use assets - operating leases 1,337  1,859  —  —  3,196 
Intangible assets - license (2)(4)
56,000  2,160  1,817  3,654  63,631 
Intangible assets - tradenames (2)
4,400  —  —  —  4,400 
Intangible assets - customer database (2)
2,100  —  —  —  2,100 
Deposits 20  6  —  19  45 
  Total assets acquired (3)(4)
$ 131,619  $ 5,932  $ 4,982  $ 5,992  $ 148,525 
Liabilities Assumed:
Accounts payable and accrued liabilities $ 7,004  $ 1,601  $ —  $ —  $ 8,605 
Finance lease obligations 27,052  —  —  2,032  29,084 
Operating lease obligations 1,267  1,859  —  —  3,126 
Deferred tax liabilities (4)
22,784  648  —  —  23,432 
Total liabilities assumed (3)(4)
$ 58,107  $ 4,108  $ —  $ 2,032  $ 64,247 
Net assets acquired (3)(4)
$ 73,512  $ 1,824  $ 4,982  $ 3,960  $ 84,278 
Goodwill (3)(4)
26,086  2,432  —  —  28,518 
Total $ 99,598  $ 4,256  $ 4,982  $ 3,960  $ 112,796 
Consideration:
Consideration paid in cash, as adjusted for working capital adjustments $ 40,360  $ 1,827  $ 4,949  $ 3,592  $ 50,728 
Consideration paid in promissory notes (fair value) (3)
15,345  2,429  —  —  17,774 
Consideration paid in shares 35,670  —  —  368  36,038 
Contingent consideration 8,223  —  —  —  8,223 
Capitalized costs —  —  33  —  33 
  Fair value of consideration (3)
$ 99,598  $ 4,256  $ 4,982  $ 3,960  $ 112,796 
(1)     As part of the OSD and Nature’s Remedy acquisition agreements, the sellers contractually agreed to indemnify the Company for certain amounts that may become payable, including for taxes that relate to periods prior to the date of acquisition. Accordingly, the Company recorded indemnification assets and corresponding estimated accrued tax liabilities, at fair value, for a total of $2,733 as of the dates of the acquisitions. Additional subsequent changes in the amounts recognized for the indemnification assets may occur in relation to the provision for the corresponding tax liabilities, according to changes in the range of outcomes or the assumptions used to develop the estimates of the liabilities at the time of the acquisition.
(2)     The licenses acquired have indefinite useful lives. The customer relationships have a useful life of 15 years and the tradenames have a useful life of 5 years.
(3) These amounts include certain measurement period adjustments made during the fourth quarter of 2021, and the adjustments were as follows: (i) a decrease in total assets acquired of $12,020; (ii) a decrease in total liabilities assumed of $5,248, (iii) a decrease in total net assets acquired of $6,772, (iv) an increase in goodwill of $6,405, and (v) a decrease in fair value of consideration of $367.
(4) The amounts for the Nature’s Remedy and Total columns reflect the revised amounts in connection with the correction of errors disclosed in Correction of Errors in Previously Issued Financial Statements in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies. Specifically, intangible assets - license increased by $10,000, goodwill decreased by $7,092, and deferred tax liabilities increased by $2,908.
Asset Acquisition
The Company had the following acquisitions during the year ended December 31, 2021: (i) Nature’s Remedy; (ii) OSD; (iii) OhiGrow; and (iv) Grover Beach (each as defined below). The following table summarizes the purchase price allocations as of their respective acquisition dates:
Business Combinations Asset Acquisitions
Nature’s Remedy OSD OhiGrow Grover Beach Total
Assets Acquired:
Cash and cash equivalents $ 3,195  $ 259  $ —  $ —  $ 3,454 
Prepaids 325  53  —  —  378 
Accounts receivable, net 263  —  —  —  263 
Inventory 15,882  184  —  —  16,066 
Indemnification assets (1)
1,322  1,411  —  —  2,733 
Property, plant and equipment 19,470  —  3,165  269  22,904 
Right-of-use assets - finance leases 27,305  —  —  2,050  29,355 
Right-of-use assets - operating leases 1,337  1,859  —  —  3,196 
Intangible assets - license (2)(4)
56,000  2,160  1,817  3,654  63,631 
Intangible assets - tradenames (2)
4,400  —  —  —  4,400 
Intangible assets - customer database (2)
2,100  —  —  —  2,100 
Deposits 20  6  —  19  45 
  Total assets acquired (3)(4)
$ 131,619  $ 5,932  $ 4,982  $ 5,992  $ 148,525 
Liabilities Assumed:
Accounts payable and accrued liabilities $ 7,004  $ 1,601  $ —  $ —  $ 8,605 
Finance lease obligations 27,052  —  —  2,032  29,084 
Operating lease obligations 1,267  1,859  —  —  3,126 
Deferred tax liabilities (4)
22,784  648  —  —  23,432 
Total liabilities assumed (3)(4)
$ 58,107  $ 4,108  $ —  $ 2,032  $ 64,247 
Net assets acquired (3)(4)
$ 73,512  $ 1,824  $ 4,982  $ 3,960  $ 84,278 
Goodwill (3)(4)
26,086  2,432  —  —  28,518 
Total $ 99,598  $ 4,256  $ 4,982  $ 3,960  $ 112,796 
Consideration:
Consideration paid in cash, as adjusted for working capital adjustments $ 40,360  $ 1,827  $ 4,949  $ 3,592  $ 50,728 
Consideration paid in promissory notes (fair value) (3)
15,345  2,429  —  —  17,774 
Consideration paid in shares 35,670  —  —  368  36,038 
Contingent consideration 8,223  —  —  —  8,223 
Capitalized costs —  —  33  —  33 
  Fair value of consideration (3)
$ 99,598  $ 4,256  $ 4,982  $ 3,960  $ 112,796 
(1)     As part of the OSD and Nature’s Remedy acquisition agreements, the sellers contractually agreed to indemnify the Company for certain amounts that may become payable, including for taxes that relate to periods prior to the date of acquisition. Accordingly, the Company recorded indemnification assets and corresponding estimated accrued tax liabilities, at fair value, for a total of $2,733 as of the dates of the acquisitions. Additional subsequent changes in the amounts recognized for the indemnification assets may occur in relation to the provision for the corresponding tax liabilities, according to changes in the range of outcomes or the assumptions used to develop the estimates of the liabilities at the time of the acquisition.
(2)     The licenses acquired have indefinite useful lives. The customer relationships have a useful life of 15 years and the tradenames have a useful life of 5 years.
(3) These amounts include certain measurement period adjustments made during the fourth quarter of 2021, and the adjustments were as follows: (i) a decrease in total assets acquired of $12,020; (ii) a decrease in total liabilities assumed of $5,248, (iii) a decrease in total net assets acquired of $6,772, (iv) an increase in goodwill of $6,405, and (v) a decrease in fair value of consideration of $367.
(4) The amounts for the Nature’s Remedy and Total columns reflect the revised amounts in connection with the correction of errors disclosed in Correction of Errors in Previously Issued Financial Statements in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies. Specifically, intangible assets - license increased by $10,000, goodwill decreased by $7,092, and deferred tax liabilities increased by $2,908.
Business Acquisition, Pro Forma Information
The following table summarizes consolidated pro forma revenue and consolidated pro forma net income (loss) as if the business combinations had occurred at the beginning of the year prior to their actual acquisition for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Revenue $ 72,817  $ 73,595  $ 217,126  $ 207,538 
Net income (loss) $ (53,982) $ 41,085  $ (57,386) $ 7,973