Quarterly report pursuant to Section 13 or 15(d)

ACQUISITIONS

v3.22.2.2
ACQUISITIONS
 6 Months Ended
Jun. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
ACQUISITIONS
 7. ACQUISITIONS
2022 Business Combinations
The Company had the following acquisitions during the six months ended June 30, 2022: (i) Apothecarium; and (ii) NuLeaf (all 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 $ 14,850  $ 6,617  $ 21,467 
Consideration payable in cash (customary hold back) 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 8,057  —  8,057 
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 assuming revenue growth rates of 7.5%, in 2023, 1% in 2024, 2% in 2025 and 3% thereafter for NuLeaf and 5.3% in 2023 and 3% thereafter for Apothecarium.
(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. The change in Goodwill for the six months ended June 30, 2022 is entirely attributable to the acquisitions.
(4)Refer to “Acquisition-Related Promissory Notes” in Note 9 - Debt for details on the seller notes.
NuLeaf
In April 2022, the Company closed on the acquisition of 100% of NuLeaf Inc., NuLeaf CLV Inc. and their subsidiaries (collectively, “NuLeaf”). The Company paid upfront consideration comprised of $14,850 in cash, subject to working capital adjustments, 4,662,384 SVS (with an acquisition date fair value of $2.91 per SVS), and an unsecured five-year note with a face value of $15,750. Additionally, cash consideration of $1,000 was subjected to customary holdbacks at closing. The Company was required to pay an additional $10,000 ($3,000 in cash, $3,000 as an addition to the five-year note and the balance in shares) contingent on the opening of a third retail dispensary. In June 2022, the Company opened the third retail dispensary, and in July 2022, the Company paid $3,000 in cash, amended the five-year note for an additional face value of $3,000 and issued 888,880 SVS to settle the contingent liability.
As of June 30, 2022, the Company remeasured the contingent consideration and recognized a gain of $1,326, primarily related to the change in the Company’s stock price. The remeasurement reduced the total contingent consideration liability from $8,057 on the acquisition date to $6,731 on June 30, 2022 and is included within accrued expenses and other current liabilities.
Apothecarium
In March 2022, the Company closed on the acquisition of 100% of the equity interest of an entity operating an adult-use and medical retail dispensary under the name, “The Apothecarium” in Las Vegas, Nevada (“Apothecarium”), for upfront consideration comprised of $6,617 in cash, net of working capital adjustments, 527,704 SVS (with a grant date fair value of $3.02 each), and an unsecured five-year note with a face value of $9,853. Refer to Note 9 - Debt for details on the seller notes. The Apothecarium acquisition, together with the prior acquisition of Franklin Bioscience NV, LLC, a holder of medical and adult-use cannabis cultivation, processing, and distribution licenses, enables the Company to become vertically integrated in Nevada, as well as provide significant branding exposure for Jushi’s high-quality product lines.
In addition, the Company may pay up to $2,000 in potential earn-out consideration based on the achievement of certain financial metrics. As of the date of acquisition and June 30, 2022, the Company has not recognized a contingent consideration liability for this acquisition as the probability is unlikely. The estimated range of such potential additional consideration is between $0 and $2,000.
Preliminary Purchase Price Allocations for 2022 Business Combinations
The consideration has been allocated to the estimated fair values of the assets acquired and liabilities assumed at the dates of the acquisitions and remain preliminary as of June 30, 2022. These estimated fair values involve significant judgement and estimates. The primary area of judgement involves the valuation of the business licenses acquired, which requires management to estimate value based on future cash flows from these assets. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to: licenses acquired, inventories, property, plant and equipment, leases, contingent consideration, promissory notes, deferred tax liabilities, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at the acquisition date
during the measurement period.
Business Combinations - Acquisition and Deal Costs
For the three and six months ended June 30, 2022, acquisition and deal costs relating to Apothecarium and NuLeaf totaled $1,109 and $1,260, respectively, and are included within operating expenses in the consolidated statements of operations and comprehensive income (loss). The remaining acquisition and deal costs included in operating expenses were incurred either for acquisitions not completed or not expected to be completed.
2021 Business Combinations and Asset Acquisitions
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 (all 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)
46,000  2,160  1,817  3,654  53,631 
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 $ 121,619  $ 5,932  $ 4,982  $ 5,992  $ 138,525 
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 19,876  648  —  —  20,524 
Total liabilities assumed $ 55,199  $ 4,108  $ —  $ 2,032  $ 61,339 
Net assets acquired $ 66,420  $ 1,824  $ 4,982  $ 3,960  $ 77,186 
Goodwill 33,178  2,432  —  —  35,610 
Total $ 99,598  $ 4,256  $ 4,982  $ 3,960  $ 112,796 
Business Combinations Asset Acquisitions
Nature’s Remedy OSD OhiGrow Grover Beach Total
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) 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 $ 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. The range of total estimated potential indemnification assets is from $0 to $6,322; however, there is no limit on the Nature’s Remedy indemnification asset. 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.
2021 Business Combinations
Nature’s Remedy
On September 10, 2021, the Company acquired 100% of the equity of Nature’s Remedy of Massachusetts, Inc. and certain of its affiliates (collectively, “Nature’s Remedy”), for upfront consideration comprised of cash, net of working capital adjustments, 8,700,000 SVS (with a grant date fair value of $4.10 each), an $11,500 unsecured three-year note and a $5,000 unsecured five-year note.
Nature’s Remedy is a vertically integrated single state operator in Massachusetts and currently operates two retail dispensaries, in Millbury, MA and Tyngsborough, MA, and a 50,000 sq. ft. cultivation and production facility in Lakeville, MA. The goodwill is not tax deductible.
The Company also agreed to issue a $5,000 increase to the principal balance of the three-year note and up to an additional $5,000 in Company SVS upon the occurrence or non-occurrence of certain events after the closing date. The payment of the contingent consideration depends on whether or not a competitor opens a competing dispensary within a certain radius of the Company’s dispensary in the Town of Tyngsborough, MA during the first 12 months following the acquisition (The “First Milestone Period”) or during the 18 months following the end of the First Milestone Period. As of the date of acquisition, the Company recognized a contingent consideration liability of $8,223, a Level 3 measurement amount, which was based on the weighted-average probability of the potential outcomes. The estimated range of such additional consideration is between $0 and $10,800 (which also includes the interest on the additional principal for the three-year note). Contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred for the business combination. Contingent consideration that is classified as a liability is remeasured at subsequent reporting dates with the corresponding gain or loss being recognized in Other, net in the consolidated statements of operations and comprehensive income (loss).
As of June 30, 2022, the Company remeasured the contingent consideration and increased the total liability, primarily related to accretion from $8,223 on December 31, 2021, to $8,871 on June 30, 2022. The Company utilized the cash flows associated with the weighted-average probability of the potential outcomes to determine the potential cash outflows that
are short-term vs. long-term. As a result, the Company classified $1,828 as a short-term contingent liability and $7,043 as a long-term contingent liability as of June 30, 2022.
OSD
On April 30, 2021, the Company acquired 100% of the equity of Organic Solutions of the Desert, LLC (“OSD”), an operating dispensary located in Palm Springs, California, for consideration comprised of cash, as adjusted for working capital adjustments, and $3,100 principal amount of promissory notes. Refer to “Promissory Notes Payable” in Note 9 - Debt for details on the seller notes. The goodwill is not tax deductible.
Preliminary Purchase Price Allocations for 2021 Business Combinations
The consideration for Nature’s Remedy has been allocated to the estimated fair values of the assets acquired and liabilities assumed at the dates of the acquisitions and remain preliminary as of June 30, 2022. These estimated fair values involve significant judgement and estimates. The primary areas of judgement involved are the valuation of the intangible assets acquired, which requires management to estimate value based on future cash flows from these assets. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to: intangible assets acquired, property, plant and equipment, indemnification assets, contingent consideration, deferred tax liabilities, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired as of the respective acquisition dates during the measurement period.
2021 Asset Acquisitions
The Company determined that the OhiGrow and Grover Beach acquisitions described below did not qualify as business combinations because, for OhiGrow, the assets acquired did not constitute a business, and for Grover Beach, under the concentration test, substantially all of the fair value of the acquisition is concentrated in a single identifiable asset – the license.
OhiGrow
In July 2021, the Company acquired OhiGrow, LLC, a licensed cultivator in Ohio, and Ohio Green Grow LLC (collectively, “OhiGrow”), inclusive of an approximately 10,000 sq. ft. facility and 1.35 acres of land for $4,949 in cash.
Grover Beach
On March 4, 2021, the Company closed on the acquisition of approximately 78% of the equity of a retail license holder located in Grover Beach, California (“Grover Beach”) for $3,592 in cash, as adjusted for working capital adjustments, and 49,348 SVS at a fair value of $7.46 per share, with the rights to acquire the remaining equity for one dollar in the future. On September 9, 2022, the Company exercised its rights to acquire the remaining 22%.
Business Combinations Acquisition Results and Unaudited Supplemental Pro Forma Financial Information
The following table summarizes consolidated proforma revenue and consolidated proforma 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 June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenue $ 73,149  $ 69,472  $ 144,309  $ 132,259 
Net income (loss) $ 12,712  $ (140) $ (4,636) $ (33,112)
These unaudited pro forma financial results do not purport to be indicative of the actual results that would have been achieved by the combined companies for the years indicated, or of the results that may be achieved by the combined companies in the future. These amounts have been calculated using actual results and adding pre-acquisition results, after adjusting for: acquisition costs, additional depreciation and amortization from acquired property, plant and equipment and intangible assets, as well as adjustments for incremental interest expense relating to consideration paid, and changes to conform to the Company’s accounting policies.
The results of Apothecarium and NuLeaf are included in the Company’s results since their respective acquisition date. For the three and six months ended June 30, 2022, in the aggregate, Apothecarium and NuLeaf, contributed revenues of $9,008 and $9,564, respectively, and net loss of ($740) and ($811), respectively, to the Company’s consolidated results.
ACQUISITIONS
 7. ACQUISITIONS
2022 Business Combinations
The Company had the following acquisitions during the six months ended June 30, 2022: (i) Apothecarium; and (ii) NuLeaf (all 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 $ 14,850  $ 6,617  $ 21,467 
Consideration payable in cash (customary hold back) 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 8,057  —  8,057 
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 assuming revenue growth rates of 7.5%, in 2023, 1% in 2024, 2% in 2025 and 3% thereafter for NuLeaf and 5.3% in 2023 and 3% thereafter for Apothecarium.
(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. The change in Goodwill for the six months ended June 30, 2022 is entirely attributable to the acquisitions.
(4)Refer to “Acquisition-Related Promissory Notes” in Note 9 - Debt for details on the seller notes.
NuLeaf
In April 2022, the Company closed on the acquisition of 100% of NuLeaf Inc., NuLeaf CLV Inc. and their subsidiaries (collectively, “NuLeaf”). The Company paid upfront consideration comprised of $14,850 in cash, subject to working capital adjustments, 4,662,384 SVS (with an acquisition date fair value of $2.91 per SVS), and an unsecured five-year note with a face value of $15,750. Additionally, cash consideration of $1,000 was subjected to customary holdbacks at closing. The Company was required to pay an additional $10,000 ($3,000 in cash, $3,000 as an addition to the five-year note and the balance in shares) contingent on the opening of a third retail dispensary. In June 2022, the Company opened the third retail dispensary, and in July 2022, the Company paid $3,000 in cash, amended the five-year note for an additional face value of $3,000 and issued 888,880 SVS to settle the contingent liability.
As of June 30, 2022, the Company remeasured the contingent consideration and recognized a gain of $1,326, primarily related to the change in the Company’s stock price. The remeasurement reduced the total contingent consideration liability from $8,057 on the acquisition date to $6,731 on June 30, 2022 and is included within accrued expenses and other current liabilities.
Apothecarium
In March 2022, the Company closed on the acquisition of 100% of the equity interest of an entity operating an adult-use and medical retail dispensary under the name, “The Apothecarium” in Las Vegas, Nevada (“Apothecarium”), for upfront consideration comprised of $6,617 in cash, net of working capital adjustments, 527,704 SVS (with a grant date fair value of $3.02 each), and an unsecured five-year note with a face value of $9,853. Refer to Note 9 - Debt for details on the seller notes. The Apothecarium acquisition, together with the prior acquisition of Franklin Bioscience NV, LLC, a holder of medical and adult-use cannabis cultivation, processing, and distribution licenses, enables the Company to become vertically integrated in Nevada, as well as provide significant branding exposure for Jushi’s high-quality product lines.
In addition, the Company may pay up to $2,000 in potential earn-out consideration based on the achievement of certain financial metrics. As of the date of acquisition and June 30, 2022, the Company has not recognized a contingent consideration liability for this acquisition as the probability is unlikely. The estimated range of such potential additional consideration is between $0 and $2,000.
Preliminary Purchase Price Allocations for 2022 Business Combinations
The consideration has been allocated to the estimated fair values of the assets acquired and liabilities assumed at the dates of the acquisitions and remain preliminary as of June 30, 2022. These estimated fair values involve significant judgement and estimates. The primary area of judgement involves the valuation of the business licenses acquired, which requires management to estimate value based on future cash flows from these assets. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to: licenses acquired, inventories, property, plant and equipment, leases, contingent consideration, promissory notes, deferred tax liabilities, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at the acquisition date
during the measurement period.
Business Combinations - Acquisition and Deal Costs
For the three and six months ended June 30, 2022, acquisition and deal costs relating to Apothecarium and NuLeaf totaled $1,109 and $1,260, respectively, and are included within operating expenses in the consolidated statements of operations and comprehensive income (loss). The remaining acquisition and deal costs included in operating expenses were incurred either for acquisitions not completed or not expected to be completed.
2021 Business Combinations and Asset Acquisitions
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 (all 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)
46,000  2,160  1,817  3,654  53,631 
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 $ 121,619  $ 5,932  $ 4,982  $ 5,992  $ 138,525 
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 19,876  648  —  —  20,524 
Total liabilities assumed $ 55,199  $ 4,108  $ —  $ 2,032  $ 61,339 
Net assets acquired $ 66,420  $ 1,824  $ 4,982  $ 3,960  $ 77,186 
Goodwill 33,178  2,432  —  —  35,610 
Total $ 99,598  $ 4,256  $ 4,982  $ 3,960  $ 112,796 
Business Combinations Asset Acquisitions
Nature’s Remedy OSD OhiGrow Grover Beach Total
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) 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 $ 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. The range of total estimated potential indemnification assets is from $0 to $6,322; however, there is no limit on the Nature’s Remedy indemnification asset. 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.
2021 Business Combinations
Nature’s Remedy
On September 10, 2021, the Company acquired 100% of the equity of Nature’s Remedy of Massachusetts, Inc. and certain of its affiliates (collectively, “Nature’s Remedy”), for upfront consideration comprised of cash, net of working capital adjustments, 8,700,000 SVS (with a grant date fair value of $4.10 each), an $11,500 unsecured three-year note and a $5,000 unsecured five-year note.
Nature’s Remedy is a vertically integrated single state operator in Massachusetts and currently operates two retail dispensaries, in Millbury, MA and Tyngsborough, MA, and a 50,000 sq. ft. cultivation and production facility in Lakeville, MA. The goodwill is not tax deductible.
The Company also agreed to issue a $5,000 increase to the principal balance of the three-year note and up to an additional $5,000 in Company SVS upon the occurrence or non-occurrence of certain events after the closing date. The payment of the contingent consideration depends on whether or not a competitor opens a competing dispensary within a certain radius of the Company’s dispensary in the Town of Tyngsborough, MA during the first 12 months following the acquisition (The “First Milestone Period”) or during the 18 months following the end of the First Milestone Period. As of the date of acquisition, the Company recognized a contingent consideration liability of $8,223, a Level 3 measurement amount, which was based on the weighted-average probability of the potential outcomes. The estimated range of such additional consideration is between $0 and $10,800 (which also includes the interest on the additional principal for the three-year note). Contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred for the business combination. Contingent consideration that is classified as a liability is remeasured at subsequent reporting dates with the corresponding gain or loss being recognized in Other, net in the consolidated statements of operations and comprehensive income (loss).
As of June 30, 2022, the Company remeasured the contingent consideration and increased the total liability, primarily related to accretion from $8,223 on December 31, 2021, to $8,871 on June 30, 2022. The Company utilized the cash flows associated with the weighted-average probability of the potential outcomes to determine the potential cash outflows that
are short-term vs. long-term. As a result, the Company classified $1,828 as a short-term contingent liability and $7,043 as a long-term contingent liability as of June 30, 2022.
OSD
On April 30, 2021, the Company acquired 100% of the equity of Organic Solutions of the Desert, LLC (“OSD”), an operating dispensary located in Palm Springs, California, for consideration comprised of cash, as adjusted for working capital adjustments, and $3,100 principal amount of promissory notes. Refer to “Promissory Notes Payable” in Note 9 - Debt for details on the seller notes. The goodwill is not tax deductible.
Preliminary Purchase Price Allocations for 2021 Business Combinations
The consideration for Nature’s Remedy has been allocated to the estimated fair values of the assets acquired and liabilities assumed at the dates of the acquisitions and remain preliminary as of June 30, 2022. These estimated fair values involve significant judgement and estimates. The primary areas of judgement involved are the valuation of the intangible assets acquired, which requires management to estimate value based on future cash flows from these assets. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to: intangible assets acquired, property, plant and equipment, indemnification assets, contingent consideration, deferred tax liabilities, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired as of the respective acquisition dates during the measurement period.
2021 Asset Acquisitions
The Company determined that the OhiGrow and Grover Beach acquisitions described below did not qualify as business combinations because, for OhiGrow, the assets acquired did not constitute a business, and for Grover Beach, under the concentration test, substantially all of the fair value of the acquisition is concentrated in a single identifiable asset – the license.
OhiGrow
In July 2021, the Company acquired OhiGrow, LLC, a licensed cultivator in Ohio, and Ohio Green Grow LLC (collectively, “OhiGrow”), inclusive of an approximately 10,000 sq. ft. facility and 1.35 acres of land for $4,949 in cash.
Grover Beach
On March 4, 2021, the Company closed on the acquisition of approximately 78% of the equity of a retail license holder located in Grover Beach, California (“Grover Beach”) for $3,592 in cash, as adjusted for working capital adjustments, and 49,348 SVS at a fair value of $7.46 per share, with the rights to acquire the remaining equity for one dollar in the future. On September 9, 2022, the Company exercised its rights to acquire the remaining 22%.
Business Combinations Acquisition Results and Unaudited Supplemental Pro Forma Financial Information
The following table summarizes consolidated proforma revenue and consolidated proforma 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 June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenue $ 73,149  $ 69,472  $ 144,309  $ 132,259 
Net income (loss) $ 12,712  $ (140) $ (4,636) $ (33,112)
These unaudited pro forma financial results do not purport to be indicative of the actual results that would have been achieved by the combined companies for the years indicated, or of the results that may be achieved by the combined companies in the future. These amounts have been calculated using actual results and adding pre-acquisition results, after adjusting for: acquisition costs, additional depreciation and amortization from acquired property, plant and equipment and intangible assets, as well as adjustments for incremental interest expense relating to consideration paid, and changes to conform to the Company’s accounting policies.
The results of Apothecarium and NuLeaf are included in the Company’s results since their respective acquisition date. For the three and six months ended June 30, 2022, in the aggregate, Apothecarium and NuLeaf, contributed revenues of $9,008 and $9,564, respectively, and net loss of ($740) and ($811), respectively, to the Company’s consolidated results.