Quarterly report pursuant to Section 13 or 15(d)

ACQUISITIONS (Tables)

v3.22.2.2
ACQUISITIONS (Tables)
 6 Months Ended
Jun. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
Schedule of Business Acquisitions, by Acquisition
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.
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.
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 (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.
Business Acquisition, Pro Forma 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)