Business Context and Reporting Period
Company: GrowGeneration Corp. (GRWG)
Filing Type: Form 8-K (Current Report)
Date of Report: July 27, 2021
Event: Entry into Material Definitive Agreements to acquire assets from subsidiaries of HGS Hydro.
Key Financial Metrics and Transaction Details
The filing details a significant acquisition rather than standard periodic financial results. Key transaction metrics include:
- Total Purchase Price: Approximately $72,180,691.
- Assets Acquired: Six existing retail stores in Michigan and one store scheduled to open in Fall 2021.
- Consideration Breakdown:
- Cash: $35,000,000
- Restricted Common Stock: $17,000,000
- Inventory (Estimated): $19,400,691
- Fixed Assets: $780,000
- Stock Valuation Method: Restricted stock value is based on the lower of the 90-day volume-weighted average price (VWAP) on July 27, 2021, or the closing price prior to the transaction closing.
Material Changes and Store-Specific Allocation
The acquisition expands the Company's footprint in Michigan. The purchase price is allocated across seven specific agreements as follows:
| Location | Inventory Estimate | Fixed Assets | Cash Consideration | Stock Consideration |
|---|---|---|---|---|
| Walled Lake | $6,373,794 | $219,910 | $8,782,079 | $4,259,165 |
| Sterling Heights | $2,260,893 | $125,440 | $5,233,173 | $3,245,192 |
| Albion | $391,527 | $33,640 | $698,549 | $1,949,585 |
| Shelby | $4,414,993 | $134,435 | $8,825,596 | $2,521,599 |
| Southfield | $943,655 | $86,860 | $2,966,857 | $847,674 |
| Hazel Park | $5,015,829 | $179,715 | $8,493,747 | $4,176,785 |
| Imlay City | N/A | N/A | N/A | N/A |
Note: Inventory values exclude obsolete inventory and include slow-moving inventory. Imlay City consideration is limited to actual outstanding out-of-pocket costs at closing.
Outlook, Risks, and Contingencies
- Closing Timeline: The acquisition is expected to close before the end of the 2021 fiscal year.
- Inventory Adjustments: Final inventory values are subject to adjustment at closing based on actual costs, excluding obsolete inventory (unsold for 12 months) and accounting for slow-moving inventory.
- Documentation: Full text of the Purchase Agreements will be filed as exhibits in the Form 10-Q for the quarter ended June 30, 2021.
- Emerging Growth Company: The registrant is identified as an emerging growth company.
Investor Verification Checklist
- Verify the final closing date and whether the transaction completed within the 2021 fiscal year.
- Review the upcoming Form 10-Q for the full text of the Purchase Agreements and final purchase price adjustments.
- Confirm the actual share count issued for the $17,000,000 stock consideration based on the final VWAP calculation.
- Assess the impact of the $35,000,000 cash outlay on the Company's liquidity and debt covenants.
- Monitor the integration progress of the seven Michigan locations, particularly the new Imlay City store.