General form of registration statement for all companies including face-amount certificate companies

ACQUISITIONS

v3.21.2
ACQUISITIONS
6 Months Ended 12 Months Ended
Jun. 30, 2021
Dec. 31, 2020
ACQUISITIONS    
2. ACQUISITIONS

2. ACQUISITIONS

 

Completed Acquisitions

 

 

 

 

(1)

 

 

(2)

 

 

 

(3)

 

 

 

(4)

 

 

 

 

 

 

 

 

 

 

The Humble

 

 

The Hacienda

 

 

Lowell Farm

 

 

 

 

(in thousands)

 

Kaizen Inc.

 

 

Flower Co.

 

 

Company, LLC

 

 

Services

 

 

Total

 

CONSIDERATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent Payment

 

$ 50

 

 

$ 44

 

 

$ -

 

 

$ -

 

 

$ 94

 

Cash

 

 

 

 

 

 

 

 

 

 

4,019

 

 

 

-

 

 

 

4,019

 

Transaction costs

 

 

 

 

 

 

 

 

 

 

428

 

 

 

190

 

 

 

618

 

Note payable and other obligations

 

 

200

 

 

 

65

 

 

 

3,115

 

 

 

9,000

 

 

 

12,380

 

Fair value of subordinate voting shares

 

 

62

 

 

 

55

 

 

 

34,358

 

 

 

9,610

 

 

 

44,085

 

Total consideration

 

$ 312

 

 

$ 164

 

 

$ 41,920

 

 

$ 18,800

 

 

$ 61,196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PURCHASE PRICE ALLOCATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Acquired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

$ -

 

 

$ 6

 

 

$ 3,300

 

 

$ -

 

 

$ 3,306

 

Accounts receivable - net

 

 

-

 

 

 

-

 

 

 

1,312

 

 

 

-

 

 

 

1,312

 

Other tangible assets

 

 

-

 

 

 

-

 

 

 

739

 

 

 

15,750

 

 

 

16,489

 

Intangible assets - brands and tradenames

 

 

104

 

 

 

80

 

 

 

37,299

 

 

 

-

 

 

 

37,483

 

Intangible assets - technology and know-how and other

 

 

208

 

 

 

78

 

 

 

-

 

 

 

3,050

 

 

 

3,336

 

Liabilities assumed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payables and other liabilities

 

 

-

 

 

 

-

 

 

 

(730 )

 

 

-

 

 

 

(730 )

Fair value of net assets acquired

 

$ 312

 

 

$ 164

 

 

$ 41,920

 

 

$ 18,800

 

 

$ 61,196

 

The Company completed the following asset acquisitions, and allocated the purchase price as follows:

 

The Kaizen Inc. and The Humble Flower Co. acquisitions qualified as a business combination under ASC 805. The Hacienda Company, LLC acquisition qualified as an asset acquisition under ASU 2017.01. Consideration has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. No goodwill was recognized. The results of these acquisitions are included in the Company’s net earnings from the date of acquisition.

 

The fair value of the assets acquired and the liabilities assumed for Kaizen Inc. and the Humble Flower Company were finalized in the quarter ended June 30, 2020.

 

Kaizen Inc.

 

On May 1, 2019, the Company acquired all of the assets, global rights and business interests of Kaizen Inc. for a purchase price of $556 that will be paid as and if financial performance targets are met during the period beginning on May 1, 2019 and ending on April 30, 2023. Kaizen is a premium brand offering a full spectrum of cannabis concentrates. Effective July 15, 2020 the asset purchase agreement was modified, eliminating payments associated with meeting financial performance targets in exchange for the issuance of 225 thousand options to purchase Subordinate Voting Shares and a note payable of $200, with payments over two years. Had the modifications been reflected as of the date of acquisition, net assets would have decreased $223 at December 31, 2019 and net loss in 2019 would have been reduced by $21.

 

The Humble Flower Co.

 

On April 18, 2019, the Company acquired all of the assets, global rights and business interests associated with the brand Humble Flower Co. for a purchase price of $472 that will be paid as and if financial performance targets are met during the period beginning on April 19, 2019 and ending on April 18, 2023. The acquisition marks the Company’s expansion into cannabis-infused topical creams, balms, and oils. Effective June 1, 2020 the asset purchase agreement was modified, eliminating payments associated with meeting financial performance targets in exchange for the issuance of 225 thousand options to purchase Subordinate Voting Shares and a note payable of $65, with payments commencing on January 1, 2021 for 24 months. Had the modifications been reflected as of the date of acquisition, net assets would have decreased $308 at December 31, 2019 and net loss in 2019 would have been reduced by $34.

 

The Hacienda Company, LLC.

 

On February 25, 2021, the Company acquired substantially all of the assets of the Lowell Herb Co. and Lowell Smokes trademark brands, product portfolio, and production assets from The Hacienda Company, LLC for a purchase price of $41,920. Lowell Herb Co. is a leading California cannabis brand that manufactures and distributes distinctive and highly regarded premium packaged flower, pre-roll, concentrates, and vape products. The acquisition consideration was comprised of $4.1 million in cash and the issuance of 22,643,678 subordinate voting shares and obligations assumed. In connection with this acquisition, the Company completed a change in its corporate name to Lowell Farms Inc. effective March 1, 2021.

 

Lowell Farm Services

 

On June 29, 2021, we acquired real property and related assets of a first-of-its-kind cannabis drying and midstream processing facility located in Monterey County for a purchase price of $18,800. The 10-acre, 40,000 square foot processing facility will provide drying, bucking, trimming, sorting, grading, and packaging operations for up to 250,000 lbs. of wholesale cannabis flower annually. The new facility will process nearly all the cannabis that we grow at our existing cultivation operations. Additionally, we commissioned a new business unit called Lowell Farm Services (“LFS”), which will engage in fee-based processing services for regional growers from the Salinas Valley area. The acquisition consideration was comprised primarily of a note payable of $9.0 million and the issuance of 7,997,520 subordinate voting shares and obligations assumed. LFS operations are expected to become operational during the third quarter of 2021.

Terminated Acquisition

 

On May 14, 2019, the Company entered into a definitive agreement to acquire the assets of W The Brand (“W Vapes”), a manufacturer and distributor in Nevada and Oregon of cannabis concentrates, cartridges and disposable pens, in a cash and stock transaction. Under the terms of the agreement, the purchase consideration to W Vapes shareholders consisted of $10 million in cash and $10 million in Subordinate Voting Shares (based on a deemed value of CDN$15.65 per share). In November 2019, the definitive agreement was amended whereby the Company advanced $2 million in non-recourse funds to the seller in exchange for release of $10 million of cash held in escrow related to the acquisition and in December 2019, the Company purchased the Las Vegas, Nevada facility for $4.1 million.

 

On July 17, 2020, the Company announced the termination of the definitive agreement with W Vapes and the obligation to acquire the assets of W Vapes was terminated. The termination coincided with an asset acquisition announcement between W Vapes and Planet 13 Holdings Inc. (“Planet 13”). Additionally, the Company sold the Las Vegas facility to certain affiliates of Planet 13 for a cash payment of approximately $500, and an additional cash payment of approximately $2.8 million upon regulatory approval of the W Vapes and Planet 13 transaction which was received in January 2021, and in the third quarter the Company finalized a note payable of $843 to the owners of W Vapes, payable coinciding with the receipt of the $2.8 million payment from the facility sale, which was paid in January 2021. As a result, the Company reflected a $4.4 million loss in loss on termination of investments, net on its consolidated statement of operations for the year ended December 31, 2020.

5. ACQUISITIONS

 

Completed Acquisitions

 

During 2019, the Company completed the following acquisitions, and allocated the purchase price as follows:

(Amounts Expressed in United States Dollars Unless Otherwise Stated)

 

 

 

 

 

 

 

(2)

 

 

 

 

 

 

 

(1)

 

 

The Humble

 

 

 

 

(in thousands)

 

Kaizen Inc.

 

 

Flower Co.

 

 

Total

 

CONSIDERATION

 

 

 

 

 

 

 

 

 

 

 

Contingent Payment

 

$ 50

 

 

$ 44

 

 

$ 94

 

Note Payable

 

 

200

 

 

 

65

 

 

 

265

 

Fair value of subordinate voting shares

 

 

62

 

 

 

55

 

 

 

117

 

Total consideration

 

$ 312

 

 

$ 164

 

 

$ 476

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PURCHASE PRICE ALLOCATION

 

 

 

 

 

 

 

 

 

 

 

 

Assets Acquired

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

$ -

 

 

$ 6

 

 

 

6

 

Intangible assets - brands and trademarks

 

 

104

 

 

 

80

 

 

 

184

 

Intangible assets - technology and know-how

 

 

208

 

 

 

78

 

 

 

286

 

Liabilities assumed

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable

 

 

-

 

 

 

-

 

 

 

-

 

Total identifiable net assets

 

 

312

 

 

 

164

 

 

 

476

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired

 

$ 312

 

 

$ 164

 

 

$ 476

 

 

These acquisitions qualified as a business combination under ASC 805 and the consideration has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. No goodwill was recognized. The purchases have been accounted for by the acquisition method, with the results included in the Company’s net earnings from the date of acquisition.

 

The fair value of the assets acquired and the liabilities assumed were finalized in the quarter ended June 30, 2020.

 

The Company also incurred $47 in transactional costs related to the above acquisitions which were recorded in general and administrative expenses in the Consolidated Statements of Operations.

 

Kaizen Inc.

 

On May 1, 2019, the Company acquired all of the assets, global rights and business interests of Kaizen Inc. for a purchase price of $556 that will be paid as and if financial performance targets are met during the period beginning on May 1, 2019 and ending on April 30, 2023. Kaizen is a premium brand offering a full spectrum of cannabis concentrates. Effective July 15, 2020 the asset purchase agreement was modified, eliminating payments associated with meeting financial performance targets in exchange for the issuance of 225 thousand options to purchase Subordinate Voting Shares and a note payable of $200, with payments over two years. Had the modifications been reflected as of the date of acquisition, net assets would have decreased $223 at December 31, 2019 and net loss in 2019 would have been reduced by $21.

 

The Humble Flower Co.

 

On April 18, 2019, the Company acquired all of the assets, global rights and business interests associated with the brand Humble Flower Co. for a purchase price of $472 that will be paid as and if financial performance targets are met during the period beginning on April 19, 2019 and ending on April 18, 2023. The acquisition marks the Company’s expansion into cannabis-infused topical creams, balms, and oils. Effective June 1, 2020 the asset purchase agreement was modified, eliminating payments associated with meeting financial performance targets in exchange for the issuance of 225 thousand options to purchase Subordinate Voting Shares and a note payable of $65, with payments commencing on January 1, 2021 for 24 months. Had the modifications been reflected as of the date of acquisition, net assets would have decreased $308 at December 31, 2019 and net loss in 2019 would have been reduced by $34.

Shredibles LLC

 

On June 12, 2019, the Company completed the acquisition of 70% of the outstanding capital stock of Shredibles LLC (“Shredibles”), a manufacturer of CBD infused health products, from its shareholders. In February 2020, the Company determined that Shredibles was not a strategic fit for the Company and reached an agreement with the Shredibles co-founders to nullify the investment. The termination has been reflected as being effective as of December 31, 2019 in the consolidated financial statements. The operations of Shredibles, and the termination of the agreement, did not have a material impact on the results of operations of the Company in 2019.

 

Terminated Acquisition

 

On May 14, 2019, the Company entered into a definitive agreement to acquire the assets of W The Brand (“W Vapes”), a manufacturer and distributor in Nevada and Oregon of cannabis concentrates, cartridges and disposable pens, in a cash and stock transaction. Under the terms of the agreement, the purchase consideration to W Vapes shareholders consisted of $10 million in cash and $10 million in Subordinate Voting Shares (based on a deemed value of CDN$15.65 per share). In November 2019, the definitive agreement was amended whereby the Company advanced $2 million in non-recourse funds to the seller in exchange for release of $10 million of cash held in escrow related to the acquisition and in December 2019, the Company purchased the Las Vegas, Nevada facility for $4.1 million.

 

On July 17, 2020, the Company announced the termination of the definitive agreement with W Vapes and is no longer obligated to acquire the assets of W Vapes. The termination of the agreement coincided with an asset acquisition announcement between W Vapes and Planet 13 Holdings Inc. (“Planet 13”). Additionally, the Company sold the Las Vegas facility to certain affiliates of Planet 13 for a cash payment of approximately $500, and an additional cash payment of approximately $2.8 million upon regulatory approval of the W Vapes and Planet 13 transaction which was received in January 2021, and in the third quarter the Company finalized a note payable of $843 to the owners of W Vapes, payable coinciding with the receipt of the $2.8 million payment from the facility sale, which was paid in January 2021. As a result, the Company has reflected a $4.4 million loss in loss on termination of investments, net on its consolidated statement of operations.

 

The Company incurred $251 in transactional costs related to the above acquisition for the year ended December 31, 2019, which were recorded in general and administrative expenses in the Consolidated Statements of Operations.