Grow Generation Corp

GrowGeneration Corp. (“GrowGen”) owns and operates specialty retail hydroponic and organic gardening stores. Currently, GrowGen has 12 stores, which includes 10 locations in Colorado, 1 location in California and 1 location in Nevada.

GrowGen carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state of the art hydroponic equipment to be used indoors and outdoors by commercial and home growers.

Our mission is to own and operate GrowGeneration branded stores in all of the major legalised cannabis states. Management estimates that roughly 1,000 hydroponic stores are in operation in the U.S. According to New Frontier Data, the U.S. cannabis market was $5.7 billion in 2015 and is expected to have reached $7.2 billion at the end of 2016.

By 2020 the market is estimated to reach over $23 billion with a compound annual growth rate of 32%.

overview

Overview

GrowGeneration (GrowGen), founded in 2014, owns and operates specialty retail hydroponic and organic gardening stores. Currently, GrowGen has 15 locations, including 9 in Colorado, 2 in California, 2 in Nevada, 1 in Seattle and 1 in Washington.

GrowGen carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state of the art hydroponic equipment to be used both indoors and outdoors by commercial and home growers alike. GrowGen’s mission is to own and operate GrowGen branded stores in all of the major legalised cannabis states. Management estimates that roughly 1,000 hydroponic stores are in operation in the U.S.

The focus is primarily in the B2B cultivation space; however, it also has significant reach in the home growers market. A real benefit is the fact that current federal regulations and laws in the US does not impact the business. GrowGen can sell to both the legal and black market, as its products (although cannabis centric) is not a product that falls fowl of current legislation.

Highlights

  • For 9 months, revenue totalled $10.7M versus $5.6M Y/Y
    • Raised $4.8M in equity capital
    • Increased current assets to $8.2M compared to $3.2M at 12/31/16
    • Acquired Seattle Hydro Spot, located in Seattle, Washington
    • Acquired Sonoma Hydro and consolidated GrowGen Santa Rosa into an over $2.5M run rate operation in Sonoma County, California
  • Opened 10,000 sq. f. store in Las Vegas, NV. Store has turned profitable in its 3rd month of operations.
  • Opened Denver South, 13,000 sq. f. and moved corporate headquarters to same location
  • Opened 8,000 sq. f. in Trinidad, CO
  • Opened San Bernardino, CA , 16,000 sq. f. of inside and outside space
  • Opened Boulder, CO location
  • Opened 2nd Las Vegas operation
  • Hired Joe Prinzivalli as Chief Operating Officer
  • Hired Monty Lamirato, as Chief Financial Officer

 

Differentiators

  • Went public through S-1 process and not through reverse-merger
  • No convertible debt, net cash on balance sheet
  • Strong revenue growth with forecast revenue of $30m for the coming year
  • Well-positioned to consolidate highly fragmented industry
  • Solid product range with more than 1,000 SKUs, including
  • Organic soils
  • Lighting technology
  • State of the art hydroponic equipment
  • Indoor/Outdoor commercial growing products
  • Strategic investors, including Merida Capital Partners and Robert Yosaitis

reach

Seattle Hydro Spot

In May 2017, GrowGen announced it acquired all of the assets of Seattle Hydro Spot and signed a three-year lease on a 4,000-square foot retail and warehouse facility in Seattle, Washington.

The Seattle Hydro Spot location, one of the original hydroponic stores in what is known as the Ballard neighbourhood of Seattle, will serve as a retail and warehouse location servicing the growing number of both commercial and home growers in the Northwest market. GrowGen acquired the assets of Seattle Hydro Spot, including existing inventory and fixed assets as well as the brand and customer relationships. In consideration, GrowGen paid $130,000 in cash, utilising cash on hand, and the Seattle Hydro Spot owner has the opportunity to earn up to $30,000 in additional considerations based on the operation achieving an approximate 50% increase in revenues during the 12-month period following closing of the transaction.

Seattle Hydro Spot, which has been in business for approximately six years, was operating at a revenue run-rate of approximately $1 million annually. Experienced, existing staff is expected to remain in place and the previous owner has agreed to join GrowGen as a salesperson, focused on large commercial growers in the region.

Humboldt Depo

In January 2018, GrowGen announced that it purchased all the assets of Humboldt Depot located in Arcata, California. The Humboldt Depot operation generated approximately $4 million in revenue in 2017 and this revenue will be added to the Company’s consolidated financial statement. Humboldt Depot also has a location in McKinleyville, California which the company plans to open and operate as a 2nd location in Humboldt County.

With over 2,000 cultivation licenses being applied for in 2018 year in Humboldt County, GrowGen is now poised to gain significant new business in one of America’s iconic regions for cannabis cultivation. California is a major marketplace that GrowGen is developing, and plans to add several locations in the coming months.

growth

Strategy

  • Mission: To become one of the largest retail hydroponic and organic specialty gardening retail outlets in the United States
  • New store openings and acquisitions
  • Geographic expansion:
    • 9 Stores in Colorado
    • 2 in California
    • 2 in Nevada
    • 1 in Washington, and
    • 1 in Seattle
  • National B2B sales team and e-commerce portal
  • White-labelled products
  • GrowGen Home, a “Store within a Store” new retail concept

Key Growth Areas

  • Arizona
  • Maryland
  • Florida
  • Michigan
  • Ohio

Growth will come through two primary channels

  1. Growth in their current markets. GrowGen has performed very well in its markets with annualised growth of 100% for the past 3 years.
  2. Growth in new markets. With 19 US states (in addition to the current 29) looking to pass either medicinal or recreational (and in some cases, both) the expansion opportunities for GrowGen are boundless

To understand the potential of this growth, since adult use was legalised in Colorado in 2014, the number of adult licensed cultivators has been growing at 33.5% year on year. This is 28x faster than their medical peers.

In a very fragmented market (more than 1,000 hydroponic retail outlets) they have secured first mover advantage and created both a customer pipeline and product range ensuring their position as market leaders moving forward.

management team

Darren Lampert – CEO & Co-Founder

Darren Lampert has been the Chief Executive Officer and a Director since the company’s inception in 2014. Mr. Lampert began his career in 1986 as a founding member of the law firm of Lampert and Lampert (1986-1999), where he concentrated on securities litigation, NASD (now FINRA) compliance and arbitration and corporate finance matters.

Mr. Lampert graduated in 1982 with a Bachelor of Science degree in business administration from Ithaca College. Mr. Lampert received a JD from Bridgeport University School of Law in 1985.

Joseph Prinzivalli – COO

Afer serving as Inventory Manager for Way To Grow, from July 2014-December 2016, Joe joined GrowGen in a similar role in January 2017 and was promoted to COO in April.

At Way To Grow, he was responsible for overseeing the movement and integrity of all Way To Grow physical inventories and managed analytical/reporting functions. Joe coordinated the shipment of goods to stores and customers with 3rd party shippers and suppliers and managed distribution operations.
From July 2011-June 2014, Joe served as Way To Grow’s Distribution Centre Manager, where he identified the need for and implemented all distribution operations for Way to Grow.

Monty R. Lamirato – CFO

Mr. Lamirato joined GrowGen in May 2017, afer he worked as an independent consultant providing chief financial officer and financial reporting consulting services to companies of various sizes in a variety of industries.

From March 2013 until November 2016, Mr. Lamirato served as Chief Financial Officer of Strategic Environmental & Energy Resources, Inc., a publicly traded holding company.

Mr. Lamirato received a Bachelor of Science, cum laude, from Regis College in Denver and is a Certified Public Accountant.