Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
GROWGENERATION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except shares)
March 31,
2025 December 31,
2024
ASSETS
Current assets:
Cash and cash equivalents $ 32,742 $ 27,471
Marketable securities 19,836 28,984
Accounts receivable, net of allowance for credit losses of $ 2,146 and $ 2,177 at March 31, 2025 and December 31, 2024, respectively
6,936 7,361
Notes receivable, current, net of allowance for credit losses of $ — and $ — at March 31, 2025 and December 31, 2024, respectively
1,056 1,056
Inventory 42,129 40,295
Prepaid income taxes 177 145
Prepaid and other current assets 6,285 7,896
Total current assets 109,161 113,208
Property and equipment, net 13,014 15,493
Operating leases right-of-use assets, net 32,431 34,453
Intangible assets, net 7,241 8,779
Goodwill 1,605 1,605
Other assets 780 814
TOTAL ASSETS $ 164,232 $ 174,352
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,959 $ 8,146
Accrued liabilities 2,149 2,358
Payroll and payroll tax liabilities 2,021 2,655
Customer deposits 2,350 2,404
Sales tax payable 1,409 1,313
Current maturities of operating lease liabilities 7,024 7,398
Total current liabilities 24,912 24,274
Operating lease liabilities, net of current maturities 27,809 29,633
Other long-term liabilities 352 352
Total liabilities 53,073 54,259
Commitments and contingencies (Note 12)
Stockholders' equity:
Common stock; $ 0.001 par value; 100,000,000 shares authorized, 59,487,477 and 59,402,628 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively
59 59
Additional paid-in capital 376,120 375,677
Accumulated deficit ( 265,020 ) ( 255,643 )
Total stockholders' equity 111,159 120,093
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 164,232 $ 174,352
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
1
GROWGENERATION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
Three Months Ended March 31,
2025 2024
Net sales $ 35,703 $ 47,888
Cost of sales (exclusive of depreciation and amortization shown below) 25,996 35,524
Gross profit 9,707 12,364
Operating expenses:
Store operations and other operational expenses 8,792 10,634
Selling, general, and administrative 7,112 7,908
Estimated credit losses (recoveries) 92 ( 488 )
Depreciation and amortization 3,585 3,742
Total operating expenses 19,581 21,796
Loss from operations ( 9,874 ) ( 9,432 )
Other income (expense):
Other income — 47
Interest income 497 602
Interest expense — ( 56 )
Total other income 497 593
Net loss before taxes ( 9,377 ) ( 8,839 )
(Provision) benefit for income taxes — 2
Net loss $ ( 9,377 ) $ ( 8,837 )
Net loss per share, basic $ ( 0.16 ) $ ( 0.14 )
Net loss per share, diluted $ ( 0.16 ) $ ( 0.14 )
Weighted average shares outstanding, basic 59,441 61,499
Weighted average shares outstanding, diluted 59,441 61,499
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
2
GROWGENERATION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, in thousands)
Common Stock Additional
Paid-In Capital Accumulated Deficit Total
Stockholders' Equity
Shares Amount
Balance as of December 31, 2024 59,403 $ 59 $ 375,677 $ ( 255,643 ) $ 120,093
Common stock issued for share-based compensation 84 — — — —
Common stock withheld for employee payroll taxes — — ( 60 ) — ( 60 )
Share-based compensation — — 503 — 503
Net loss — — — ( 9,377 ) ( 9,377 )
Balance as of March 31, 2025 59,487 $ 59 $ 376,120 $ ( 265,020 ) $ 111,159
Common Stock Additional
Paid-In Capital Accumulated Deficit Total
Stockholders' Equity
Shares Amount
Balance as of December 31, 2023 61,484 $ 61 $ 373,433 $ ( 200,099 ) $ 173,395
Common stock issued for share-based compensation 23 1 — — 1
Common stock withheld for employee payroll taxes — — ( 29 ) — ( 29 )
Share-based compensation — — 778 — 778
Net loss — — — ( 8,837 ) ( 8,837 )
Balance as of March 31, 2024 61,507 $ 62 $ 374,182 $ ( 208,936 ) $ 165,308
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3
GROWGENERATION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended March 31,
2025 2024
Cash flows from operating activities:
Net loss $ ( 9,377 ) $ ( 8,837 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 3,585 3,742
Share-based compensation 503 778
Estimated credit losses (recoveries) 92 ( 488 )
Loss on asset disposition 658 33
Change in value of marketable securities ( 234 ) ( 390 )
Changes in operating assets and liabilities:
Accounts and notes receivable 333 1,581
Inventory ( 1,834 ) ( 1,123 )
Prepaid expenses and other assets 1,613 2,170
Accounts payable and accrued liabilities 1,600 295
Operating leases ( 176 ) 80
Payroll and payroll tax liabilities ( 634 ) ( 72 )
Customer deposits ( 54 ) ( 1,479 )
Sales tax payable 96 64
Net cash and cash equivalents used in operating activities ( 3,829 ) ( 3,646 )
Cash flows from investing activities:
Purchase of marketable securities ( 7,186 ) ( 21,143 )
Maturities of marketable securities 16,568 26,465
Purchase of property and equipment ( 237 ) ( 355 )
Proceeds from disposals of assets 15 —
Net cash and cash equivalents provided by investing activities 9,160 4,967
Cash flows from financing activities:
Common stock withheld for employee payroll taxes ( 60 ) ( 28 )
Net cash and cash equivalents used in financing activities ( 60 ) ( 28 )
Net increase in cash and cash equivalents 5,271 1,293
Cash and cash equivalents at the beginning of period 27,471 29,757
Cash and cash equivalents at the end of period $ 32,742 $ 31,050
Supplemental cash flow disclosures and non-cash investing and financing transactions:
Cash paid for interest $ — $ 56
Cash paid for income taxes $ 46 $ —
Right-of use assets obtained in exchange for new or modified operating lease liabilities $ — $ 2,869
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
1. GENERAL
GrowGeneration Corp. (together with its direct and indirect wholly-owned subsidiaries, collectively "GrowGeneration" or the "Company") was incorporated in Colorado in 2014. Since then, GrowGeneration has grown from a small chain of specialty retail hydroponic and organic garden centers to a multifaceted business with diverse assets. Today, GrowGeneration operates two major lines of business: its Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business; and its Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business.
As of March 31, 2025, GrowGeneration has 31 retail locations across 12 states in the U.S. The Company also operates an online superstore at growgeneration.com, as well as a wholesale distribution business for resellers, and a benching, racking, and storage solutions business, Mobile Media or MMI.
Basis of Presentation
The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 ("2024 Form 10-K"). There were no significant changes to the Company's significant accounting policies as disclosed in the 2024 Form 10-K. The results reported in these unaudited Condensed Consolidated Financial Statements are not necessarily indicative of results for the full fiscal year.
All amounts included in the accompanying notes to the Condensed Consolidated Financial Statements, except per share data, are in thousands (000).
Reclassifications
Certain amounts in the prior period Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported net loss within the Condensed Consolidated Statements of Operations.
Use of Estimates
The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and the reported revenues and expenses during the reporting period. Actual results could vary from the estimates that were used.
2. RECENT ACCOUNTING PRONOUNCEMENTS
From time to time, the Financial Accounting Standard Board ("FASB") or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through the issuance of an Accounting Standards Update ("ASU"). The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements. In addition to the accounting pronouncements discussed below, no other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material effect on the Company's Condensed Consolidated Financial Statements or disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to income tax disclosures ("ASU 2023-09"), expanding the disclosures requirement for income taxes primarily by requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. ASU 2023-09 is effective for annual periods beginning after
5
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
December 15, 2024. Early adoption is permitted, and adoption of ASU 2023-09 can be applied prospectively or retrospectively. The Company is currently evaluating the impact of this standard.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"), which requires disclosure on an annual and interim basis of disaggregated information about certain income statement expense line items in the notes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted, and adoption of ASU 2024-03 can be applied prospectively or retrospectively. The Company is currently evaluating the impact of this standard.
3. FAIR VALUE MEASUREMENTS
Fair Value Measurements
Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
• Level 1—Quoted prices in active markets for identical assets or liabilities.
• Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies, and similar techniques.
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgement. Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and all other current liabilities approximate fair values due to their short-term nature. The fair value of notes receivable approximates the outstanding balance net of reserves for expected credit loss. The marketable securities are classified as available-for-sale and are carried at fair value based on quoted market prices. Changes in fair value of marketable securities, principally derived from accretion of discounts, were $ 0.2 million and $ 0.4 million for the three months ended March 31, 2025 and 2024, respectively. Changes in fair value of marketable securities are included in Interest income on the Condensed Consolidated Statements of Operations.
Level March 31,
2025 December 31,
2024
Cash equivalents 1 $ 26,587 $ 16,945
Marketable securities 2 $ 19,836 $ 28,984
4. REVENUE RECOGNITION
Disaggregation of Revenues
Net sales are disaggregated by the Company's segments, which represent its principal lines of business, as well as by major product line, including proprietary brands, non-proprietary brands, and commercial fixtures, and by product type, including consumable and durable products. Refer to Note 13, Segments, for disaggregated revenue disclosures.
6
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
Contract Assets and Liabilities
Depending on the timing of when title of product transfers to a customer and when a customer makes payments for such product, the Company recognizes an accounts receivable (contract asset) or a customer deposit (contract liability). The opening and closing balances of the Company's accounts receivables and customer deposits were as follows:
Accounts Receivable, Net Customer Deposits
Balance as of January 1, 2025
$ 7,361 $ 2,404
Balance as of March 31, 2025
6,936 2,350
Decrease $ ( 425 ) $ ( 54 )
Balance as of January 1, 2024
$ 8,895 $ 5,359
Balance as of March 31, 2024
7,832 3,880
Decrease $ ( 1,063 ) $ ( 1,479 )
Of the total amount of customer deposits as of January 1, 2025, $ 1.1 million was reported as revenue during the three months ended March 31, 2025. Of the total amount of customer deposits as of January 1, 2024, $ 2.9 million was reported as revenue during the three months ended March 31, 2024.
Notes receivable at March 31, 2025 and December 31, 2024 were as follows:
March 31,
2025 December 31,
2024
Notes receivable $ 1,056 $ 1,056
Allowance for credit losses — —
Notes receivable, net $ 1,056 $ 1,056
During the three months ended March 31, 2024, the Company received a $ 0.3 million settlement related to a $ 1.5 million note receivable, which had been fully reserved as of December 31, 2023. Refer to Note 12, Commitments and Contingencies, for additional information regarding the settlement.
5. PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2025 and December 31, 2024 consisted of the following:
March 31,
2025 December 31,
2024
Vehicles $ 2,507 $ 2,553
Building and land 2,121 2,121
Leasehold improvements 10,374 12,086
Furniture, fixtures and equipment 12,995 13,051
Capitalized software 9,075 16,446
Construction-in-progress 29 49
Total property and equipment, gross 37,101 46,306
Accumulated depreciation and amortization ( 24,087 ) ( 30,813 )
Property and equipment, net $ 13,014 $ 15,493
Depreciation and amortization expense related to property and equipment was $ 2.0 million and $ 2.1 million for the three months ended March 31, 2025 and 2024, respectively. In conjunction with the Company's restructuring activities as discussed in Note 14, Restructuring, the Company reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in a $ 0.6 million increase to depreciation and amortization expense related to property and equipment in the
7
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
three months ended March 31, 2025. These capitalized software assets became fully amortized and were retired during the three months ended March 31, 2025. Refer to Note 14, Restructuring, for additional information on the restructuring activities.
6. GOODWILL AND INTANGIBLE ASSETS
The carrying value of goodwill by segment was as follows:
Cultivation and Gardening Storage Solutions Total
Balance as of December 31, 2024 $ — $ 1,605 $ 1,605
Balance as of March 31, 2025 $ — $ 1,605 $ 1,605
Accumulated impairment for goodwill related entirely to the Cultivation and Gardening segment and totaled $ 131.9 million as of March 31, 2025 and December 31, 2024.
The changes in intangible assets by segment for the three months ended March 31, 2025 were as follows:
Cultivation and Gardening Storage Solutions Total
Balance as of December 31, 2024 $ 6,881 $ 1,898 $ 8,779
Amortization ( 1,363 ) ( 175 ) ( 1,538 )
Balance as of March 31, 2025 $ 5,518 $ 1,723 $ 7,241
Intangible assets on the Condensed Consolidated Balance Sheets consisted of the following:
March 31, 2025 December 31, 2024
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Trade names $ 27,790 $ ( 23,187 ) $ 4,603 $ 27,790 $ ( 21,908 ) $ 5,882
Patents, trademarks 69 ( 69 ) — 69 ( 69 ) —
Customer relationships 12,869 ( 10,233 ) 2,636 12,869 ( 9,974 ) 2,895
Non-competes 860 ( 858 ) 2 860 ( 858 ) 2
Intellectual property 1,136 ( 1,136 ) — 1,136 ( 1,136 ) —
Total $ 42,724 $ ( 35,483 ) $ 7,241 $ 42,724 $ ( 33,945 ) $ 8,779
Amortization expense was $ 1.5 million and $ 1.7 million for the three months ended March 31, 2025 and 2024, respectively.
Future amortization expense as of March 31, 2025 was as follows:
2025 (remainder of the year) $ 4,354
2026 2,015
2027 765
2028 82
2029 25
Total $ 7,241
8
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
7. INCOME TAXES
For the three months ended March 31, 2025 and 2024, the effective tax rate was 0.0 %. The effective tax rate for each of the three months ended March 31, 2025 and 2024 was lower than the U.S. federal statutory rate of 21.0% primarily due to the Company's valuation allowance against deferred tax assets. As of March 31, 2025, the Company concluded that its deferred tax assets are not expected to be realizable, based on positive and negative evidence, therefore it has assigned a full valuation allowance against them.
8. LEASES
The right-of-use assets and corresponding liabilities related to the Company's operating leases were as follows:
March 31,
2025 December 31,
2024
Operating leases right-of-use assets, net
$ 32,431 $ 34,453
Current maturities of operating lease liability $ 7,024 $ 7,398
Operating lease liability, net of current maturities 27,809 29,633
Total lease liability $ 34,833 $ 37,031
The weighted-average remaining lease terms and weighted-average discount rates for operating leases were as follows:
March 31,
2025 2024
Weighted average remaining lease term 5.4 years 6.0 years
Weighted average discount rate 6.2 % 6.2 %
The components of lease costs were as follows:
Three Months Ended March 31,
2025 2024
Operating lease costs $ 2,292 $ 2,563
Variable lease costs 153 664
Short-term lease costs 88 85
Sublease income ( 380 ) ( 272 )
Total operating lease costs $ 2,153 $ 3,040
Future maturities of the Company's operating lease liabilities and receipts from subleases as of March 31, 2025 were as follows:
Lease Payments Sublease Receipts
2025 (remainder of the year) $ 6,780 $ ( 895 )
2026 8,091 ( 1,222 )
2027 6,455 ( 1,257 )
2028 6,022 ( 1,294 )
2029 5,425 ( 1,332 )
Thereafter 8,170 ( 1,470 )
Total lease payments (receipts) 40,943 ( 7,470 )
Less: imputed interest ( 6,110 )
Operating lease liability as of March 31, 2025
$ 34,833
9
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
Supplemental and other information related to leases was as follows:
Three Months Ended March 31,
2025 2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases $ 2,358 $ 2,580
9. EARNINGS PER SHARE
The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive loss per share computation for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31,
2025 2024
Net loss $ ( 9,377 ) $ ( 8,837 )
Weighted average shares outstanding, basic 59,441 61,499
Effect of dilutive outstanding restricted stock units and stock options
— —
Adjusted weighted average shares outstanding, dilutive 59,441 61,499
Basic loss per share $ ( 0.16 ) $ ( 0.14 )
Dilutive loss per share $ ( 0.16 ) $ ( 0.14 )
Diluted loss per share calculations for the three months ended March 31, 2025 excluded 1.4 million non-vested restricted stock units and 17 thousand shares of common stock issuable upon exercise of stock options that would have been anti-dilutive. Diluted loss per share calculations for the three months ended March 31, 2024 excluded 0.9 million non-vested restricted stock units and 0.6 million shares of common stock issuable upon exercise of stock options that would have been anti-dilutive.
10. SHARE-BASED PAYMENTS
The Company maintains a long-term incentive plan, the Second Amended and Restated 2018 Equity Incentive Plan, for employees, non-employee members of its Board of Directors (the "Board"), and consultants. The plan allows the Company to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, common stock warrants, or a combination of awards (collectively, "share-based awards").
The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based awards made to employees, non-employee members of the Board, and consultants of the Company, including stock options and restricted stock units. The Company recorded share-based compensation expense of $ 0.5 million and $ 0.8 million in the three months ended March 31, 2025 and 2024, respectively.
Restricted Stock Units
The Company issues restricted stock units to eligible employees, which are subject to forfeiture until the end of an applicable vesting period. The awards generally vest annually or biannually over three to five years following the date of grant, subject to the employee's continuing employment as of that date. Restricted stock units are valued using the market value on the grant date.
10
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
Restricted stock unit activity for the three months ended March 31, 2025 is presented in the following table:
Units Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2024
1,403 $ 2.57
Granted 244 $ 1.26
Vested ( 131 ) $ 3.14
Forfeited ( 13 ) $ 2.65
Nonvested as of March 31, 2025
1,503 $ 2.30
As of March 31, 2025, the Company had approximately $ 2.7 million of unrecognized share-based compensation related to restricted stock units, which is expected to be recognized over a weighted average period of approximately 2.5 years. During the three months ended March 31, 2024, no restricted stock units were granted.
Stock Options
Stock option activity for the three months ended March 31, 2025 is presented in the following table:
Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2024
16 $ 4.63 0.36 $ 2.56
Granted — — — —
Exercised — — — —
Forfeited or expired — — — —
Outstanding as of March 31, 2025
16 $ 4.63 0.11 $ 2.56
Vested and exercisable as of March 31, 2025
16 $ 4.63 0.11 $ 2.56
11. STOCKHOLDERS' EQUITY
On March 20, 2024, the Board authorized a share repurchase program, whereby the Company could repurchase up to $ 6.0 million worth of its common stock in open market transactions pursuant to Rule 10b-18 of the Exchange Act and a 10b5-1 trading plan. The program began on April 1, 2024. This share repurchase program was intended to enhance long-term shareholder value. The program did not obligate the Company to acquire any specific number of shares or to acquire any shares over any specific period of time. The timing and amount of any repurchases was dependent upon factors such as the stock price, trading volumes, market conditions, and regulatory requirements. The stock repurchase program could be amended, suspended, or discontinued at any time by the Company.
As of December 31, 2024, the Company completed all purchases available under the stock repurchase program. The Company retired all shares of treasury stock acquired under the share repurchase program during the year ended December 31, 2024. The shares were returned to the status of authorized but unissued shares.
12. COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, the Company has been, and may again become involved in legal proceedings arising in the ordinary course of its business, including the initiation and defense of proceedings related to contract and employment disputes. It is the Company's opinion that these claims individually and in the aggregate are not expected to have a material adverse effect on its financial condition, results of operations or cash flows.
11
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
In December 2021, the Company was sued in the U.S. District Court for the Southern District of Texas related to a Promissory Note & Asset Acquisition Rights Option ("Note & Option") with TGC Systems, LLC ("Total Grow"). The case was dismissed and the parties submitted the matter to arbitration pursuant to the arbitration clause of the Note & Option. Among other claims, Total Grow alleged that the Company was liable to Total Grow for failing to consummate the acquisition of Total Grow by the Company. The Company asserted counterclaims for repayment of $ 1.5 million in principal loaned by the Company to Total Grow pursuant to the Note & Option, plus interest and certain costs. In July 2023, the arbitrator rendered an arbitration award denying all of Total Grow's claims and defenses and awarding the Company more than $ 2.0 million in total, consisting of principal, interest, and certain costs. Total Grow voluntarily filed for bankruptcy in October 2023. In February 2024, the Company received $ 0.3 million from the bankruptcy proceedings, which it recorded as a recovery on the $ 1.5 million Note & Option. The remainder of the Note & Option, which were fully reserved, were written off during the three months ended March 31, 2024.
There can be no assurance that future developments related to pending claims or claims filed in the future, whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material effect on the Company's financial condition, results of operations or cash flows. The Company believes that its assessment of contingencies is reasonable and that the related accruals, in the aggregate, are adequate; however, there can be no assurance that the final resolution of these matters will not have a material effect on the Company's financial condition, results of operations or cash flows.
Indemnifications
In the ordinary course of its business, the Company makes certain indemnities under which it may be required to make payments in relation to certain transactions. As of March 31, 2025, the Company did not have any liabilities associated with indemnities.
In addition, the Company, as permitted under Colorado law and in accordance with its amended and restated certificate of incorporation and amended and restated bylaws, in each case, as amended to date, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company's request in such capacity. The duration of these indemnifications varies. The Company has a director and officer insurance policy that may enable it to recover a portion of any future amounts paid. The Company accrues for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable. No such losses have been recorded to date.
13. SEGMENTS
The Company has two operating segments, each its own reportable segment, based on its major lines of business: the Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business; and the Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business.
In addition to sales by operating segment, which represent the Company's principal lines of business, the chief operating decision maker ("CODM") evaluates the Company's operations by regularly reviewing sales by major product line, including proprietary brands, non-proprietary brands, and commercial fixtures, and by product type, including consumable and durable products. Profit measures are evaluated for each reportable segment based on income from operations with identifiable expenses allocated to each reporting unit from which the expense line item was derived.
The CODM compares actual results to prior year and current year budgeted income statements to identify areas for improvement and make capital allocation decisions. The CODM uses gross profit measures to evaluate pricing decisions and product mix, also reviewing proprietary brand versus non-proprietary brand sales to assess the Company’s progress with key performance initiatives. The Company's CODM is the chief executive officer.
12
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
Disaggregated revenue by segment is presented in the following tables:
Three Months Ended March 31,
Net sales 2025 2024
Cultivation and Gardening
Proprietary brand sales $ 9,883 $ 9,726
Non-proprietary brand sales 21,028 33,382
Total Cultivation and Gardening 30,911 43,108
Storage Solutions
Commercial fixture sales 4,792 4,780
Total Storage Solutions 4,792 4,780
Total $ 35,703 $ 47,888
Three Months Ended March 31,
Net sales 2025 2024
Cultivation and Gardening
Consumables $ 23,055 $ 30,181
Durables 7,856 12,927
Total Cultivation and Gardening 30,911 43,108
Storage Solutions
Durables 4,792 4,780
Total Storage Solutions 4,792 4,780
Total $ 35,703 $ 47,888
13
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
Selected information by segment is presented in the following tables for the three months ended:
March 31, 2025
Cultivation & Gardening Storage Solutions Corporate Total
Net sales $ 30,911 $ 4,792 $ — $ 35,703
Cost of sales 23,007 2,989 — 25,996
Gross profit 7,904 1,803 — 9,707
Operating expenses
Store operations and other operational expenses:
Employee costs 2,661 747 — 3,408
Facilities 2,756 394 — 3,150
External service providers 95 14 — 109
Other segment items (1)
1,857 268 — 2,125
Total store operations and other operational expenses 7,369 1,423 — 8,792
Other operating expenses
Selling, general, and administrative — — 7,112 7,112
Estimated credit losses — — 92 92
Depreciation and amortization — — 3,585 3,585
Total operating expenses 7,369 1,423 10,789 19,581
Income (loss) from operations 535 380 ( 10,789 ) ( 9,874 )
Other income — — 497 497
Net income (loss) before taxes $ 535 $ 380 $ ( 10,292 ) $ ( 9,377 )
(1) Other segment items for each reportable segment include travel expenses, transaction fees, and other miscellaneous expenses.
March 31, 2024
Cultivation & Gardening Storage Solutions Corporate Total
Net sales $ 43,108 $ 4,780 $ — $ 47,888
Cost of sales 32,783 2,741 — 35,524
Gross profit 10,325 2,039 — 12,364
Operating expenses
Store operations and other operational expenses:
Employee costs 3,654 771 — 4,425
Facilities 3,480 358 — 3,838
External service providers 529 11 — 540
Other segment items (1)
1,598 233 — 1,831
Total store operations and other operational expenses 9,261 1,373 — 10,634
Other operating expenses
Selling, general, and administrative — — 7,908 7,908
Estimated credit recoveries — — ( 488 ) ( 488 )
Depreciation and amortization — — 3,742 3,742
Total operating expenses 9,261 1,373 11,162 21,796
Income (loss) from operations 1,064 666 ( 11,162 ) ( 9,432 )
Other income — — 593 593
Net income (loss) before taxes $ 1,064 $ 666 $ ( 10,569 ) $ ( 8,839 )
(1) Other segment items for each reportable segment include travel expenses, transaction fees, and other miscellaneous expenses.
The Company does not evaluate segments by assets or capital expenditures as it is not practical and does not inform any of its decision making processes. The CODM neither reviews nor requests this information.
14
GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited)
14. RESTRUCTURING
On July 22, 2024, the Company announced a strategic restructuring plan focused on long-term profitability and advancing growth initiatives in key areas of its Cultivation and Gardening segment such as its proprietary brands, commercial sales, and e-commerce business. The restructuring plan primarily included reductions in cost structure by closing and consolidating 12 redundant or underperforming retail locations, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.
The Company's restructuring and restructuring-related charges consisted of inventory disposal costs, retail location closure costs including related contract termination costs and fixed asset disposals, employee termination benefits, asset impairments including the impairment of operating lease right-of-use assets, and other associated costs.
Since the restructuring activities were announced in July 2024, the Company incurred aggregate restructuring and restructuring-related costs of $ 3.5 million, of which $ 1.1 million were incurred during the three months ended March 31, 2025 and are presented on the Condensed Consolidated Statements of Operations as follows:
Restructuring
Cultivation and Gardening segment:
Store operations and other operational expenses (1)
765
Segment operating loss ( 765 )
Corporate expenses:
Selling, general, and administrative (2)
376
Total restructuring and restructuring-related charges $ ( 1,141 )
(1) Costs consist primarily of fixed asset disposals and lease contract termination costs for previously closed retail locations
(2) Costs consist of corporate operational and administrative contract terminations
In conjunction with the Company's restructuring activities related to operational and administrative improvements, the Company reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in an $ 0.6 million increase to depreciation and amortization expense related to property and equipment in the three months ended March 31, 2025. These capitalized software assets became fully amortized and were retired during the three months ended March 31, 2025. Additionally, certain facilities costs or contract termination costs related to closed retail locations for which the Company is pursuing sublease arrangements or lease terminations may be paid over the remaining terms which extend through 2032.
The liabilities associated with restructuring costs are included in Accrued liabilities and Payroll and payroll tax liabilities on the Condensed Consolidated Balance Sheets. Activities related to liabilities incurred under the restructuring plan were as follows:
Retail Location Closures Termination Benefits Total
Balance as of January 1, 2025 $ 115 $ 9 $ 124
Additions 765 — 765
Payments and other adjustments ( 880 ) ( 9 ) ( 889 )
Balance as of March 31, 2025 $ — $ — $ —
Overall, the Company has incurred a total of approximately $ 3.5 million in restructuring and restructuring-related costs, including the $ 1.1 million incurred in the three months ended March 31, 2025. The Company has substantially completed its restructuring activities as of March 31, 2025 and does not expect to incur significant additional restructuring and restructuring-related costs in future periods.
15
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.