What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-08-12 · 186 added, 123 removed, 481 unchanged (39% of the section changed)

FINANCIAL STATEMENTS

GROWGENERATION CORPORATION AND SUBSIDIARIES

GROWGENERATION CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30,

2021 December 31,

5 unchanged sentences

Inventory, net 113,281 54,024

Income taxes receivable — 655

Prepaid income taxes 2,546 655

Prepaids and other current assets 28,169 11,125

29 unchanged sentences

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GROWGENERATION CORPORATION AND SUBSIDIARIES

GROWGENERATION CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2021 2020 2021 2020

21 unchanged sentences

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GROWGENERATION CORPORATION AND SUBSIDIARIES

GROWGENERATION CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2021 AND 2020

NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(in thousands)

24 unchanged sentences

Balances, June 30, 2021 59,562 $ 60 $ 353,575 $ 10,218 $ 363,853

Common stock issued upon cashless warrant exercise 5 — — — —

Common stock issued upon exercise of options 8 — 22 — 22

Common stock issued upon cashless exercise of options 47 — — — —

Common stock issued in connection with business combinations 87 — 3,063 — 3,063

Common stock issued for share based compensation 61 — 220 — 220

Share based compensation — — 1,722 — 1,722

Net income — — — 4,027 4,027

Balances, September 30, 2021 59,770 $ 60 $ 358,602 $ 14,245 $ 372,907

Common Stock Additional

24 unchanged sentences

Balances, June 30, 2020 38,846 $ 38 $ 69,382 $ ( 7,490 ) $ 61,930

Sale of common stock, net of offering costs 8,625 9 44,611 — 44,620

Common stock issued upon warrant exercise 88 — 272 — 272

Common stock issued upon cashless warrant exercise 570 1 ( 1 ) — —

Common stock issued upon cashless exercise of options 164 — — — —

Common stock issued for share based compensation 120 — 44 — 44

Share based compensation — — 978 — 978

Net income — — — 3,338 3,338

Balances, September 30, 2020 48,413 $ 48 $ 115,286 $ ( 4,152 ) $ 111,182

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GROWGENERATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

GROWGENERATION CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

4 unchanged sentences

Bad debt expense, net of recoveries 304 94

Gain on asset disposition — ( 28 )

Deferred taxes 1,601 —

13 unchanged sentences

Purchase of marketable securities ( 75,000 ) —

Maturities from marketable securities 45,039 —

Purchase of property and equipment ( 10,756 ) ( 2,115 )

7 unchanged sentences

Net change ( 114,877 ) 42,368

Cash at the beginning of period 177,912 12,979

Cash at the end of period $ 67,155 $ 14,824

Cash and cash equivalents at the beginning of period 177,912 12,979

Cash and cash equivalents at the end of period $ 63,035 $ 55,347

Supplemental disclosures of non-cash activities:

4 unchanged sentences

Right to use assets acquired under new operating leases $ 26,115 $ 2,173

Cash paid for income taxes $ 4,275 $ —

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GrowGeneration Corporation and Subsidiaries

GrowGeneration Corp.

and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

GrowGeneration Corp (the “Company”, "we", or "our") is the largest chain of hydroponic garden centers in North America and is a leading marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting, ventilation systems and accessories for hydroponic gardening.

Currently, the Company owns and operates a chain of fifty-eight ( 58 ) retail hydroponic/gardening stores across 12 states, an online e-commerce platform, and proprietary businesses that market grow solutions through our platforms and other wholesale customers.

September 30, 2021

GrowGeneration Corp.

(the “Company”, “we”, or “our”) is the largest chain of hydroponic garden centers in North America and is a leading marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting,

ventilation systems and accessories for hydroponic gardening.

Currently, the Company owns and operates a chain of sixty-one ( 61 ) retail hydroponic/gardening stores across 12 states, an online e-commerce platform, and proprietary businesses that market grow solutions through our platforms and other wholesale customers.

The Company’s plan is to continue to acquire, open and operate hydroponic/gardening stores and related businesses throughout the United States.

7 unchanged sentences

The results of operations for our interim periods are not necessarily indicative of results for the full fiscal year.

All amounts included in the accompanying footnotes to the consolidated financial statements, except per share data, is in thousands (000).

All amounts included in the accompanying footnotes to the consolidated financial statements, except per share data, are in thousands (000).

Risk and Uncertainties

The COVID-19 pandemic has created significant public health concerns as well as economic disruption, uncertainty, and volatility which may negatively affect our business operations.

As a result, if the pandemic persists or worsens, our accounting estimates and assumptions could be impacted in subsequent interim reports and upon final determination at year-end, and it is reasonably possible such changes could be significant (although the potential effects cannot be estimated at this time).

As a result, if the pandemic or its effects persist or worsen, our accounting estimates and assumptions could be impacted in subsequent interim reports and upon final determination at year-end, and it is reasonably possible such changes could be significant (although the potential effects cannot be estimated at this time).

The Company has experienced minimal business interruption as a result of the COVID-19 pandemic.

We have been deemed an “essential” business by state and local authorities in the areas in which we operate and as such have not been subject to business closures.

The COVID-19 pandemic to date has resulted in temporary supply chain delays of our inventory.

The COVID-19 pandemic to date has resulted in temporary supply chain delays of our inventory and increased shipping cost among other impacts.

As events surrounding the COVID-19 pandemic can change rapidly we cannot predict how it may disrupt our operations or the full extent of the disruption.

New Accounting Policies Adopted During the Six Months Ended June 30, 2021

New Accounting Policies Adopted During the Nine Months Ended September 30, 2021

The Company classifies its commercial paper and debt securities as marketable securities.

2 unchanged sentences

Realized gains or losses on sale of marketable securities are computed using primarily the moving average cost and reported in net income.

For the six months ended June 30, 2021, there were no significant unrealized gains or losses recorded.

For the nine months ended September 30, 2021, there were no significant unrealized gains or losses recorded.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

FAIR VALUE MEASUREMENTS

12 unchanged sentences

The fair value of impaired notes receivable is determined based on estimated future payments discounted back to present value using the notes effective interest rate.

Level June 30,

Level September 30,

2021 December 31,

1 unchanged sentence

Marketable securities 2 $ 29,961 $ —

Notes receivable 2 $ 5,906 $ 2,937

Notes receivable impaired 3 $ — $ 875

Accounts receivable 2 $ 4,377 $ 3,901

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

RECENT ACCOUNTING PRONOUNCEMENTS

19 unchanged sentences

Three Months Ended

June 30, 2021 Three Months Ended

June 30, 2020 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

September 30, 2021 Three Months Ended

September 30, 2020 Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

Sales at company owned stores $ 100,799 $ 51,684 $ 290,937 $ 123,991

4 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

REVENUE RECOGNITION, continued

2 unchanged sentences

Opening balance, January 1, 2021 $ 7,713 $ 5,155

Closing balance, June 30, 2021

Closing balance, September 30, 2021

15,237 13,743

Increase (decrease) $ 7,524 $ 8,588

Opening balance, January 1, 2020 $ 4,455 $ 2,504

Closing balance, June 30, 2020

Closing balance, September 30, 2020

Increase (decrease) $ 792 $ ( 34 )

Of the total amount of customer deposit liability as of January 1, 2021, $ 2,873 was reported as revenue during the six months ended June 30, 2021.

Of the total amount of customer deposit liability as of January 1, 2020, $ 1,599 was reported as revenue during the six months ended June 30, 2020.

Of the total amount of customer deposit liability as of January 1, 2021, $ 3,708 was reported as revenue during the nine months ended September 30, 2021.

Of the total amount of customer deposit liability as of January 1, 2020, $ 1,599 was reported as revenue during the nine months ended September 30, 2020.

The Company also has customer trade receivables under longer term financing arrangements at interest rates ranging from 9 % to 12 % with repayment terms ranging for 12 to 18 months.

Long term trade receivables as of June 30, 2021 and December 31, 2020 are as follows:

Long term trade receivables as of September 30, 2021 and December 31, 2020 are as follows:

September 30,

2021 December 31,

3 unchanged sentences

The following table summarizes changes in notes receivable balances that have been deemed impaired.

September 30,

2021 December 31,

4 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

Marketable securities have maturities of less than one year as of June 30, 2021.

There were no significant realized or unrealized gains or losses for the six months ended June 30, 2021.

The components of investments, available for sales securities, as of June 30, 2021 were as follows:

September 30, 2021

Marketable securities have maturities of less than one year as of September 30, 2021.

There were no significant realized or unrealized gains or losses for the nine months ended September 30, 2021.

The components of investments, available for sales securities, as of September 30, 2021 were as follows:

Fair Value Level Adjusted Cost Basis Unrealized Gain (Loss) Recorded

4 unchanged sentences

Notes receivable include customer trade receivables under long term financing arrangements and other note receivables not associated with customer transactions.

September 30,

2021 December 31,

5 unchanged sentences

PROPERTY AND EQUIPMENT

September 30,

2021 December 31,

3 unchanged sentences

Furniture, fixtures and equipment 9,106 5,739

Construction-in-progress 3,966 —

Total property and equipment, gross 22,199 9,546

1 unchanged sentence

Property and equipment, net $ 16,755 $ 6,475

Depreciation expense for the three and six months ended June 30, 2021 was $ 782 thousand and $ 1.4 million, respectively.

Depreciation expense for the three and six months ended June 30, 2020 was $ 374 thousand and $ 705 thousand, respectively.

Depreciation expense for the three and nine months ended September 30, 2021 was $ 932 thousand and $ 2.4 million, respectively.

Depreciation expense for the three and nine months ended September 30, 2020 was $ 400 thousand and $ 1.1 million, respectively.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

GOODWILL AND INTANGIBLE ASSETS

The changes in goodwill are as follows:

June 30, 2021 December 31,

September 30, 2021 December 31,

Balance, beginning of period $ 62,951 $ 17,799

2 unchanged sentences

Intangible assets consist of the following:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Amount Accumulated

8 unchanged sentences

$ 56,323 $ ( 6,926 ) $ 22,279 $ ( 789 )

Amortization expense for the six months ended June 30, 2021 and 2020 was $ 2,135 and $ 3,530 , respectively.

Amortization expense for the three months ended September 30, 2021 and 2020 was $ 2.6 million and $ 44.1 thousand, respectively.

Amortization expense for the nine months ended September 30, 2021 and 2020 was $ 6.1 million and $ 0.2 million, respectively.

Future amortization expense is as follows:

4 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

LONG-TERM DEBT

September 30,

2021 December 31,

4 unchanged sentences

Total Long-Term Debt $ 92 $ 158

Interest expense for the three months ended June 30, 2021 and 2020 was $ 4 thousand and $ 13 thousand, respectively.

Interest expense for the six months ended June 30, 2021 and 2020 was $ 6 thousand and $ 20 thousand, respectively.

Interest expense for the three months ended September 30, 2021 and 2020 was $ 25 thousand and $ 0 , respectively.

Interest expense for the nine months ended September 30, 2021 and 2020 was $ 31 thousand and $ 20 thousand, respectively.

We determine if a contract contains a lease at inception.

1 unchanged sentence

Our leases generally have remaining terms of 1 - 7 years, most of which include options to extend the leases for additional 3 to 5 -year periods.

Generally, the lease term is the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods.

Generally, the lease term is the minimum of the non-cancelable period of the lease or the lease term inclusive of reasonably certain renewal periods.

September 30,

2021 December 31,

3 unchanged sentences

$ 37,560 $ 12,480

2021 June 30,

September 30,

2021 September 30,

Weighted average remaining lease term 6.89 years 2.98 years

Weighted average discount rate 6.5 % 7.6 %

Six Months Ended

Nine Months Ended

September 30,

Operating lease costs $ 5,687 $ 2,660

3 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

LEASES, continued

The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2021:

The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2021:

2021 (remainder of the year) $ 2,248

2 unchanged sentences

Imputed interest ( 9,130 )

Lease Liability at June 30, 2021

Lease Liability at September 30, 2021

SHARE BASED PAYMENTS

3 unchanged sentences

The Company also issues share based payments in the form of common stock warrants to non-employees.

The following table presents share-based payment expense for the six months ended June 30, 2021 and 2020.

Six months ended June 30,

The following table presents share-based payment expense for the nine months ended September 30, 2021 and 2020.

Nine months ended September 30,

Restricted stock $ 3,511 $ 3,966

2 unchanged sentences

Total $ 5,347 $ 6,324

As of June 30, 2021, the Company had approximately $ 10.4 million of unamortized share-based compensation for option awards and restricted stock awards, which is expected to be recognized over a weighted average period of approximately 3.3 years.

As of June 30, 2021, the Company also had approximately $ 3.3 million of unamortized share-based compensation for common stock warrants issued to consultants, which is expected to be recognized over a weighted average period of 2.5 years.

As of September 30, 2021, the Company had approximately $ 9.7 million of unamortized share-based compensation for option awards and restricted stock awards, which is expected to be recognized over a weighted average period of approximately 3.1 years.

As of September 30, 2021, the Company also had approximately $ 2.9 million of unamortized share-based compensation for common stock warrants issued to consultants, which is expected to be recognized over a weighted average period of 2.3 years.

Restricted Stock

3 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

SHARE BASED PAYMENTS AND STOCK OPTIONS, continued

Restricted stock activity for the six months ended June 30, 2021 is presented in the following table:

Restricted stock activity for the nine months ended September 30, 2021 is presented in the following table:

Shares Weighted Average Grant Date Fair Value

3 unchanged sentences

Forfeited ( 9 ) $ 18.54

Nonvested, June 30, 2021

The table below summarizes all option activity under all plans during the six months ended June 30, 2021:

Nonvested, September 30, 2021

The table below summarizes all option activity under all plans during the nine months ended September 30, 2021:

Options Shares Weight -

6 unchanged sentences

Forfeited or expired ( 51 ) 4.12 — 2.26

Outstanding at June 30, 2021

Outstanding at September 30, 2021

931 $ 4.55 3.12 $ 2.62

Options vested at June 30, 2021

Options vested at September 30, 2021

595 $ 4.27 3.01 $ 2.51

A summary of the status of the Company’s outstanding stock purchase warrants for the six months ended June 30, 2021 is as follows:

A summary of the status of the Company’s outstanding stock purchase warrants for the nine months ended September 30, 2021 is as follows:

Warrants Weighted Average

2 unchanged sentences

Exercised ( 968 ) $ 2.84

Outstanding at June 30, 2021

Forfeited — —

Outstanding at September 30, 2021

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

EARNINGS PER SHARE

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computation for the three and six months ended June 30, 2021 and 2020.

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computation for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended

2021 June 30,

September 30,

2021 September 30,

Net income $ 4,027 $ 3,338

2 unchanged sentences

Adjusted weighted average shares outstanding, dilutive 59,490 51,626

Basic earnings per shares $ 0.11 $ 0.07

Basic earnings per share $ 0.07 $ 0.07

Dilutive earnings per share $ 0.07 $ 0.06

Six Months Ended

2021 June 30,

Nine Months Ended

September 30,

2021 September 30,

Net income $ 16,887 $ 3,818

2 unchanged sentences

Adjusted weighted average shares outstanding, dilutive 60,108 44,224

Basic earnings per shares $ 0.22 $ 0.01

Basic earnings per share $ 0.29 $ 0.09

Dilutive earnings per share $ 0.28 $ 0.09

Our acquisition strategy is to acquire (i) well established profitable hydroponic garden centers in markets where the Company does not have a market presence or in markets where it is increasing its market presence;

Our acquisition strategy is primarily to acquire (i) well established profitable hydroponic garden centers in markets where the Company does not have a market presence or in markets where it is increasing its market presence;

and (ii) proprietary brands and private label brands.

2 unchanged sentences

The Company has made adjustments to the preliminary valuations of the acquisition based on valuation analysis prepared by independent third-party valuation consultants.

During the nine months ended September 30, 2021 our measurement period adjustments included reducing intangible assets by $ 1.0 million and increasing goodwill by the same amount.

As a result of these measurement period adjustments, we made an insignificant reduction in amortization expense which is included in the income statement.

All acquisition costs are expensed as incurred and recorded in general and administrative expenses in the consolidated statements of operations.

Acquisitions during the six months ended June 30, 2021.

Acquisitions during the nine months ended September 30, 2021

On January 25, 2021, the Company purchased the assets of Indoor Garden & Lighting, Inc, a two-store chain of hydroponic and equipment and indoor gardening supply stores serving the Seattle and Tacoma, Washington area.

6 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

ACQUISITIONS, continued

2 unchanged sentences

Acquired goodwill of approximately $ 11.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

On February 22, 2021, the Company purchased the assets of San Diego Hydroponics & Organics, a four-store chain of hydroponic and organic garden stores in San Diego, CA.

On February 22, 2021, the Company purchased the assets of San Diego Hydroponics & Organics, a four-store chain of hydroponic and organic garden stores in San Diego, California.

The total consideration for the purchase of San Diego Hydroponics was approximately $ 9.3 million, including $ 4.8 million in cash and common stock valued at approximately $ 4.5 million.

Acquired goodwill of approximately $ 5.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

On March 12, 2021, the Company purchased the assets of Charcoir Corporation, who sells an RHP-certified growing medium made from the highest-grade coconut fiber.

On March 12, 2021, the Company purchased the assets of Charcoir Corporation, which sells an RHP-certified growing medium made from the highest-grade coconut fiber.

The total consideration for the purchase of Charcoir was approximately $ 16.4 million, including $ 9.9 million in cash and common stock valued at approximately $ 6.5 million.

Acquired goodwill of approximately $ 6.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established distribution market for the Company of a proprietary brand.

On March 15, 2021, the Company purchased the assets of 55 Hydroponics, a hydroponic and organic superstore located in Santa Ana, CA.

On March 15, 2021, the Company purchased the assets of 55 Hydroponics, a hydroponic and organic superstore located in Santa Ana, California.

The total consideration for the purchase of 55 Hydroponics was approximately $ 6.5 million, including $ 5.4 million in cash and common stock valued at approximately $ 1.1 million.

Acquired goodwill of approximately $ 3.9 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

On March 15, 2021, the Company purchased the assets of Aquarius, a hydroponic and organic garden store in Springfield, MA.

On March 15, 2021, the Company purchased the assets of Aquarius, a hydroponic and organic garden store in Springfield, Massachusetts.

The total consideration for the purchase of Aquarius was approximately $ 3.6 million, including $ 2.4 million in cash and common stock valued at approximately $ 1.2 million.

3 unchanged sentences

Acquired goodwill of approximately $ 8.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established e-commerce market for the Company targeting the commercial customer.

On April 19, 2021, the Company purchased the assets of Grow Depot LLC ("Down River Hydro"), a hydroponic and indoor gardening supply store in Brownstown, MI.

On April 19, 2021, the Company purchased the assets of Grow Depot LLC ("Down River Hydro"), a hydroponic and indoor gardening supply store in Brownstown, Michigan.

The total consideration for the purchase of Down River Hydro was approximately $ 4.4 million, including approximately $ 3.2 million in cash and common stock valued at approximately $ 1.2 million.

Acquired goodwill of approximately $ 2.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company.

On May 24, 2021, the Company purchased the assets of The Harvest company ("Harvest"), a northern California-based hydroponic supply center and cultivation design innovator with stores in Redding and Trinity County.

The total consideration for the purchase if Harvest was approximately $ 8.3 million, including approximately $ 5.6 million in cash and common stock valued at approximately $ 2.8 million.

On May 24, 2021, the Company purchased the assets of The Harvest Company ("Harvest"), a northern California-based hydroponic supply center and cultivation design innovator with stores in Redding and Trinity Counties.

The total consideration for the purchase of Harvest was approximately $ 8.3 million, including approximately $ 5.6 million in cash and common stock valued at approximately $ 2.8 million.

Acquired goodwill of approximately $ 4.6 million represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company.

On July 19, 2021, the Company purchased the assets of Aqua Serene, Inc., ("Aqua Serene") an Oregon corporation which consists of an indoor/outdoor garden center with stores in Eugene and Ashland, Oregon.

The total consideration for the purchase was $ 11.7 million, including approximately $ 9.9 million in cash and common stock valued at approximately $ 1.8 million.

Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

ACQUISITIONS, continued

The table below represents the allocation of the purchase price to the acquired net assets during the six months ended June 30, 2021.

Agron Aquarius 55 Hydro Charcoir San Diego Hydro

On July 3, 2021, the Company purchased the assets of Mendocino Greenhouse & Garden Supply, Inc, a Northern California-based hydroponic garden center located in Mendocino, California.

The purchase agreement was modified on July 19, 2021 to amend the purchase price.

The total consideration for the purchase was $ 4.0 million in cash.

This acquisition allows the Company to expand its footprint in the Northern California.

On August 24, 2021, the Company purchased the assets of Commercial Grow Supply, Inc.

("CGS"), a hydroponic superstore located in Santa Clarita, California.

The total consideration for the purchase was $ 7.2 million, including approximately $ 6.0 million in cash and common stock valued at approximately $ 1.3 million.

Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company.

On August 23, 2021 the Company purchased the assets of Hoagtech Hydroponics, Inc.

("Hoagtech"), a Washington -based corporation consisting of a hydroponic and garden supply center serving the Bellingham, Washington area.

The total consideration for the purchase was $ 3.9 million in cash.

The Asset Purchase Agreement contains a contingent payment equal to $ 0.6 million to be settled in GrowGen common stock if this garden supply center reaches $ 8.0 million in revenue within a 12-month calendar period from the date of close.

The Company used a third-party specialist to value this contingent consideration.

The probability that the target will be reached was determined to be 5 % which resulted in a value of approximately $ 29 thousand of contingent consideration which was offset against goodwill.

This acquisition expands our footprint in the Pacific Northwest.

Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company.

The table below represents the allocation of the purchase price to the acquired net assets during the nine months ended September 30, 2021.

Agron Aquarius Aqua Serene 55 Hydro Charcoir San Diego Hydro Mendocino Hoagtech

Inventory $ — $ 957 $ 1,696 $ 780 $ 839 $ 1,400 753 751

10 unchanged sentences

Total $ 11,249 $ 3,558 $ 11,651 $ 6,479 $ 16,368 $ 9,282 $ 4,000 $ 3,932

Grow Warehouse Grow Depot Maine Indoor Garden Down River Hydro Harvest Total

CGS Grow Warehouse Grow Depot Maine Indoor Garden Down River Hydro Harvest Total

Inventory 875 $ 2,450 $ 326 $ 372 $ 824 $ 1,204 $ 13,227

10 unchanged sentences

Total $ 7,248 $ 17,779 $ 2,149 $ 1,692 $ 4,351 $ 8,325 $ 108,063

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2021

The table below represents the consideration paid for the net assets acquired in business combinations.

Agron Aquarius 55 Hydro Charcoir San Diego Hydro

Agron Aquarius Aqua Serene 55 Hydro Charcoir San Diego Hydro Mendocino Hoagtech

Cash $ 5,973 $ 2,331 $ 9,860 $ 5,347 $ 9,902 $ 4,751 $ 4,000 $ 3,932

1 unchanged sentence

Total $ 11,249 $ 3,558 $ 11,651 $ 6,479 $ 16,368 $ 9,282 $ 4,000 $ 3,932

Grow Warehouse Grow

CGS Grow Warehouse Grow

Depot Maine Indoor Garden Down River Hydro Harvest Total

2 unchanged sentences

Total $ 7,248 $ 17,779 $ 2,149 $ 1,692 $ 4,351 $ 8,325 $ 108,063

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

The following table discloses the date of the acquisitions noted above and the revenue and earnings included in the consolidated income statement for the period ended June 30, 2021.

Agron Aquarius 55 Hydro Charcoir San Diego Hydro

The following table discloses the date of the acquisitions noted above and the revenue and earnings included in the consolidated income statement for the period ended September 30, 2021.

Agron Aquarius Aqua Serene 55 Hydro Charcoir San Diego Hydro Mendocino Hoagtech

Acquisition date

2 unchanged sentences

Net Income $ 149 $ 1,145 $ 331 $ 393 $ 723 $ 839 $ 158 $ 36

Grow Warehouse Grow Depot Maine Indoor Garden Down River Hydro Harvest Total

CGS Grow Warehouse Grow Depot Maine Indoor Garden Down River Hydro Harvest Total

Acquisition date

4 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

September 30, 2021

ACQUISITIONS, continued

The following represents the pro forma consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the entire period for the quarter ended June 30, 2021 and 2020.

Three Months Ended Six Months Ended

June 30, 2021

(Unaudited) June 30, 2021

Three Months Ended Nine Months Ended

September 30, 2021

(Unaudited) September 30, 2021

Revenue $ 146,030 $ 361,937

Net income $ 5,299 $ 23,276

Three Months Ended Six Months Ended

June 30, 2020

(Unaudited) June 30, 2020

Three Months Ended Nine Months Ended

September 30, 2020

(Unaudited) September 30, 2020

Revenue $ 121,809 $ 222,193

Net income $ 6,412 $ 15,681

Acquisitions during the six months ended June 30, 2020.

Acquisitions during the nine months ended September 30, 2020

On February 26, 2020, we acquired certain assets of Health & Harvest LLC in a transaction valued at approximately $ 2.85 million.

4 unchanged sentences

Cash consideration was funded from the Company's existing working capital.

The table below represents the allocation of the purchase price to the acquired net assets during the six months ended June 30, 2020.

H2O Hydroponics LLC Health & Harvest LLC Total

On August 10, 2020, we acquired certain assets of Benzakry Family Corp, d/b/a Emerald City Garden, in a transaction valued at $ 1.0 million.

Acquired goodwill of approximately $ 0.6 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

Cash consideration was funded from the Company’s existing working capital.

The table below represents the allocation of the purchase price to the acquired net assets during the nine months ended September 30, 2020.

Emerald City Garden H2O Hydroponics LLC Health & Harvest LLC Total

Inventory $ 150 $ 498 $ 1,054 $ 1,702

8 unchanged sentences

Total $ 1,000 $ 1,987 $ 2,853 $ 5,840

The table below represents the consideration paid for the net assets acquired in business combinations.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

H2O Hydroponics LLC Health & Harvest LLC Total

September 30, 2021

The table below represents the consideration paid for the net assets acquired in business combinations.

Emerald City Garden H2O Hydroponics LLC Health & Harvest LLC Total

Cash $ 1,000 $ 1,282 $ 1,750 $ 4,032

1 unchanged sentence

Total $ 1,000 $ 1,987 $ 2,853 $ 5,840

The following table discloses the date of the acquisitions noted above and the revenue and earnings included in the consolidated income statement from the date of acquisition to the period ended June 30, 2020.

H2O Hydroponics LLC Health & Harvest LLC Total

Emerald City Gardens H2O Hydroponics LLC Health & Harvest LLC Total

Acquisition date 8/10/20 6/26/20 2/26/2020

1 unchanged sentence

Earnings $ 74 $ 504 $ 831 $ 1,409

Pro forma consolidated income statement:

Three Months Ended Six Months Ended

June 30, 2019 June 30, 2019

Three Months Ended Nine Months Ended

September 30, 2019

(Unaudited) September 30, 2019

Revenue $ 24,651 $ 61,176

3 unchanged sentences

The firm provides certain legal services.

Amounts paid for to that firm in total was approximately $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2021, there was no outstanding balance due.

Amounts paid for to that firm in total were approximately $ 32.0 thousand and $ 457.8 thousand for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2021, there was no outstanding balance due.

SUBSEQUENT EVENTS

The Company has evaluated events and transaction occurring subsequent to June 30, 2021 up to the date of this filing of these consolidated financial statements.

The Company has evaluated events and transaction occurring subsequent to September 30, 2021 up to the date of this filing of these consolidated financial statements.

These statements contain all necessary adjustments and disclosures resulting from that evaluation.

For all acquisitions subsequent to the end of the quarter, the Company’s initial accounting for the business combination has not been completed because the valuations have not yet been received from the Company’s independent valuation firm.

On July 1, 2021, the Company purchased the assets of Aqua Serene, an indoor/outdoor garden center with stores in Eugene and Ashland, Oregon.

The total consideration for the purchase was $ 10.0 million, including approximately $ 7.7 million in cash and 46,554 shares of common stock valued at approximately $ 2.3 million.

On July 3, 2021, the Company purchased the assets of Mendocino Greenhouse & Garden Supply, Inc, a Northern California-based hydroponic garden center located in Mendocino, California.

The total consideration for the purchase was approximately $ 4.0 million.

On October 12, 2021, the Company purchased the assets of All Seasons Gardening, an indoor-outdoor garden supply center specializing in hydroponics systems, lighting, and nutrients.

All Seasons Gardening is the largest hydroponics retailer in New Mexico.

The total consideration for the purchase was $ 1.0 million, including approximately $ 0.7 million in cash and common stock valued at approximately $ 0.3 million.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

On July 27, 2021, the Company entered into a series of asset purchase agreements (the “Purchase Agreements”) through its wholly-owned subsidiary, GrowGeneration Michigan Corp., to purchase the assets from subsidiaries of HGS Hydro (“HGS Hydro”) with six stores across the State of Michigan and a seventh store to open in the fall of 2021.

This acquisition is expected to close before the end of 2021 fiscal year-end.

As consideration for the assets, the Company agreed to pay HGS Hydro an aggregate purchase price of approximately $ 72.2 million which includes $ 55.2 million in cash and approximately $ 17.0 million in shares of the Company's restricted common stock.

September 30, 2021

On October 12, 2021, the Company terminated a series of asset purchase agreements (the “Asset Purchase Agreements”) entered into on July 27, 2021 through its wholly-owned subsidiary, GrowGeneration Michigan Corp., to purchase the assets from subsidiaries of HGS Hydro (“HGS Hydro”).

The termination of the Asset Purchase Agreement was mutually agreed to by both parties.

In connection with the termination, the Company reimbursed HGS Hydro of a transaction fee of $ 300,000 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements