What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-09 compared with 2022-05-16 · 314 added, 129 removed, 455 unchanged (49% of the section changed)

7 unchanged sentences

Marketable securities 10,000 39,793

Accounts receivable, net of allowance for doubtful accounts of $ 0.6 million and $ 0.6 million at March 31, 2022 and December 31, 2021

Notes receivable, current, net of allowance for doubtful accounts of $ 0.9 million and $ 0.5 million at March 31, 2022 and December 31, 2021

Accounts receivable, net of allowance for doubtful accounts of $ 0.9 million and $ 0.6 million at June 30, 2022 and December 31, 2021

Notes receivable, current, net of allowance for doubtful accounts of $ 1.3 million and $ 0.5 million at June 30, 2022 and December 31, 2021

Inventory 99,086 105,571

18 unchanged sentences

Total current liabilities 39,456 47,076

Commitments and ontingencies (Note 15)

Commitments and contingencies (Note 14)

Deferred tax liability 440 2,359

5 unchanged sentences

$ 0.001 par value;

100,000,000 shares authorized, 60,727,888 and 59,928,564 shares issued and outstanding as of March 31, 2022 and December 31, 2021

100,000,000 shares authorized, 60,782,525 and 59,928,564 shares issued and outstanding as of June 30, 2022 and December 31, 2021

Additional paid-in capital 368,077 361,087

Retained earnings 4,967 10,144

Retained earnings (deficit) ( 131,412 ) 10,144

Total stockholders’ equity 236,726 371,291

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Three Months Ended March 31,

(in thousands, except shares and per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net sales $ 71,093 $ 125,885 $ 152,860 $ 215,907

Cost of sales 59,627 64,645

Cost of sales (exclusive of depreciation and amortization shown below) 50,866 90,172 110,493 154,817

Gross profit 20,227 35,713 42,367 61,090

3 unchanged sentences

Depreciation and amortization 4,783 2,917 9,289 4,971

Impairment loss 127,831 — 127,831 —

Total operating expenses 157,028 26,104 186,389 43,745

14 unchanged sentences

GROWGENERATION CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(in thousands)

SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(in thousands, except shares and per share amounts)

Common Stock Additional

3 unchanged sentences

Shares Amount

Balances, March 31, 2022 60,728 $ 61 $ 367,064 $ 4,967 $ 372,092

Common stock issued for share based compensation 28 — — — —

Common stock withheld for employee payroll taxes — — ( 93 ) — ( 93 )

Share based compensation — — 1,106 — 1,106

Common stock issued upon cashless exercise of options 12 — — — —

Common stock issued upon cashless exercise of warrants 14 — — — —

Net income (loss) — — — ( 136,379 ) ( 136,379 )

Balances, June 30, 2022 60,782 $ 61 $ 368,077 $ ( 131,412 ) $ 236,726

Common Stock Additional

Paid-In Capital Retained

Earnings (Deficit) Total

Stockholders’ Equity

Shares Amount

Balances, March 31, 2021 58,394 $ 58 $ 346,176 $ 3,505 $ 349,739

Common stock issued upon warrant exercise 216 $ — $ 224 — 224

Common stock issued upon cashless warrant exercise 119 — — — —

Common stock issued upon exercise of options 460 1 1,729 — 1,730

Common stock issued upon cashless exercise of options 272 — — — —

Common stock issued in connection with business combinations 101 1 3,938 — 3,939

Share based compensation — — 1,508 — 1,508

Net income — — — 6,713 6,713

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

Common Stock Additional

Paid-In Capital Retained

Earnings (Deficit) Total

Stockholders’ Equity

Shares Amount

Balances, December 31, 2021 59,929 $ 60 $ 361,087 $ 10,144 $ 371,291

3 unchanged sentences

Share based compensation — — 2,689 — 2,689

Common stock issued upon cashless exercise of options 12 — — — —

Common stock issued upon cashless exercise of warrants 14 — — — —

Net income (loss) — — — ( 141,556 ) ( 141,556 )

Balances, March 31, 2022 60,728 $ 61 $ 367,064 $ 4,967 $ 372,092

Balances, June 30, 2022 60,782 $ 61 $ 368,077 $ ( 131,412 ) $ 236,726

Common Stock Additional

13 unchanged sentences

Share based compensation — — 2,695 — 2,695

Net income (loss) — — — 6,147 6,147

Balances, March 31, 2021 58,394 $ 58 $ 346,176 $ 3,505 $ 349,739

Net income — — — 12,860 12,860

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

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended March 31,

(in thousands, except shares and per share amounts)

Six Months Ended June 30,

Cash flows from operating activities:

5 unchanged sentences

Gain on asset disposition 12 —

Impairment loss 127,831 —

Deferred taxes ( 1,919 ) 947

32 unchanged sentences

Notes To Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

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-three ( 63 ) retail hydroponic/gardening stores across 13 states, an online e-commerce platform, and proprietary businesses that market grow solutions through our platforms and other wholesale customers.

As of June 30, 2022, the Company owns and operates a chain of 64 retail hydroponic/gardening stores across 14 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.

8 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, are in thousands (000).

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

Use of Estimates

Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with generally accepted accounting principles.

These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenues and expenses during the reporting period.

Actual results could vary from the estimates that were used.

Risk and Uncertainties

5 unchanged sentences

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.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments — Credit Losses (Topic 326),” changing the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incurred losses as required currently by the other-than-temporary impairment model.

The ASU will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, available-for-sale and held-to-maturity debt securities, net investments in leases, and off-balance sheet credit exposures.

The Company is in the process of evaluating the impact of this standard.

Immaterial out-of-period adjustments

During the three months ended March 31, 2022, the Company recorded an immaterial out-of period adjustment that impacted the prior year Consolidated Balance Sheets.

During the six months ended June 30, 2022, the Company recorded an immaterial out-of period adjustment that impacted the prior year Consolidated Balance Sheets.

The adjustment related to a change in the calculation of operating lease right-of-use assets and operating lease liabilities.

This adjustment corrected an understatement of operating lease right-of-use assets of $ 1.3 million and an understatement of operating lease liabilities of $ 1.3 million as of December 31, 2021 during the period ended March 31, 2022.

The Company assessed the materiality of this adjustment on the previously issued annual financial statements in accordance with SEC Staff Accounting Bulletin No.

The Company concluded that the changes were not material to any of the previously issued consolidated financial statements.

During the three months ended March 31, 2022, the Company identified an omission regarding the disclosure of reportable segments under ASC 280 related to the year ended December 31, 2021.

During the six months ended June 30, 2022, the Company identified an omission regarding the disclosure of reportable segments under ASC 280 related to the year ended December 31, 2021.

During the year ended December 31, 2021 the Company inappropriately reported a single segment, aggregating multiple operating segments.

The impact at March 31, 2021 was that $ 8.8 million of revenue, $ 3.5 million of gross margin, and $ 1.5 million of operating income should have been reported as a separate “Distribution and other segment ” .

The impact at June 30, 2021 was that $ 25.8 million of revenue, $ 8.6 million of gross margin, and $ 2.4 million of operating income should have been reported as a separate “Distribution and other segment.

” The Company assessed the materiality of this omission on the previously issued interim and annual financial statements in accordance with SEC Staff Accounting Bulletin No.

The Company concluded that the ommission was not material to any of the previously issued consolidated financial statements and will begin reporting segments results in accordance with ASC 280 on a prospective basis starting with the quarter ending March 31, 2022.

The Company concluded that the omission was not material to any of the previously issued consolidated financial statements and will begin reporting segments results in accordance with ASC 280 on a prospective basis starting with the quarter ending March 31, 2022.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

FAIR VALUE MEASUREMENTS

6 unchanged sentences

• 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 judgment.

Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.

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.

2 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 March 31,

Level June 30,

2022 December 31,

Cash and cash equivalents 1 $ 47,273 $ 41,372

Marketable securities 2 $ 10,000 $ 39,793

1 unchanged sentence

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

RECENT ACCOUNTING PRONOUNCEMENTS

4 unchanged sentences

We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position or results of operations.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No.

The Company is in the process of evaluating the impact of this standard.

Refer to Note 3 to the Consolidated Financial Statements reported in Form 10-K for the year ended December 31, 2021 for recently issued accounting pronouncements that are pending adoption.

1 unchanged sentence

The following table disaggregates revenue by source:

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

Sales at company owned stores $ 55,354 $ 108,911 $ 119,650 $ 190,138

5 unchanged sentences

Opening balance, January 1, 2022 $ 5,741 $ 11,686

Closing balance, March 31, 2022

Closing balance, June 30, 2022

Increase (decrease) $ 2,572 $ ( 5,392 )

Opening balance, January 1, 2021 $ 3,901 $ 5,155

Closing balance, March 31, 2021

Closing balance, June 30, 2021

Increase (decrease) $ 476 $ 1,638

Of the total amount of customer deposit liability as of January 1, 2022, $ 7.6 million was reported as revenue during the three months ended March 31, 2022.

Of the total amount of customer deposit liability as of January 1, 2021, $ 2.1 million was reported as revenue during the three months ended March 31, 2021.

Of the total amount of customer deposit liability as of January 1, 2022, $ 11.1 million was reported as revenue during the six months ended June 30, 2022.

Of the total amount of customer deposit liability as of January 1, 2021, $ 2.9 million was reported as revenue during the six months ended June 30, 2021.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

Marketable securities have maturities of less than one year as of March 31, 2022.

There were no significant realized or unrealized gains or losses for the three months ended March 31, 2022.

The components of investments, available for sale securities, as of March 31, 2022 were as follows:

June 30, 2022

Marketable securities have maturities of less than one year as of June 30, 2022.

There were no significant realized or unrealized gains or losses for the six months ended June 30, 2022.

The components of investments, available for sale securities, as of June 30, 2022 were as follows:

Adjusted Cost Basis Unrealized Gain (Loss) Recorded

2 unchanged sentences

The Company also has notes receivables under longer term financing arrangements at interest rates ranging from 8 % to 12 % with repayment terms ranging for 12 to 18 months.

Notes receivables as of March 31, 2022 and December 31, 2021 are as follows:

Notes receivables as of June 30, 2022 and December 31, 2021 are as follows:

2022 December 31,

16 unchanged sentences

Total property and equipment, gross 40,248 31,324

Accumulated depreciation and amortization ( 8,956 ) ( 7,208 )

Accumulated depreciation ( 10,910 ) ( 7,208 )

Property and equipment, net $ 29,338 $ 24,116

Depreciation expense for the three months ended March 31, 2022 and 2021 was $ 1.8 million, and $ 0.7 million, respectively.

Depreciation expense for the three and six months ended June 30, 2022 was $ 2.0 million and $ 3.7 million.

Depreciation expense for the three and six months ended June 30, 2021 was $ 0.8 million and $ 1.4 million.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

GOODWILL AND INTANGIBLE ASSETS

The Company performs its goodwill impairment testing annually during the fourth quarter, or more frequently if events or if circumstances were to occur that would more likely than not reduce the fair value of our reporting unit below its carrying amount.

The Company would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill.

The adjusted carrying amount of goodwill shall be its new accounting basis.

During the second quarter of 2022, the Company’s market capitalization fell below total net assets.

In addition, financial performance continued to weaken during the quarter, which is contrary to prior experience.

Management reassessed business performance expectations, following persistent adverse developments in equity markets, deterioration in the environment in which we operate, inflation, lower than expected sales, and an increase in operating expenses.

These indicators, in the aggregate, required impairment testing for finite-lived intangible assets at the asset group level and goodwill at the reporting unit level.

Under ASC 360, we performed a cash recoverability test on the following intangible assets:

customer relationships, trade name, and non-compete.

The carrying amounts of any assets that are not within the scope of ASC 360-10, other than goodwill, were adjusted for impairment, as necessary, prior to testing long-lived assets and goodwill.

The Company recognized impairment losses as disclosed in the table below.

For goodwill impairment testing purposes, the Company determined four reporting units, three of which were subject to a quantitative assessment.

We determined fair value using the income approach, where estimated future returns are discounted to present value at an appropriate rate of return.

The Company completed its interim goodwill impairment test as of June 30, 2022 and recognized impairment losses as disclosed in the table below.

The changes in goodwill are as follows:

March 31, 2022 December 31,

June 30, 2022 December 31,

Balance, beginning of period $ 125,401 $ 62,951

Goodwill additions and measurement period adjustments 7,099 62,450

Impairment $ ( 116,657 ) $ —

Balance, end of period $ 15,843 $ 125,401

The goodwill balance and impairment by segment are as follows:

Retail E-commerce Distribution Total

Gross carrying value December 31, 2020 $ 55,180 $ 2,911 $ 4,860 $ 62,951

Acquisitions & measurement period adjustments 47,583 8,748 6,119 62,450

Gross carrying value December 31, 2021 102,763 11,659 10,979 125,401

Acquisitions & measurement period adjustments 331 ( 341 ) 7,109 7,099

Gross carrying value June 30, 2022 $ 103,094 $ 11,318 $ 18,088 $ 132,500

Accumulated impairment losses December 31, 2020 $ — $ — $ — $ —

Impairment — — — —

Accumulated impairment losses December 31, 2021 — — — —

Impairment ( 103,094 ) ( 9,848 ) ( 3,715 ) ( 116,657 )

Accumulated impairment losses June 30, 2022 $ ( 103,094 ) $ ( 9,848 ) $ ( 3,715 ) $ ( 116,657 )

Net carrying value at December 31, 2021 $ 102,763 $ 11,659 $ 10,979 $ 125,401

Net carrying value at June 30, 2022 $ — $ 1,470 $ 14,373 $ 15,843

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

A summary of intangible assets is as follows:

2 unchanged sentences

of Intangible Assets

as of March 31, 2022

as of June 30, 2022

Trade names 3.68

3 unchanged sentences

Intangible assets consist of the following:

March 31, 2022 December 31, 2021

June 30, 2022

Amount Accumulated

Amortization Gross

Amortization Net

Trade names $ 28,774 $ ( 7,815 ) $ 20,959

Patents 100 ( 49 ) 51

Customer relationships 17,102 ( 5,317 ) 11,785

Non-competes 932 ( 444 ) 489

Intellectual property 2,065 ( 551 ) 1,514

Total $ 48,973 $ ( 14,176 ) $ 34,798

December 31, 2021

Amount Accumulated

Amortization Net

Trade names $ 28,300 $ ( 4,948 ) $ 23,352

4 unchanged sentences

Total $ 57,024 $ ( 8,622 ) $ 48,402

Amortization expense for the three months ended March 31, 2022 and 2021 was $ 2.7 million and $ 1.4 million, respectively.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

Intangibles and impairment by segment are as follows:

Retail E-commerce Distribution Total

Gross carrying value December 31, 2020 $ 17,635 $ — $ 3,481 $ 21,116

Acquisitions & measurement period adjustments 20,190 2,501 13,217 35,908

Gross carrying value December 31, 2021 37,825 2,501 16,698 57,024

Acquisitions & measurement period adjustments ( 57 ) — 3,181 3,124

Gross carrying value June 30, 2022 $ 37,768 $ 2,501 $ 19,879 $ 60,148

Accumulated amortization December 31, 2020 $ ( 540 ) $ — $ ( 27 ) $ ( 567 )

Amortization ( 5,745 ) ( 354 ) ( 1,956 ) ( 8,055 )

Accumulated amortization December 31, 2021 ( 6,285 ) ( 354 ) ( 1,983 ) ( 8,622 )

Amortization ( 3,554 ) ( 237 ) ( 1,763 ) ( 5,554 )

Accumulated amortization June 30, 2022 $ ( 9,839 ) $ ( 591 ) $ ( 3,746 ) $ ( 14,176 )

Accumulated impairment losses December 31, 2020 $ — $ — $ — $ —

Impairments — — — —

Accumulated impairment losses December 31, 2021 — — — —

Impairments ( 11,079 ) ( 95 ) — ( 11,174 )

Accumulated impairment losses June 30, 2022 $ ( 11,079 ) $ ( 95 ) $ — $ ( 11,174 )

Net carrying value at December 31, 2021 $ 31,540 $ 2,147 $ 14,715 $ 48,402

Net carrying value at June 30, 2022 $ 16,850 $ 1,815 $ 16,133 $ 34,798

Amortization expense for the three and six months ended June 30, 2022 was $ 2.8 million and $ 5.6 million.

Amortization expense for the three and six months ended June 30, 2021 was $ 2.1 million and $ 3.5 million.

Future amortization expense is as follows:

2 unchanged sentences

Total $ 34,798

For the six months ended June 30, 2022, the effective tax rate is 1.34 %, which decreased from 25.80 % at June 30, 2021.

The decrease in the effective tax rate is primarily due to the Company recording a valuation allowance against deferred tax assets.

The effective tax rate for the six months ended June 30, 2022 is lower than the US federal statutory rate of 21.0%, which is also primarily due to the Company recording a valuation allowance against deferred tax assets.The Company has evaluated positive and negative evidence and has concluded that its deferred tax assets are not expected to be realizable and has recorded a valuation allowance in the current period.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

For the three months ended March 31, 2022, the effective tax rate is 24.02 %, which increased from 20.17 % at March 31, 2021.

The increase in rate is primarily due to the effect of stock based compensation.

The three months ended March 31, 2022 effective tax rate is higher than the US federal statutory rate of 21.00%, which is also primarily due to stock compensation.

June 30, 2022

We determine if a contract contains a lease at inception.

Our material operating leases consist of retail and warehouse locations as well as office space.

Our leases generally have remaining terms of 1 - 10 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 non-cancelable period of the lease or the lease term inclusive of reasonably certain renewal periods.

Our leases generally have remaining terms of 1 to 10 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 non-cancellable period of the lease or the lease term inclusive of reasonably certain renewal periods.

Operating lease assets and liabilities are recognized at the lease commencement date.

13 unchanged sentences

Non-current lease liability 41,028 38,546

$ 47,619 $ 45,404

2022 March 31,

Total lease liability $ 49,340 $ 45,404

2022 June 30,

Weighted average remaining lease term 6.60 years 7.17 years

Weighted average discount rate 5.6 % 6.0 %

Three Months Ended

Six Months Ended

Operating lease costs $ 5,445 $ 3,548

4 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2022 :

June 30, 2022

The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2022 :

2022 (remainder of the year) $ 5,452

2 unchanged sentences

Imputed interest ( 9,956 )

Lease Liability at March 31, 2022

Lease Liability at June 30, 2022

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 three months ended March 31, 2022 and 2021:

Three months ended March 31,

The following table presents share-based payment expense for the six months ended June 30, 2022 and 2021:

Six months ended June 30,

Restricted stock $ 1,951 $ 1,935

2 unchanged sentences

Total $ 2,689 $ 3,241

As of March 31, 2022, the Company had approximately $ 12.9 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 3.7 years.

As of March 31, 2022, the Company also had approximately $ 2.2 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 1.7 years.

As of June 30, 2022, the Company had approximately $ 7.6 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 3.5 years.

As of June 30, 2022, the Company also had approximately $ 1.9 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 1.5 years.

Restricted Stock

1 unchanged sentence

The awards generally vest on the first, second, third, or fourth anniversary of the date of grant, subject to the employee’s continuing employment as of that date.

Restricted stock is valued using market value on the grant date.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

Restricted stock activity for the three months ended March 31, 2022 is presented in the following table:

June 30, 2022

Restricted stock activity for the six months ended June 30, 2022 is presented in the following table:

Shares Weighted Average Grant Date Fair Value

4 unchanged sentences

Forfeited ( 304,500 ) $ 17.51

Nonvested, March 31, 2022

Nonvested, June 30, 2022

511,250 $ 18.36

The table below summarizes all option activity under all plans during the three months ended March 31, 2022:

Options Shares Weight -

The table below summarizes all option activity under all plans during the six months ended June 30, 2022:

Options Shares Weighted -

Price Weighted -

5 unchanged sentences

Forfeited or expired ( 197,427 ) 5.68 — 3.19

Outstanding at March 31, 2022

Outstanding at June 30, 2022

682,998 $ 4.00 2.32 $ 2.24

Options vested at March 31, 2022

Options vested at June 30, 2022

688,998 $ 4.00 2.32 $ 2.24

A summary of the status of the Company’s outstanding stock purchase warrants for the three months ended March 31, 2022 is as follows:

A summary of the status of the Company’s outstanding stock purchase warrants for the six months ended June 30, 2022 is as follows:

Warrants Weighted Average

4 unchanged sentences

Forfeited — —

Outstanding at March 31, 2022

Outstanding at June 30, 2022

282,497 $ 25.33

1 unchanged sentence

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 months ended March 31, 2022 and 2021:

June 30, 2022

EARNINGS (LOSS) 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 six months ended June 30, 2022 and 2021:

Three Months Ended

2022 March 31,

2022 June 30,

Net income (loss) $ ( 136,379 ) $ 6,713

2 unchanged sentences

Adjusted weighted average shares outstanding, dilutive 60,756 60,223

Basic earnings per share $ ( 0.09 ) $ 0.11

Dilutive earnings per share $ ( 0.09 ) $ 0.10

The following potentially outstanding restricted stock, stock options, and warrants were excluded from the computation of diluted EPS because the effect would have been antidilutive:

Basic earnings (loss) per share $ ( 2.24 ) $ 0.11

Dilutive earnings (loss) per share $ ( 2.24 ) $ 0.11

Six Months Ended

2022 June 30,

Net income (loss) $ ( 141,556 ) $ 12,860

Weighted average shares outstanding, basic 60,742 58,588

Effect of dilution — 1,206

Adjusted weighted average shares outstanding, dilutive 60,742 59,794

Basic earnings (loss) per share $ ( 2.33 ) $ 0.22

Dilutive earnings (loss) per share $ ( 2.33 ) $ 0.22

The following potentially outstanding restricted stock and stock options were excluded from the computation of diluted earnings per share because the effect would have been antidilutive:

Three Months Ended

2022 March 31,

2022 June 30,

Restricted stock 511 —

Stock options 202 —

Warrants 819 —

Total 2,548 —

Six Months Ended

2022 June 30,

Restricted stock 511 —

Stock options 320 —

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

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;

3 unchanged sentences

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

During the three months ended March 31, 2022 our measurement period adjustments included increasing goodwill by $ 1.3 million offset with intangible assets.

During the six months ended June 30, 2022 our measurement period adjustments included increasing goodwill by $ 1.3 million offset with intangible assets.

As a result of these measurement period adjustments, we made an insignificant reduction in amortization expense.

All acquisition costs are expensed as incurred and recorded in general and administrative expenses in the Condensed Consolidated Statements of Operations.

Acquisitions during the three months ended March 31, 2022

Acquisition during the six months ended June 30, 2022

On February 1, 2022, the Company purchased all of the assets of Horticultural Rep Group, Inc.

4 unchanged sentences

HRG is included in our Distribution and other segment.

The Company's preliminary estimates of fair values of the net assets acquired are based on the information that was available at the date of the acquisition, and the Company is continuing to evaluate the underlying inputs and assumptions used in its valuations.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

The table below represents the allocation of the purchase price to the acquired net assets during the three months ended March 31, 2022.

The table below represents the allocation of the purchase price to the acquired net assets during the six months ended June 30, 2022.

Inventory $ 4,170

12 unchanged sentences

Total $ 13,391

The following table discloses the date of the acquisition noted above and the revenue and earnings included in the Condensed Consolidated Statement of Operations for the period ended March 31, 2022.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

The following table discloses the date of the acquisition noted above and the revenue and earnings included in the Condensed Consolidated Statement of Operations for the period ended June 30, 2022.

Revenue and earnings amounts include other proprietary brands now being included under HRG for operations.

Acquisition date February 1, 2022

Revenue 8,086

The following represents the pro forma Condensed Consolidated Statement of Operations as if the acquisition had been included in the consolidated results of the Company for the entire period for the three months ended March 31, 2022 and 2021.

Three Months Ended Three Months Ended

March 31, 2022 (Unaudited) March 31, 2021 (Unaudited)

Revenue $ 83,603 $ 93,458

Net Income 130

Acquisitions during the three months ended March 31, 2021

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Revenue $ 70,939 $ 130,535 $ 154,542 $ 223,993

Net income (loss) $ ( 8,626 ) $ 6,899 $ ( 13,802 ) $ 13,046

Acquisitions during 2021

On January 25, 2021, the Company purchased all of 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.

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is included in our Retail segment.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

On February 1, 2021, the Company purchased all of the assets of J.A.R.B., Inc d/b/a Grow Depot Maine, a two-store chain in Auburn and Augusta, Maine.

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Charcoir is included in our Distribution and other segment.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

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

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Agron is included in our E-commerce segment.

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.

Down River Hydro is included in our Retail segment.

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.

Harvest is included in our Retail segment.

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 approximately $ 11.7 million, including approximately $ 9.9 million in cash and common stock valued at approximately $ 1.8 million.

Acquired goodwill of approximately $ 7.0 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

Aqua Serene is included in our Retail segment.

On July 3, 2021, the Company purchased the assets of Mendocino Greenhouse & Garden Supply, Inc, ("Mendocino") 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 approximately $ 4.0 million in cash.

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

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.

Mendocino is included in our Retail segment.

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 approximately $ 7.2 million, including approximately $ 6.0 million in cash and common stock valued at approximately $ 1.3 million.

Acquired goodwill of approximately $ 4.0 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

CGS is included in our Retail segment.

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 approximately $ 3.9 million in cash.

The Asset Purchase Agreement contains a contingent payment equal to approximately $ 0.6 million to be settled in common stock of the Company 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 $ 28.5 thousand of contingent consideration which was added to

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

The table below represents the allocation of the purchase price to the acquired net assets during the three months ended March 31, 2021.

Agron Aquarius 55 Hydro Charcoir San Diego Hydro Grow Warehouse Grow Depot Maine Indoor Garden Total

June 30, 2022

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.

Hoagtech is included in our Retail segment.

On October 15, 2021, the Company purchased the assets of Indoor Store, LLC ("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 approximately $ 0.9 million, including approximately $ 0.7 million in cash and common stock valued at approximately $ 0.2 million.

Acquired goodwill of approximately $ 0.5 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

All Seasons is included in our Retail segment.

On December 31, 2021, the Company purchased the assets of Mobile Media, Inc and MMI Agriculture ("MMI"), a mobile shelving design and build facility.

The total consideration for the purchase was approximately $ 9.1 million, including approximately $ 8.3 million in cash and common stock valued at approximately $ 0.8 million.

Acquired goodwill of approximately $ 1.2 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

The measurement of the intangible assets for MMI is still provisional and may be subject to future adjustments as the Company obtains additional information to finalize the accounting for the acquisition.

MMI is included in our Distribution and other segment.

The table below represents the allocation of the purchase price to the acquired net assets during 2021.

Agron Aquarius 55 Hydro Charcoir San Diego Hydro Grow Warehouse Grow Depot Maine Indoor Garden Downriver

Inventory $ — $ 957 $ 780 $ 839 $ 1,400 $ 2,450 $ 326 $ 372 $ 824

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Total $ 11,249 $ 3,558 $ 6,479 $ 16,368 $ 9,282 $ 17,779 $ 2,149 $ 1,692 $ 4,351

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

Harvest Aquaserene Mendocino CGS Hoagtech All Seasons MMI Total

Inventory $ 1,204 1,696 753 875 751 100 3,530 $ 16,857

Prepaids and other current assets 7 2 1 1 37 1 — 742

Furniture and equipment 100 500 160 100 144 25 328 2,233

Liabilities — — — — ( 29 ) — ( 250 ) ( 448 )

Operating lease right to use asset 3,782 1,177 408 746 1,569 37 2,332 13,340

Operating lease liability ( 3,782 ) ( 1,177 ) ( 408 ) ( 746 ) ( 1,569 ) ( 37 ) ( 2,332 ) ( 13,340 )

Customer relationships 1,016 1,235 575 1,382 493 154 2,964 18,765

Trade name 1,392 1,231 414 852 428 117 1,039 14,792

Non-compete — 11 6 11 3 — 238 588

Intellectual property — — — — — — — 2,065

Goodwill 4,606 6,976 2,091 4,027 2,105 545 1,202 62,462

Total $ 8,325 11,651 4,000 $ 7,248 3,932 942 9,051 $ 118,056

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

Agron Aquarius 55 Hydro Charcoir San Diego Hydro Grow Warehouse Grow

Depot Maine Indoor Garden Total

Depot Maine Indoor Garden Downriver

Cash $ 5,973 $ 2,331 $ 5,347 $ 9,902 $ 4,751 $ 8,100 $ 1,738 $ 1,165 $ 3,177

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Total $ 11,249 $ 3,558 $ 6,479 $ 16,368 $ 9,282 $ 17,779 $ 2,149 $ 1,692 $ 4,351

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 March 31, 2021.

Agron Aquarius 55 Hydro Charcoir San Diego Hydro Grow Warehouse Grow Depot Maine Indoor Garden Total

Harvest Aquaserene Mendocino CGS Hoagtech All Seasons MMI Total

Cash $ 5,561 $ 9,860 $ 4,000 $ 5,976 $ 3,932 $ 701 $ 8,270 $ 80,784

Common stock 2,764 1,791 — 1,272 — 241 781 37,272

Total $ 8,325 $ 11,651 $ 4,000 $ 7,248 $ 3,932 $ 942 $ 9,051 $ 118,056

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

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 Grow Warehouse Grow Depot Maine Indoor Garden Downriver

Acquisition date 3/19/2021 3/15/2021 3/15/2021 3/12/2021 2/22/2021 2/15/2021 2/1/2021 1/25/2021 3/31/2021

3/19/2021 3/15/2021 3/15/2021 3/12/2021 2/22/2021 2/15/2021 2/1/2021 1/25/2021

Revenue $ 6,105 $ 2,684 $ 2,222 $ 1,880 $ 3,446 $ 6,753 $ 2,779 $ 2,308 $ 1,200

Net Income $ 324 $ 365 $ 314 $ 518 $ 547 $ 1,297 $ 555 $ 433 $ 176

The following table discloses the pro forma consolidated statement of operations as if the acquisition had been included in the consolidated results of the Company for the three months ended March 31, 2021.

Three Months Ended March 31, 2021

Harvest Aquaserene Mendocino CGS Hoagtech All Seasons MMI Total

Acquisition date 5/3/21 7/19/21 7/19/21 8/24/21 8/23/21 10/15/21 12/31/21

Revenue $ 1,489 — — — — — — $ 30,866

Net Income (loss) $ 268 — — — — — — $ 4,797

The following table discloses the pro forma consolidated statement of operations as if the acquisition had been included in the consolidated results of the Company for the six months ended June 30, 2021.

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

(Unaudited) (Unaudited)

Revenue $ 130,504 $ 229,599

Net income $ 12,446 $ 19,849

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

COMMITMENTS AND CONTINGENCIES

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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, 2022, the Company did not have any liabilities associated with indemnities.

As of June 30, 2022, 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.

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No such losses have been recorded to date.

As discussed in Note ,1 at December 31, 2021 the Company had two reportable segments which increased to three at March 31, 2022 based on quantitative and qualitative analyses the Company now also reports E-commerce as a reportable segment.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

As discussed in Note 1, at December 31, 2021, the Company had two reportable segments which increased to three at March 31, 2022, based on quantitative and qualitative analyses.

The Company now also reports E-commerce as a reportable segment.

The Company has three primary reportable segments including retail operations, e-commerce and all other which includes the distribution of proprietary brands to wholesale accounts.

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Shared services and other corporate costs are allocated to individual segments based on that segments profitability.

Retail – Currently, the Company owns and operates a chain of 63 hydroponic/gardening centers focused on serving growers and cultivators.

Retail – As of June 30, 2022, the Company owns and operates a chain of 64 hydroponic/gardening centers focused on serving growers and cultivators.

Inclusive of commercial sales organizations selling directly to customers outside of the physical retail network.

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The Company also sells and distributes product through third-party marketplaces.

Distribution and other – In December 2020, GrowGeneration purchased the business of Canopy Crop Management Corp., the developer of the popular Power Si line of monosilicic acid products, a widely used nutrient additive for plants.

On March 12, 2021, the Company purchased Char Coir, a line of premium coco pots, cubes and medium.

Distribution and other – In December 2020, GrowGeneration purchased the business of Canopy Crop Management Corp., the developer of the popular PowerSi line of monosilicic acid products, a widely used nutrient additive for plants.

On March 12, 2021, the Company purchased CharCoir, a line of premium coco pots, cubes and medium.

On December 31, 2021, the Company purchased the assets of Mobile Media, Inc.

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The Company is in the process of combining the operations and management of these non-retail enterprises.

The products these companies provide are integrated into our

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2022

retail, e-commerce, and direct sales activities and we receive incremental gross profit from the sale of these products.

The products these companies provide are integrated into our retail, e-commerce, and direct sales activities and we receive incremental gross profit from the sale of these products.

The profit generated from those sales are recorded in our retail and e-commerce segments.

Selected information by segment is presented in the following tables:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Retail 55,354 108,911 $ 119,650 $ 190,138

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Total $ 71,093 $ 125,885 $ 152,860 $ 215,907

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Retail $ 15,601 $ 30,572 $ 31,094 $ 52,473

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Total $ 20,227 $ 35,713 $ 42,367 $ 61,090

Three Months Ended March 31,

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Income (Loss) from operations

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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