What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-07 compared with 2022-08-09 · 165 added, 142 removed, 627 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except shares and per share amounts)

September 30,

2022 December 31,

2 unchanged sentences

Marketable securities — 39,793

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

Accounts receivable, net of allowance for doubtful accounts of $ 1.1 million and $ 0.6 million at September 30, 2022 and December 31, 2021

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

Inventory 89,080 105,571

22 unchanged sentences

Long-term debt, net of current portion — 66

Other long-term liabilities 111 —

Total liabilities 76,453 88,047

2 unchanged sentences

$ 0.001 par value;

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

100,000,000 shares authorized, 60,859,674 and 59,928,564 shares issued and outstanding as of September 30, 2022 and December 31, 2021

Additional paid-in capital 369,164 361,087

6 unchanged sentences

(in thousands, except shares and per share amounts)

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

5 unchanged sentences

Selling, general, and administrative 8,796 10,530 28,164 28,102

Bad debt expense 172 477 1,774 873

Depreciation and amortization 3,875 3,539 13,164 8,510

17 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2022 AND 2021

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(in thousands, except shares and per share amounts)

4 unchanged sentences

Shares Amount

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 issued for share based compensation 78 — — — —

1 unchanged sentence

Share based compensation — — 1,104 — 1,104

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

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

Net income (loss) — — — ( 7,202 ) ( 7,202 )

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

Balances, September 30, 2022 60,860 $ 61 $ 369,164 $ ( 138,614 ) $ 230,611

Common Stock Additional

3 unchanged sentences

Shares Amount

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

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

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

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

2 unchanged sentences

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 — — — 6,713 6,713

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

Net income (loss) — — — 4,027 4,027

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

Common Stock Additional

11 unchanged sentences

Net income (loss) — — — ( 148,758 ) ( 148,758 )

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

Balances, September 30, 2022 60,860 $ 61 $ 369,164 $ ( 138,614 ) $ 230,611

Common Stock Additional

13 unchanged sentences

Share based compensation — — 4,417 — 4,417

Net income — — — 12,860 12,860

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

Net income (loss) — — — 16,887 16,887

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

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

2 unchanged sentences

(in thousands, except shares and per share amounts)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Net income (loss) $ ( 148,758 ) $ 16,887

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 13,164 8,510

11 unchanged sentences

Payroll and payroll tax liabilities ( 3,046 ) 4,050

Income taxes payable — 1,846

Customer deposits ( 7,538 ) 8,419

20 unchanged sentences

Right of use assets acquired under new operating leases $ 6,221 $ 26,115

Indemnity holdback from business acquisition $ 875 0

Cash paid for income taxes $ — $ 4,275

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

1 unchanged sentence

Notes To Condensed Consolidated Financial Statements

June 30, 2022

September 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.

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.

As of September 30, 2022, the Company owns and operates a chain of 61 retail hydroponic/gardening stores across 15 states, an online e-commerce platform, and proprietary brands and private label brands that we market grow 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.

6 unchanged sentences

These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

There were no significant changes to our significant accounting policies as disclosed in our 2021 Form 10-K, except for the immaterial out-of-period adjustments discussed below.

There were no significant changes to our significant accounting policies as disclosed in our 2021 Form 10-K.

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

7 unchanged sentences

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 supply chain delays of our inventory, higher operating costs and increased shipping costs, among other impacts.

Although the COVID-19 pandemic to date has resulted in supply chain delays of our inventory, higher operating costs and increased shipping costs, among other impacts, we have experienced minimal business interruption as a result of the COVID-19 pandemic.

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.

Immaterial out-of-period adjustments

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.

During the nine months ended September 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 June 30, 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 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 nine months ended September 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 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 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.

The impact at September 30, 2021 was that $ 41.0 million of revenue, $ 13.7 million of gross margin, and $ 3.1 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 consolidated financial statements in accordance with SEC Staff Accounting Bulletin No.

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

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

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,

2022 December 31,

2 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

RECENT ACCOUNTING PRONOUNCEMENTS

8 unchanged sentences

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.

2016-13 was effective January 1, 2020.

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

2 unchanged sentences

The following table disaggregates revenue by source:

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

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

Sales at company owned stores $ 47,948 $ 100,799 $ 167,598 $ 290,937

5 unchanged sentences

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

Closing balance, June 30, 2022

Closing balance, September 30, 2022

Increase (decrease) $ 4,406 $ ( 6,296 )

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

Closing balance, June 30, 2021

Closing balance, September 30, 2021

Increase (decrease) $ 3,052 $ 8,588

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.

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

Of the total amount of customer deposit liability as of January 1, 2021, $ 3.7 million was reported as revenue during the nine months ended September 30, 2021.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

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

Corporate notes and bonds $ 10,000 $ — $ 10,000

NOTES RECEIVABLE

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

2022 December 31,

Notes receivable $ 2,605 $ 2,962

Allowance for losses ( 1,233 ) ( 522 )

Notes receivable, net $ 1,372 2,440

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

2022 December 31,

Note receivable $ 1,500 $ 1,500

Allowance for losses ( 1,233 ) ( 522 )

Notes receivable, net $ 267 978

September 30, 2022

PROPERTY AND EQUIPMENT

September 30,

2022 December 31,

8 unchanged sentences

Property and equipment, net $ 29,846 $ 24,116

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.

Depreciation expense for the three and nine months ended September 30, 2022 was $ 1.7 million and $ 5.4 million.

Depreciation expense for the three and nine months ended September 30, 2021 was $ 0.9 million and $ 2.4 million.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

GOODWILL AND INTANGIBLE ASSETS

14 unchanged sentences

The changes in goodwill are as follows:

June 30, 2022 December 31,

September 30, 2022 December 31,

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

8 unchanged sentences

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

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

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

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

2 unchanged sentences

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

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

Accumulated impairment losses September 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

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

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

A summary of intangible assets is as follows:

2 unchanged sentences

of Intangible Assets

as of June 30, 2022

as of September 30, 2022

Trade names 3.43

3 unchanged sentences

Intangible assets consist of the following:

June 30, 2022

September 30, 2022

Amount Accumulated

17 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

Intangibles and impairment by segment are as follows:

4 unchanged sentences

Acquisitions & measurement period adjustments ( 58 ) — 3,181 3,123

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

Gross carrying value, September 30, 2022 37,767 2,501 19,879 60,147

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

2 unchanged sentences

Amortization ( 4,720 ) ( 348 ) ( 2,672 ) ( 7,740 )

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

Accumulated amortization September 30, 2022 ( 11,005 ) ( 702 ) ( 4,655 ) ( 16,362 )

Accumulated impairment losses December 31, 2020 — — — —

2 unchanged sentences

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

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

Accumulated impairment losses September 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.

Net carrying value at September 30, 2022 15,683 1,704 15,224 32,611

Amortization expense for the three and nine months ended September 30, 2022 was $ 2.2 million and $ 7.7 million.

Amortization expense for the three and nine months ended September 30, 2021 was $ 2.6 million and $ 6.1 million.

Future amortization expense is as follows:

2 unchanged sentences

Total $ 32,611

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

For the three months ended September 30, 2022, the effective tax rate is 9.07 % which decreased from 21.39 % for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, the effective tax rate is 1.74 %, which decreased from 24.80 % at September 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.

The effective tax rate for the nine months ended September 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

June 30, 2022

September 30, 2022

We determine if a contract contains a lease at inception.

13 unchanged sentences

Where assets are used to directly serve our customers, such as facilities dedicated to customer contracts, lease costs are recorded in “store operating costs.” Facilities and assets which serve management and support functions are expensed through general and administrative expenses.

September 30,

2022 December 31,

3 unchanged sentences

Total lease liability $ 46,558 $ 45,404

2022 June 30,

September 30,

2022 September 30,

Weighted average remaining lease term 6.68 years 6.89 years

Weighted average discount rate 5.5 % 6.5 %

Six Months Ended

Three Months Ended September 30,

Operating lease costs $ 2,615 2,139

4 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

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

September 30, 2022

Nine Months Ended

September 30,

Operating lease costs $ 8,060 $ 5,687

Variable lease costs 2,004 —

Short-term lease costs 306 1,212

Total operating lease costs $ 10,370 $ 6,899

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

2022 (remainder of the year) $ 2,614

2 unchanged sentences

Imputed interest ( 9,394 )

Lease Liability at June 30, 2022

Lease Liability at September 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 six months ended June 30, 2022 and 2021:

Six months ended June 30,

The following table presents share-based payment expense for the three and nine months ended September 30, 2022 and 2021:

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Restricted stock $ 951 $ 1,576 $ 2,902 $ 3,511

2 unchanged sentences

Total $ 1,291 $ 2,106 $ 3,980 $ 5,347

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.

As of September 30, 2022, the Company had approximately $ 5.7 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 3.3 years.

As of September 30, 2022, the Company also had approximately $ 1.5 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 1.3 years.

Restricted Stock

4 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

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

September 30, 2022

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

Shares Weighted Average Grant Date Fair Value

4 unchanged sentences

Forfeited ( 500,350 ) $ 20.05

Nonvested, June 30, 2022

Nonvested, September 30, 2022

672,583 $ 6.07

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

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

Options Shares Weighted -

6 unchanged sentences

Forfeited or expired ( 247,427 ) 5.36 — 2.97

Outstanding at June 30, 2022

Outstanding at September 30, 2022

632,998 $ 4.01 2.07 $ 2.26

Options vested at June 30, 2022

Options vested at September 30, 2022

632,998 $ 4.01 2.07 $ 2.26

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

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

Warrants Weighted Average

4 unchanged sentences

Forfeited — —

Outstanding at June 30, 2022

Outstanding at September 30, 2022

282,497 $ 25.33

Liability Awards

In August 2022, the Company issued certain stock awards classified as liabilities based on the guidance set forth at ASC 480-10-25 and ASC 718-10-25.

These awards entitle the employees to receive a specified dollar value of common stock on future dates ranging from June 15, 2023, through June 15, 2025.

The awards generally vest over three years subject to the employee’s continued employment.

The aggregate face value of these awards as of September 30, 2022 amounted to $ 5.3 million.

The Company recognizes compensation expense for these awards over the requisite service period.

The expense related to the liability awards for the period ended September 30, 2022 was $ 0.2 million;

the corresponding liability is included in accrued liabilities and other long-term liabilities on the Company’s balance sheet as of September 30, 2022.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 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:

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 nine months ended September 30, 2022 and 2021:

Three Months Ended

2022 June 30,

September 30,

2022 September 30,

Net income (loss) $ ( 7,202 ) $ 4,027

4 unchanged sentences

Dilutive earnings (loss) per share $ ( 0.12 ) $ 0.07

Six Months Ended

2022 June 30,

Nine Months Ended

September 30,

2022 September 30,

Net income (loss) $ ( 148,758 ) $ 16,887

6 unchanged sentences

Three Months Ended

2022 June 30,

September 30,

2022 September 30,

Restricted stock 646 —

Stock options 84 —

Six Months Ended

2022 June 30,

Nine Months Ended

September 30,

2022 September 30,

Restricted stock 677 —

2 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

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

During the nine months ended September 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.

Acquisition during the six months ended June 30, 2022

Acquisition during the nine months ended September 30, 2022

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

("HRG"), a specialty marketing and sales organization of horticultural products based in Ogden, Utah.

The total consideration for the purchase of HRG was approximately $ 13.4 million, including $ 6.8 million in cash and common stock valued at $ 5.7 million.

The total consideration for the purchase of the assets of HRG was approximately $ 13.4 million, including $ 6.8 million in cash and common stock valued at $ 5.7 million.

The Asset Purchase Agreement also provides for an indemnity holdback to be settled in common stock of the Company valued at $ 0.9 million.

1 unchanged sentence

HRG is included in our Distribution and other segment.

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

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

Inventory $ 4,170

14 unchanged sentences

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.

September 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 September 30, 2022.

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

1 unchanged sentence

Revenue 13,474

Net Income 130

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 and six months ended June 30, 2022 and 2021.

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

2022 2021 2022 2021

Net Income (loss) ( 209 )

Three months ended September 30, 2021 Nine Months Ended September 30,

Revenue $ 121,391 $ 235,443 $ 345,384

2 unchanged sentences

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.

The total consideration for the purchase of Garden & Lighting was approximately $ 1.7 million, including $ 1.2 million in cash and common stock valued at approximately $ 0.5 million.

The total consideration for the purchase of the assets of Garden & Lighting was approximately $ 1.7 million, including $ 1.2 million in cash and common stock valued at approximately $ 0.5 million.

Acquired goodwill of approximately $ 0.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

2 unchanged sentences

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.

The total consideration for the purchase of Grow Depot Maine was approximately $ 2.1 million, including $ 1.7 million in cash and common stock valued at approximately $ 0.4 million.

The total consideration for the purchase of the assets of Grow Depot Maine was approximately $ 2.1 million, including $ 1.7 million in cash and common stock valued at approximately $ 0.4 million.

Acquired goodwill of approximately $ 0.9 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

1 unchanged sentence

On February 15, 2021, the Company purchased all of the assets of Grow Warehouse LLC, a four-store chain of hydroponic and organic garden stores in Colorado (3) and Oklahoma (1).

The total consideration for the purchase of Grow Warehouse LLC was approximately $ 17.8 million, including $ 8.1 million in cash and common stock valued at approximately $ 9.7 million.

The total consideration for the purchase of the assets of Grow Warehouse LLC was approximately $ 17.8 million, including $ 8.1 million in cash and common stock valued at approximately $ 9.7 million.

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.

1 unchanged sentence

On February 22, 2021, the Company purchased all of 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.

The total consideration for the purchase of the assets 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.

1 unchanged sentence

On March 12, 2021, the Company purchased all of 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.

Charcoir is included in our Distribution and other segment.

The total consideration for the purchase of the assets 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

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

opportunity to expand into a well-established distribution market for the Company of a proprietary brand.

Charcoir is included in our Distribution and other segment.

On March 15, 2021, the Company purchased all of 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.

The total consideration for the purchase of the assets 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.

55 Hydroponics is included in our Retail segment.

On March 15, 2021, the Company purchased all of 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.

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

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

Acquired goodwill of approximately $ 1.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

1 unchanged sentence

On March 19, 2021, the Company purchased all of the assets of Agron, LLC, an online seller of growing equipment.

The total consideration for the purchase of Agron was approximately $ 11.3 million, including $ 6.0 million in cash and common stock valued at approximately $ 5.3 million.

The total consideration for the purchase of the assets of Agron was approximately $ 11.3 million, including $ 6.0 million in cash and common stock valued at approximately $ 5.3 million.

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.

1 unchanged sentence

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.

The total consideration for the purchase of the assets 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.

1 unchanged sentence

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.

The total consideration for the purchase of the assets 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.

19 unchanged sentences

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

The Company used

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

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 goodwill.

This acquisition expands our footprint in the Pacific Northwest.

27 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

Harvest Aquaserene Mendocino CGS Hoagtech All Seasons MMI Total

23 unchanged sentences

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.

September 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 September 30, 2021.

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

6 unchanged sentences

Net Income (loss) $ 756 331 158 ( 1 ) 36 — — $ 8,045

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

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 nine months ended September 30, 2021.

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

(Unaudited) (Unaudited)

7 unchanged sentences

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 June 30, 2022, the Company did not have any liabilities associated with indemnities.

As of September 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.

5 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 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.

4 unchanged sentences

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

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

Retail – As of September 30, 2022, the Company owns and operates a chain of 61 hydroponic/gardening centers focused on serving growers and cultivators.

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

14 unchanged sentences

Selected information by segment is presented in the following tables:

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

3 unchanged sentences

Total $ 70,850 $ 116,003 $ 223,710 $ 331,910

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

5 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2022

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

September 30, 2022

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

4 unchanged sentences

Total $ ( 8,094 ) $ 4,675 $ ( 152,116 ) $ 22,020

SUBSEQUENT EVENTS

Subsequent Events

In October 2022, the Company invested approximately $ 32.0 million in three to six-month corporate bonds and treasury bills.

On October 12, 2022, the Company purchased certain assets from V&W Ag Consulting, LLC )(“VW”).

VW develops, formulates, procures, sells, and distributes products for the horticulture and agricultural industries.

The total consideration for the purchase was common stock worth approximately $ 0.3 million, including an indemnity holdback payment of common stock worth approximately $ 0.1 million.

On November 7, 2022, the Company purchased the inventory, customer list, and certain other assets of Warson Hydro Partners, LLC d/b/a St.

Louis Hydroponic Company (“St.

Louis Hydro”).

The Company also entered into a short-term license agreement to remain in St.

Louis Hydro’s current store location.

Louis Hydro operates a hydroponic and organic garden center in St.

Louis, Missouri.

The total consideration for the purchase was approximately $ 0.4 million cash.

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