What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-08 compared with 2023-05-09 · 208 added, 105 removed, 479 unchanged (40% of the section changed)

7 unchanged sentences

Marketable securities 40,986 31,852

Accounts receivable, net of allowance for credit losses of $ 0.7 million and $ 0.7 million at March 31, 2023 and December 31, 2022

Notes receivable, current, net of allowance for credit losses of $ 1.7 million and $ 1.3 million at March 31, 2023 and December 31, 2022

Accounts receivable, net of allowance for credit losses of $ 0.8 million and $ 0.7 million at June 30, 2023 and December 31, 2022

Notes receivable, current, net of allowance for credit losses of $ 1.7 million and $ 1.3 million at June 30, 2023 and December 31, 2022

Inventory 76,689 77,091

25 unchanged sentences

$ 0.001 par value;

100,000,000 shares authorized, 61,035,521 and 61,010,155 shares issued and outstanding as of March 31, 2023 and December 31, 2022

100,000,000 shares authorized, 61,229,051 and 61,010,155 shares issued and outstanding as of June 30, 2023 and December 31, 2022

Additional paid-in capital 371,863 369,938

6 unchanged sentences

(in thousands, except shares and per share amounts)

Three Months Ended March 31,

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

2023 2022 2023 2022

Net sales $ 63,925 $ 71,093 $ 120,752 $ 152,860

6 unchanged sentences

Depreciation and amortization 3,824 4,783 7,756 9,289

Impairment loss — 127,831 — 127,831

Total operating expenses 23,703 157,028 47,756 186,389

15 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2023 AND 2022

SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(in thousands, except shares and per share amounts)

4 unchanged sentences

Shares Amount

Balances, December 31, 2022 61,010 $ 61 $ 369,938 $ ( 153,603 ) $ 216,396

Balances, March 31, 2023 61,035 $ 61 $ 370,379 $ ( 159,737 ) $ 210,703

Common stock issued for share based compensation 159 — — — —

1 unchanged sentence

Share based compensation — — 816 — 816

Noncash repurchase of liability awards — $ — $ 653 $ — $ 653

Liability redemption associated with business acquisition 35 $ — $ 120 $ — $ 120

Net income (loss) — — — ( 5,699 ) ( 5,699 )

Balances, June 30, 2023 61,229 $ 61 $ 371,863 $ ( 165,436 ) $ 206,488

Common Stock Additional

Paid-In Capital Retained

Earnings (Deficit) Total

Stockholders’ Equity

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

4 unchanged sentences

Balances, December 31, 2022 61,010 61 369,938 ( 153,603 ) $ 216,396

Common stock issued in connection with business combinations 650 1 5,749 — 5,750

Common stock issued for share based compensation 184 — — — $ —

1 unchanged sentence

Share based compensation — — 1,327 — $ 1,327

Noncash repurchase of liabilty awards — — 653 — $ 653

Liability redemption associated with business acquisition 35 — 120 — $ 120

Net income (loss) — $ — $ — $ ( 11,833 ) $ ( 11,833 )

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

Balances, June 30, 2023 61,229 $ 61 $ 371,863 $ ( 165,436 ) $ 206,488

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

Common stock issued in connection with business combination 650 1 5,749 — 5,750

Common stock issued for share-based compensation 177 — — — —

Common stock withheld for employee payroll taxes — — ( 1,448 ) — ( 1,448 )

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

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

2 unchanged sentences

(in thousands, except shares and per share amounts)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

5 unchanged sentences

Gain (loss) on asset disposition 21 12

Impairment loss — 127,831

Deferred taxes — ( 1,919 )

30 unchanged sentences

Notes To Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

GrowGeneration Corp.

1 unchanged sentence

Incorporated in Colorado in 2014, GrowGeneration is the largest chain of specialty retail hydroponic and organic garden centers in the U.S.

As of March 31, 2023, GrowGeneration has 59 retail locations across 16 states in the U.S.

As of June 30, 2023, GrowGeneration has 62 retail locations across 18 states in the U.S.

The Company also operates an online superstore for cultivators at growgeneration.com, as well as a wholesale business for resellers, HRG Distribution, and a benching, racking, and storage solutions business, MMI.

14 unchanged sentences

Use of Estimates

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

Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with U.S.

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.

2 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

FAIR VALUE MEASUREMENTS

10 unchanged sentences

The carrying amounts of cash and cash equivalents, accounts receivable, available for sale securities, accounts payable, and all other current liabilities approximate fair values due to their short-term nature.

The fair value of notes receivable approximates the outstanding balance and are reviewed for impairment at least annually.

The fair value of notes receivable approximates the outstanding balance and is reviewed for impairment at least annually.

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,

2023 December 31,

3 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

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.

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.

In June 2016, 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 previously by the other-than-temporary impairment model.

The ASU applies 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.

2 unchanged sentences

Based on the composition of the Company’s accounts receivable, investment portfolio, and other financial assets, including current market conditions and historical credit loss activity, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

Specifically, the Company’s estimate of expected credit losses as of March 31, 2023, using its expected credit loss evaluation process described above, resulted in no adjustments to the provision for credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

Specifically, the Company’s estimate of expected credit losses as of June 30, 2023, using the expected credit loss evaluation process described above, resulted in no adjustments to the provision for credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

REVENUE RECOGNITION

5 unchanged sentences

Opening balance, January 1, 2023 $ 8,336 $ 4,338

Closing balance, March 31, 2023

Closing balance, June 30, 2023

Increase (decrease) $ ( 1,018 ) $ ( 592 )

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 )

Of the total amount of customer deposit liability as of January 1, 2023, $ 2.3 million was reported as revenue during the three months ended March 31, 2023.

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, 2023, $ 2.9 million was reported as revenue during the six months ended June 30, 2023.

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.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

PROPERTY AND EQUIPMENT

9 unchanged sentences

Property and equipment, net $ 30,682 $ 28,669

Depreciation expense for the three months ended March 31, 2023 was $ 1.7 million.

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

Depreciation expense for the three and six months ended June 30, 2023 was $ 1.6 million and $ 3.3 million.

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

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

GOODWILL AND INTANGIBLE ASSETS

3 unchanged sentences

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.

In addition, financial performance continued to weaken during the quarter, which was 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.

7 unchanged sentences

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

There were no goodwill impairments recognized during the six months ended June 30, 2023.

The changes in goodwill are as follows:

March 31, 2023 December 31,

June 30, 2023 December 31,

Balance, beginning of period $ 15,978 $ 125,401

8 unchanged sentences

Acquisitions & measurement period adjustments 830 — — 830

Gross carrying value, at March 31, 2023 $ 103,229 $ 11,318 $ 18,088 $ 132,635

Gross carrying value, at June 30, 2023 $ 104,059 $ 11,318 $ 18,088 $ 133,465

Accumulated impairment losses at December 31, 2021 $ — $ — $ — $ —

2 unchanged sentences

Impairment — — — —

Accumulated impairment losses at March 31, 2023 $ ( 103,094 ) $ ( 9,848 ) $ ( 3,715 ) $ ( 116,657 )

Accumulated impairment losses at June 30, 2023

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

Net carrying value at December 31, 2022 $ 135 $ 1,470 $ 14,373 $ 15,978

Net carrying value at March 31, 2023 $ 135 $ 1,470 $ 14,373 $ 15,978

Net carrying value at June 30, 2023

$ 965 $ 1,470 $ 14,373 $ 16,808

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

A summary of intangible assets is as follows:

2 unchanged sentences

of Intangible Assets

as of March 31, 2023

as of June 30, 2023

Trade names 2.71

3 unchanged sentences

Intangible assets consist of the following:

March 31, 2023

June 30, 2023

Amount Accumulated

17 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

Intangibles and impairment by segment are as follows:

4 unchanged sentences

Acquisitions & measurement period adjustments 441 — — 441

Gross carrying value at March 31, 2023 $ 38,055 $ 2,501 $ 19,880 $ 60,436

Gross carrying value at June 30, 2023 $ 38,495 $ 2,501 $ 19,880 $ 60,876

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

2 unchanged sentences

Amortization ( 2,572 ) ( 224 ) ( 1,816 ) ( 4,612 )

Accumulated amortization at March 31, 2023 $ ( 13,387 ) $ ( 926 ) $ ( 6,470 ) $ ( 20,783 )

Accumulated amortization at June 30, 2023 $ ( 14,578 ) $ ( 1,038 ) $ ( 7,379 ) $ ( 22,995 )

Accumulated impairment losses at December 31, 2021 $ — $ — $ — $ —

2 unchanged sentences

Impairments — — — —

Accumulated impairment losses at March 31, 2023 $ ( 11,079 ) $ ( 95 ) $ — $ ( 11,174 )

Accumulated impairment losses June 30, 2023 $ ( 11,079 ) $ ( 95 ) $ — $ ( 11,174 )

Net carrying value at December 31, 2022 $ 14,969 $ 1,592 $ 14,317 $ 30,878

Net carrying value at March 31, 2023 $ 13,589 $ 1,480 $ 13,410 $ 28,479

Amortization expense for the three months ended March 31, 2023 was $ 2.2 million.

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

Net carrying value June 30, 2023 $ 12,838 $ 1,368 $ 12,501 $ 26,707

Amortization expense for the three and six months ended June 30, 2023 was $ 2.4 million and $ 4.6 million.

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

Future amortization expense is as follows:

2 unchanged sentences

Total $ 26,707

For the three months ended March 31, 2023, the effective tax rate is 0.00 % which decreased from 24.02 % for the three months ended March 31, 2022.

For the six months ended June 30, 2023, the effective tax rate was zero %, compared to 1.42 % for the six months ended June 30, 2022.

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 three months ended March 31, 2023 is lower than the U.S.

The effective tax rate for the six months ended June 30, 2023 is lower than the U.S.

federal statutory rate of 21.0%, which is also primarily due to the Company recording a valuation allowance against deferred tax assets.

2 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

We determine if a contract contains a lease at inception.

9 unchanged sentences

We have elected the practical expedient to account for lease and non-lease components as a single component for our entire population of leases.

Short-term disclosures include only those leases with a term greater than one month and 12 months or less, and expense is recognized on a straight-line basis over the lease term.

Short-term disclosures include only those leases with a term greater than one month and less than or equal to 12 months, and expense is recognized on a straight-line basis over the lease term.

Leases with an initial term of 12 months or less that do not include an option to purchase the underlying asset that we are reasonably certain to exercise are not recorded on the balance sheet.

6 unchanged sentences

Total lease liability $ 45,343 $ 48,790

2023 March 31,

2023 June 30,

Weighted average remaining lease term 6.26 years 6.60 years

Weighted average discount rate 5.8 % 5.6 %

Three Months Ended

Three Months Ended June 30,

Operating lease costs $ 2,803 $ 2,783

4 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2023 :

June 30, 2023

Six Months Ended

Operating lease costs $ 5,696 $ 5,445

Variable lease costs 1,169 1,340

Short-term lease costs 264 237

Total operating lease costs $ 7,129 $ 7,022

The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2023 :

2023 (remainder of the year) $ 5,418

2 unchanged sentences

Imputed interest ( 9,000 )

Lease Liability at March 31, 2023

Lease Liability at June 30, 2023

SHARE BASED PAYMENTS

1 unchanged sentence

The plans allow us to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, or a combination of awards (collectively, "share-based awards").

The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based payment awards made to employees and directors of the Company, including stock options and restricted shares.

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, 2023 and 2022:

Three months ended March 31,

The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based awards made to employees and directors of the Company, including stock options and restricted shares.

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

The following table presents share-based award expense for the three and six months ended June 30, 2023 and 2022:

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Restricted stock $ 947 $ 750 $ 1,514 $ 1,951

2 unchanged sentences

Total $ 947 $ 1,106 $ 1,514 $ 2,689

As of March 31, 2023, the Company had approximately $ 7.8 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 2.7 years.

As of June 30, 2023, the Company had approximately $ 5.4 million of unamortized share-based compensation for option awards and restricted stock awards, which are expected to be recognized over a weighted average period of approximately 3.1 years.

Restricted Stock

2 unchanged sentences

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

Restricted stock activity for the three months ended March 31, 2023 is presented in the following table:

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2023

Restricted stock activity for the six months ended June 30, 2023 is presented in the following table:

Shares Weighted Average Grant Date Fair Value

4 unchanged sentences

Forfeited ( 318,750 ) $ 4.23

Nonvested, March 31, 2023

Nonvested, June 30, 2023

1,072,959 $ 5.64

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

The table below summarizes all option activity under all plans during the three months ended March 31, 2023:

The table below summarizes all option activity under all plans during the six months ended June 30, 2023:

Options Shares Weighted -

6 unchanged sentences

Forfeited or expired — — — —

Outstanding at March 31, 2023

Outstanding at June 30, 2023

604,498 $ 3.97 1.38 $ 2.24

Vested at March 31, 2023

Vested at June 30, 2023

604,498 $ 3.97 1.38 $ 2.24

A summary of the status of the Company’s outstanding stock purchase warrants for the three months ended March 31, 2023 is as follows:

A summary of the status of the Company’s outstanding stock purchase warrants for the six months ended June 30, 2023 is as follows:

Warrants Weighted Average

4 unchanged sentences

Forfeited — —

Outstanding at March 31, 2023

Outstanding at June 30, 2023

32,500 $ 15.82

1 unchanged sentence

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 an equity award with 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 March 31, 2023 amounted to $ 3.7 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 March 31, 2023 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 March 31, 2023.

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

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

On June 15, 2023, the three employees subject to these awards entered into new employment agreements which superseded the prior agreements and removed the liability awards from their compensation package.

In accordance with ASC 718-20-35-2A through 718-20-35-9, these awards were evaluated and accounted for as modified awards.

The liability of $ 0.7 million was relieved to additional paid-in capital and the incremental expense of $ 0.1 million will be recognized over the remaining term of the modified awards.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

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 three months ended March 31, 2023 and 2022:

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computation for the three and six months ended June 30, 2023 and 2022:

Three Months Ended

2023 March 31,

2023 June 30,

Net income (loss) $ ( 5,699 ) $ ( 136,379 )

4 unchanged sentences

Dilutive earnings (loss) per share $ ( 0.09 ) $ ( 2.24 )

Six Months Ended

2023 June 30,

Net income (loss) $ ( 11,833 ) $ ( 141,556 )

Weighted average shares outstanding, basic 61,053 60,742

Effect of dilution — —

Adjusted weighted average shares outstanding, dilutive 61,053 60,742

Basic earnings (loss) per share $ ( 0.19 ) $ ( 2.33 )

Dilutive earnings (loss) per share $ ( 0.19 ) $ ( 2.33 )

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

2023 March 31,

2023 June 30,

Restricted stock 1,868 511

Stock options — 202

Warrants — 819

Total 1,868 713

Six Months Ended

2023 June 30,

Restricted stock 1,949 511

Stock options — 320

Total 1,949 831

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2023

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.

There have been no measurement periods during the current year.

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

There have been no measurement period adjustments during the current year.

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.

Acquisition during the three months ended March 31, 2023

The Company had no material acquisitions during the three months ended March 31, 2023.

Acquisitions during the six months ended June 30, 2023

On May 23, 2023, the Company purchased substantially all of the assets of Southside Garden Supply ("Alaska"), a two-store chain of indoor/outdoor garden centers.

The total consideration for the purchase of the Alaska assets was approximately $ 2.0 million, including $ 1.9 million in cash and an indemnity holdback of $ 0.1 million.

The Alaska asset acquisition also included acquired goodwill of approximately $ 0.6 million, which represents the value expected to rise from organic growth and an opportunity for the Company to expand into a new market.

Alaska is included in our Retail segment.

Additionally, the Company made other, individually immaterial acquisitions during the six months ended June 30, 2023.

Total consideration for these purchases was approximately $ 1.2 million, including $ 1.1 million paid in cash and indemnity holdbacks of less than $ 0.1 million.

These individually immaterial acquisitions also included aggregate acquired goodwill of approximately $ 0.3 million, which represents the value expected to rise from organic growth and an opportunity for the Company to expand into a new market.

These acquisitions are included in our Retail segment.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2023

The table below represents the allocation of the purchase price to the acquired net assets during the six months ended June 30, 2023.

Alaska Other Total

Inventory $ 720 $ 867 $ 1,587

Prepaids and other current assets 292 2 294

Furniture and equipment — 47 47

Operating lease right of use asset 630 648 1,278

Operating lease liability ( 630 ) ( 648 ) ( 1,278 )

Customer relationships 440 — 440

Goodwill 577 252 829

Total $ 2,029 $ 1,168 $ 3,197

The table below represents the consideration paid for the net assets acquired in business combinations during the six months ended June 30, 2023.

Alaska Other Total

Cash $ 1,922 $ 1,128 $ 3,050

Indemnity holdback 107 40 147

Total $ 2,029 $ 1,168 $ 3,197

The following table discloses the date of the acquisitions noted above and the revenue and earnings included in the Condensed Consolidated Statement of Operations for the six months ended June 30, 2023.

Alaska Other Total

Acquisition date May 23, 2023

Revenue $ 392 $ 916 $ 1,308

Net income (loss) $ ( 83 ) $ ( 32 ) $ ( 114 )

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, 2023, and June 30, 2022.

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

2023 2022 2023 2022

Revenue $ 122,966 $ 154,168 $ 122,966 154,168

Net income (loss) $ ( 11,491 ) $ ( 141,670 ) $ ( 11,491 ) ( 141,670 )

Acquisitions during 2022

7 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

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

June 30, 2023

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

8 unchanged sentences

Total $ 13,391

The table below represents the consideration paid for the net assets acquired in business combinations during the three months ended March 31, 2022.

The table below represents the consideration paid for the net assets acquired in business combinations during the six months ended June 30, 2022.

Indemnity stock holdback 875

1 unchanged sentence

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 three months ended March 31, 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 six months ended June 30, 2022.

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

2 unchanged sentences

Net Income (loss) $ 130

Three Months Ended March 31,

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

Revenue $ 70,939 $ 154,542

2 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

District Court for the Southern District of Texas related to a Promissory Note & Asset Acquisition Rights Option (“Note & Option”) with TGC Systems, LLC (“Total Grow”).

The case has been dismissed and the parties are currently engaged in arbitration pursuant to the arbitration clause of the Note & Option.

Among other claims, Total Grow alleges that the Company is liable to Total Grow based on promissory estoppel and breach of contract for failing to consummate the acquisition of Total Grow by the Company.

The Company believes that the claims against it are without merit and is vigorously defending against them.

The Company is also counterclaiming for repayment of $ 1.5 million principal plus interest loaned by the Company to Total Grow pursuant to the Note & Option.

The Company has accrued a reserve of $ 1.5 million against the Note & Option.

The case was dismissed and the parties submitted the matter to arbitration pursuant to the arbitration clause of the Note & Option.

Among other claims, Total Grow alleged that the Company was liable to Total Grow based on promissory estoppel and breach of contract for failing to consummate the acquisition of Total Grow by the Company.

The Company counterclaimed for repayment of $ 1.5 million principal plus interest loaned by the Company to Total Grow pursuant to the Note & Option.

The Company accrued a reserve of $ 1.5 million against the Note & Option.

As discussed in Note 14, Subsequent Events , on July 26, 2023, the arbitrator denied all of Total Grow's claims and defenses, determined that the Company prevailed in its counterclaim, and awarded the Company an award in full settlement of the matter.

There can be no assurance that future developments related to pending claims or claims filed in the future, whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material effect on the Company’s financial condition, results of operations, or cash flows.

3 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 March 31, 2023, the Company did not have any liabilities associated with indemnities.

As of June 30, 2023, 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

The structure reflects the manner in which the chief operating decision maker regularly assesses information for decision-making purposes, including the allocation of resources.

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

Shared services and other corporate costs are allocated to an individual segment based on that segment's profitability.

Retail – The core of our business strategy is to operate the largest chain of retail garden centers in the U.S.

2 unchanged sentences

Our retail segment also includes our commercial sales organization, which is focused on selling products and services, including end-to-end solutions, for large commercial cultivators outside of the physical retail network.

When a commercial customers gain new cultivation licenses, they need lighting, benching, environmental control systems, irrigation, fertigation and other products to outfit their facilities.

When commercial customers gain new cultivation licenses, they need lighting, benching, environmental control systems, irrigation, fertigation, and other products to outfit their facilities.

Existing facilities also need consumable products for operations, as well as equipment updates from time to time.

Commercial customers typically purchase large dollar amounts and sizes of products.

Commercial customers typically purchase large dollar amounts, quantities, and sizes of products.

We offer commercial customers volume pricing, terms, and financing.

4 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

customers the option to have their orders shipped directly to their locations, anywhere in North America.

5 unchanged sentences

In February 2022, the Company purchased the assets of Horticultural Rep Group, Inc.

("HRG"), a specialty marketing and sales organization of horticultural products.

("HRG"), a specialty marketing and sales organization specializing in horticultural products.

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

1 unchanged sentence

Disaggregated revenue by segment is presented in the following table:

Three Months Ended March 31,

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

2023 2022 2023 2022

Private label sales $ 7,200 $ 6,000 $ 13,801 $ 13,096

11 unchanged sentences

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,

2023 2022 2023 2022

Retail $ 46,917 $ 55,354 $ 86,318 $ 119,650

4 unchanged sentences

Notes To Unaudited Condensed Consolidated Financial Statements

March 31, 2023

Three Months Ended March 31,

June 30, 2023

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

2023 2022 2023 2022

Retail $ 11,521 $ 15,601 $ 22,258 $ 31,094

2 unchanged sentences

Total $ 17,137 $ 20,227 $ 33,426 $ 42,367

Three Months Ended March 31,

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

2023 2022 2023 2022

Income (Loss) from operations

3 unchanged sentences

Total $ ( 6,566 ) $ ( 136,801 ) $ ( 14,330 ) $ ( 144,022 )

SUBSEQUENT EVENTS

In December 2021, the Company was sued in the U.S.

District Court for the Southern District of Texas related to a Promissory Note & Asset Acquisition Rights Option (“Note & Option”) with TGC Systems, LLC (“Total Grow”).

The case was dismissed and the parties submitted the matter to arbitration pursuant to the arbitration clause of the Note & Option.

The Company counterclaimed for repayment of $ 1.5 million principal plus interest loaned by the Company to Total Grow pursuant to the Note & Option.

On July 26, 2023, the arbitrator denied all of Total Grow’s claims and defenses, determined that the Company prevailed in its counterclaim, and granted the Company an award of $ 1.5 million, with interest at the rate of 8 % compounded annually beginning on March 15, 2021 until paid in full, and certain other costs.

The Award is in full settlement of all claims and counterclaims related to the matter.

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