What changed in this filing

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Item 9A. Controls and Procedures

2024-03-13 compared with 2023-03-16 · 53 added, 54 removed, 158 unchanged (40% of the section changed)

38 unchanged sentences

Our management is committed to remediating identified control deficiencies (including both those that rise to the level of a material weakness and those that do not), fostering continuous improvement in our internal controls, and enhancing our overall internal controls environment.

Through the full year of 2022, the Company initiated and will continue efforts toward implementation of certain steps in its remediation plan, including:

• Engaged a third-party CPA firm to assist with the redesign of the Sarbanes-Oxley program inclusive of entity-level controls.

• Created and staffed a controls compliance analyst charged with monitoring and facilitating compliance with the Company’s responsibilities under the Sarbanes Oxley Act of 2002 (“SOX”).

We initiated many of our control remediation efforts in fiscal 2022, and these efforts continued throughout 2023, including:

• Engaged a third-party specialist CPA firm to consult with management in redesigning and documenting of our internal controls over financial reporting, including our entity-level controls, to be compliant with Sarbanes Oxley Act of 2002 ("SOX").

• Hired a dedicated controls compliance manager charged with monitoring and facilitating compliance with the Company’s responsibilities under SOX in coordination with the third-party specialist.

• Implemented a global risk and compliance software to assist in monitoring and documenting compliance with SOX.

• For certain processes, developed new and revised existing process narratives and identified risks inherent to those processes.

• Developed new controls and revised the design of existing controls for a significant number of relevant key controls to mitigate the aforementioned risks, inclusive of general information technology controls and entity-level controls.

• Certain business functions have been restructured or consolidated to align more closely with effective business operation as well as to enable appropriate segregation of duties.

The following remaining activities are scheduled to occur in the first half of 2023 in anticipation of conducting management’s testing that will begin in the first half of 2023 in support of issuing management’s assessment of internal control over financial reporting as of December 31, 2023:

• Conduct initial organization-wide training sessions with all control owners.

• Implementation of new business systems to support information technology general controls.

• Completion of the identification of risks arising from inappropriate segregation of duties and fraud risks.

• Completion of risk assessment and control design for the remaining populations of processes and controls.

• Implementation of controls across all financial reporting processes and information technology environments.

• Development of effective communication plans relating to, among other things, identification of deficiencies and recommendations for corrective actions.

These plans will apply to all parties responsible for remediation.

• Implement periodic compliance reports are made to the Nominating and Governance Committee of the Board of Directors.

• Ongoing training with control owners, as necessary.

• Ongoing migration of certain components of a legacy information technology system onto a common information technology environment, including risk assessment, control design and implementation of new and revised controls.

• Made significant progress related to our control design and assessment, including the identification of risks arising from inappropriate segregation of duties and fraud risks and the development of new controls and revised the design of existing controls to mitigate the aforementioned risks, inclusive of entity-level controls.

• For certain processes, developed new and revised existing process narratives and flowcharts and identified risks inherent to those processes.

• Conducted training sessions with control owners.

• Restructured or consolidated certain business functions to align more closely with effective business operation as well as to enable appropriate segregation of duties.

• Implemented new business systems, including an enterprise resource planning software system, to support information technology general controls, appropriate segregation of duties, appropriate journal entry posting processes, change management, and user access.

• Added personnel to the accounting and financial reporting department with technical accounting experience to act as internal resources for reviewing complex financial reporting transactions, including areas such as business combinations, share based compensation, and income tax reporting.

• Continue to engage third party specialists to assist management with complex financial transactions and valuations, including valuation model techniques and inputs such as forecasted, prospective financial information

The following remaining activities are scheduled to occur during our fiscal year 2024 in support of issuing management’s assessment of internal control over financial reporting as of December 31, 2024:

• Testing design and operating effectiveness of newly implemented controls across all financial reporting processes and information technology environments.

• Finalization of risk assessments, control design, and implementation of new and revised controls, inclusive of general information technology controls and entity-level controls, as necessary.

• Ongoing training with control owners.

• Developing effective communication plans to all parties responsible for remediation relating to, among other things, identification of deficiencies and recommendations for corrective actions.

• Providing periodic compliance reports to the Audit Committee of the Board of Directors.

Our management believes that these remediation actions, when fully implemented, will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting.

Our remediation efforts are ongoing and additional remediation initiatives may be necessary.

We will continue our initiatives to implement and document the strengthening of existing, and development of new policies, procedures, and internal controls.

Remediation of the identified material weaknesses and strengthening our internal control environment will require a substantial effort throughout 2023.

However, our remediation efforts are ongoing and additional remediation initiatives may be necessary.

We will continue to implement and document the strengthening of existing and the development of new policies, procedures, and internal controls.

Remediation of the identified material weaknesses and strengthening our internal control environment has required and will continue to require a substantial effort throughout 2024.

We will test the ongoing operating effectiveness of the new and existing controls in future periods.

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Other than as provided below, the information required by Items 401, 405, 406 and 407 (c)(3);

(d)(4) and (d)(5) of Regulation S-K is incorporated into this Annual Report on Form 10-K by reference to the Company’s Definitive Proxy Statement for its 2023 Annual Meeting of Shareholders to be filed within 120 days following December 31, 2022.

Other than as provided below, the information required by Items 401, 405, 406, and 407 (c)(3), (d)(4), and (d)(5) of Regulation S-K is incorporated into this Annual Report on Form 10-K by reference to the Company's Definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed within 120 days following December 31, 2023.

All directors of the Company hold office for one-year terms until the election and qualification of their successors.

Officers are appointed by our Board and serve at the discretion of the Board, subject to applicable employment agreements.

The following table sets forth information regarding our executive officers and the members of our Board.

Officers are appointed by our Board of Directors ("Board") and serve at the discretion of the Board, subject to applicable employment agreements.

The following table sets forth information regarding our directors and executive officers.

Name Age Position

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Paul Ciasullo 64 Director

Darren Lampert has been our Chief Executive Officer and a Director since our inception in 2014.

Darren Lampert has been our Chief Executive Officer, a Director, and the Chairperson of the Board since our inception in 2014.

Lampert began his career in 1986 as a founding member of the law firm of Lampert and Lampert (1986-1999), where he concentrated on securities litigation, NASD (now FINRA) compliance, and arbitration and corporate finance matters.

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Lampert was admitted to practice law in New York in 1986 and is also admitted to practice before the United States District Courts for the Southern and Eastern Districts of New York.

Michael Salaman has been our President and a Director since our inception.

Salaman served as the Chairperson of Skinny Nutritional Corp.

from 2002 to 2014 and as Chief Executive Officer and President of Skinny Nutritional Corp.

from 2010 to 2014.

Skinny Nutritional Corp.

filed for Chapter 11 Bankruptcy protection in 2013 and the assets were sold to a private equity firm in 2014.

Salaman has over 20 years’ experience in the area of start-ups, new product development, distribution and marketing.

Michael Salaman has been our President and a Director since our inception in 2014.

Salaman began his business career as Vice President of Business Development for National Media Corp., an infomercial marketing company in the United States, from 1985 to 1993.

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Salaman became the principal officer of that entity, directing its operations as a marketing and distribution company, and in 2005 focused its efforts in the enhanced water business.

Salaman served as the Chairperson of Skinny Nutritional Corp.

from 2002 to 2014 and as Chief Executive Officer and President of Skinny Nutritional Corp.

from 2010 to 2014.

Salaman received a Bachelor of Business Administration degree in business from Temple University in 1986.

Gregory Sanders has been Chief Financial Officer of the Company since August 2022.

Gregory Sanders has been our Chief Financial Officer since August 2022.

Immediately prior, Mr.

Sanders served as Vice President and Corporate Controller at GrowGeneration for nearly five years.

He came to GrowGeneration with prior public company experience, having served in various accounting positions for Enterprise Holdings and Arrow Electronics.

Sanders also led the Finance and Accounting Department, as well as Administrative and Human Resources functions, for Machol & Johannes LLC.

Sanders began his career in 2008 with Enterprise Holdings, one of the nation's largest privately held organizations, where he held nine different positions during his tenure, including Accounting Manager.

From 2014 to 2015, he served as Accounting Manager at Arrow Electronics.

From 2015 to 2018, Mr.

Sanders served as Director of Accounting at Machol & Johannes LLC, where he led accounting, finance, human resources, and administrative functions and supported the organization in its highest ranking financial position.

Sanders holds a B.S.

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Adams worked at First Data Corporation (now Fiserv), holding positions as President of Merchant Services, President of Card Issuer Services and President of Teleservices.

From 2004 to 2008, Mr.

Adams served as Senior Vice President at Sun Microsystems responsible for systems, software and data storage.

From 2004 to 2006, he served as Senior Vice President of StorageTek, which was acquired in 2006 by Sun Microsystems.

From 2006 to 2008, he served as Senior Vice President of Sun Microsystems Storage Division.

From 2008 to 2013, Mr.

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from 2013 to 2019.

Adams currently serves on the board of directors of Your Way Cannabis Brands Inc., as well as the White House Historical Association and the Transportation Commission of Colorado.

Adams currently serves on the boards of the White House Historical Association and the Transportation Commission of Colorado and is a former director of Harvest Health and Recreation Inc.

and Your Way Cannabis Brands Inc.

Adams is a graduate of Morris Brown College with a Bachelor of Science degree in accounting, has a Master of Business Administration from Harvard Business School, and is a Certified Public Accountant.

Stephen Aiello has been a Director of the Company since 2014.

Aiello has been a private investor focusing on cannabis and real estate since 2008.

Aiello was a partner at Jones and Company from 2004 to 2008.

From 1986 to 2001, Mr.

Aiello was a partner at Montgomery Securities, where he managed the sales and trading institutional desk.

From 2001 to 2003, he worked at 033 Asset Management, a long/short equity fund where he was responsible for day-to-day trading of the portfolio.

From 1986 to 2001, he was a partner at Montgomery Securities, where he managed the sales and trading institutional desk.

Aiello was a partner at Jones and Company from 2004 to 2008.

Aiello has been a private investor focusing on cannabis and real estate since 2008.

Aiello received a Bachelor of Arts in Psychology from Ithaca College and a Master of Business Administration from Fordham University.

Paul Ciasullo has been a Director of the Company since 2020.

He has also been a board member of Leafline Labs, LLC since 2018.

Ciasullo has held a number of Managing Director positions as head of trading at large brokerage firms.

From 2000 to 2004, Mr.

Ciasullo was a founder of and acted as President of CreditSights, Inc., an institutional investment research firm specializing in fixed income research for institutional investors.

From 2005 to 2006, Mr.

Ciasullo was a Managing Director at Soleil Securities Group Inc., responsible for developing a strategy for bringing alternative research such as industry knowledge into a stock research environment.

Ciasullo founded Wallstreet Research Solutions, LLC, which provided sales, marketing and customer account services primarily in partnership with a fixed income research firm specializing in bond and loan covenants called Covenant Review, LLC (with which he had been working to build the business since 2007).

1 unchanged sentence

Ciasullo acted as President of Global Marketing and Sales and was a board member from 2014 to 2018 when the company was sold to Fitch Ratings Services.

From 2005 to 2006, Mr.

Ciasullo was a Managing Director at Soleil Securities Group Inc., responsible for developing a strategy for bringing alternative research such as industry knowledge into a stock research environment.

From 2000 to 2004, Mr.

Ciasullo was a founder of and acted as President of CreditSights, Inc., an institutional investment research firm specializing in fixed income research for institutional investors.

Prior to that, Mr.

Ciasullo held a number of Managing Director positions as head of trading at large brokerage firms.

He was also a board member of Leafline Labs, LLC from 2018 to 2021.

Ciasullo graduated from Brown University in 1981 with a Bachelor of Arts in Economics and International Relations.

EXECUTIVE COMPENSATION

The information required by Item 402 of Regulation S-K is incorporated into this Annual Report Form 10-K by reference to the Definitive Proxy Statement for its 2023 Annual Meeting of Shareholders to be filed within 120 days following December 31, 2022.

The information required by Item 402 of Regulation S-K is incorporated into this Annual Report on Form 10-K by reference to the Company's Definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed within 120 days following December 31, 2023.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 201(d) and Item 403 of Regulation S-K is incorporated into this Annual Report Form 10-K by reference to the Definitive Proxy Statement for its 2023 Annual Meeting of Shareholders to be filed within 120 days following December 31, 2022.

The information required by Item 201(d) and Item 403 of Regulation S-K is incorporated into this Annual Report on Form 10-K by reference to the Company's Definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed within 120 days following December 31, 2023.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by Items 404 and 407(a) of Regulation S-K is incorporated into this Annual Report Form 10-K by reference to the Definitive Proxy Statement for its 2023 Annual Meeting of Shareholders to be filed within 120 days following December 31, 2022.

The information required by Items 404 and 407(a) of Regulation S-K is incorporated into this Annual Report on Form 10-K by reference to the Company's Definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed within 120 days following December 31, 2023.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 9(e) of Schedule 14A is incorporated into this Annual Report Form 10-K by reference to the Definitive Proxy Statement for its 2023 Annual Meeting of Shareholders to be filed within 120 days following December 31, 2022.

The information required by Item 9(e) of Schedule 14A is incorporated into this Annual Report on Form 10-K by reference to the Company's Definitive Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed within 120 days following December 31, 2023.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

24 unchanged sentences

32.2 Section 1350 Certification of Principal Financial and Accounting Officer (Filed herewith.)

97 Incentive Compensation Recovery Policy

101.INS XBRL Instance Document (Filed herewith.)

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(Principal Accounting Officer and Principal Financial Officer)

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors GrowGeneration Corp., a Colorado corporation (the “Registrant”), do hereby constitute and appoint Darren Lampert and Gregory Sanders, and each of them, as his or her true and lawful attorney-in-fact and agents, with full power of substitution and re-substitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Each of the undersigned officers and directors of GrowGeneration Corp., a Colorado corporation (the "Registrant"), does hereby constitute and appoint Darren Lampert and Gregory Sanders, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Person Capacity Date

15 unchanged sentences

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-K

Item 9A. Controls and Procedures