What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-08 compared with 2023-11-08 · 243 added, 434 removed, 224 unchanged (75% of the section changed)

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS (UNAUDITED)

GROWGENERATION CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and per share amounts)

September 30,

(in thousands, except shares)

2024 December 31,

2 unchanged sentences

Marketable securities 30,280 35,212

Accounts receivable, net of allowance for credit losses of $ 1.1 million and $ 0.7 million at September 30, 2023 and December 31, 2022

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

Accounts receivable, net of allowance for credit losses of $ 1.4 million and $ 1.4 million at March 31, 2024 and December 31, 2023

Notes receivable, current, net of allowance for credit losses of $ 0.2 million and $ 1.7 million at March 31, 2024 and December 31, 2023

Inventory 66,028 64,905

Prepaid income taxes 213 516

Prepaids and other current assets 12,383 6,455

Prepaid and other current assets 6,102 7,973

Total current assets 141,720 147,451

Property and equipment, net 25,336 27,052

Operating leases right-of-use assets 42,316 46,433

Operating leases right-of-use assets, net 40,408 39,933

Notes receivable, long-term 54 106

Intangible assets, net 14,503 16,180

9 unchanged sentences

Sales tax payable 1,249 1,185

Current maturities of lease liability 8,374 8,131

Current portion of long-term debt — 50

Current maturities of operating lease liabilities 7,593 8,021

Total current liabilities 29,337 30,930

Commitments and contingencies (Note 12)

Operating lease liability, net of current maturities 36,387 40,659

Operating lease liabilities, net of current maturities 35,431 34,448

Other long-term liabilities 317 317

Total liabilities 65,085 65,695

Commitments and contingencies (Note 12)

Stockholders' equity:

1 unchanged sentence

$ 0.001 par value;

100,000,000 shares authorized, 61,309,456 and 61,010,155 shares issued and outstanding as of September 30, 2023 and December 31, 2022

100,000,000 shares authorized, 61,507,259 and 61,483,762 shares issued and outstanding as of March 31, 2024 and December 31, 2023

Additional paid-in capital 374,182 373,433

2 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 230,393 $ 239,090

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

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

GROWGENERATION CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

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

2023 2022 2023 2022

Three Months Ended March 31,

Net sales $ 47,888 $ 56,827

4 unchanged sentences

Selling, general, and administrative 7,908 6,838

Bad debt expense 257 172 681 1,774

Estimated credit losses (recoveries) ( 488 ) 317

Depreciation and amortization 3,742 3,932

Impairment loss — — — 127,831

Total operating expenses 21,796 23,709

4 unchanged sentences

Interest expense ( 56 ) ( 2 )

Total non-operating income (expense), net 953 174 3,543 721

Total other income (expense) 593 1,286

Net income (loss) before taxes ( 8,839 ) ( 6,134 )

5 unchanged sentences

Weighted average shares outstanding, diluted 61,499 61,028

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

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

GROWGENERATION CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

5 unchanged sentences

Shares Amount

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

Common stock issued for share based compensation 80 — — — —

Common stock withheld for employee payroll taxes — — ( 12 ) — ( 12 )

Share based compensation — — 938 — 938

Net income (loss) — — — ( 7,349 ) ( 7,349 )

Balances, September 30, 2023 61,309 $ 61 $ 372,789 $ ( 172,785 ) $ 200,065

Common Stock Additional

Paid-In Capital Retained

Earnings (Deficit) Total

Stockholders’ Equity

Shares Amount

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

Common stock issued for share-based compensation 78 — — — —

Common stock withheld for employee payroll taxes — — ( 17 ) — ( 17 )

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

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

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

Common Stock Additional

Paid-In Capital Retained

Earnings (Deficit) Total

Stockholders’ Equity

Shares Amount

Balances, December 31, 2023 61,484 $ 61 $ 373,433 $ ( 200,099 ) $ 173,395

2 unchanged sentences

Share-based compensation — — 778 — 778

Noncash repurchase of liability awards — — 653 — 653

Liability redemption associated with business acquisition 35 — 120 — 120

Net income (loss) — — — ( 8,837 ) ( 8,837 )

Balances, September 30, 2023 61,309 $ 61 $ 372,789 $ ( 172,785 ) $ 200,065

Balances, March 31, 2024 61,507 $ 62 $ 374,182 $ ( 208,936 ) $ 165,308

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 combination 650 1 5,749 — 5,750

Common stock issued for share-based compensation 25 — — — —

1 unchanged sentence

Share-based compensation — — 511 — 511

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

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

Net income (loss) — — — ( 6,134 ) ( 6,134 )

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

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

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

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

GROWGENERATION CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income (loss) $ ( 8,837 ) $ ( 6,134 )

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

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

Depreciation and amortization 3,742 3,932

Stock-based compensation expense 2,452 3,980

Bad debt expense 681 1,774

(Gain) loss on asset disposition 85 629

Impairment loss — 127,831

Deferred taxes — ( 2,166 )

Share-based compensation 778 567

Estimated credit losses (recoveries) ( 488 ) 317

Loss (gain) on disposal of fixed assets 33 ( 19 )

Change in value of marketable securities ( 390 ) —

Changes in operating assets and liabilities (net of the effect of acquisitions):

Changes in operating assets and liabilities:

Accounts and notes receivable 1,551 1,664

6 unchanged sentences

Sales tax payable 64 126

Net cash provided by (used in) operating activities 2,777 9,870

Net cash and cash equivalents provided by (used in) operating activities ( 3,676 ) 3,457

Cash flows from investing activities:

Acquisitions, net of cash acquired ( 3,050 ) ( 6,806 )

Purchase of marketable securities ( 21,143 ) ( 10,726 )

Maturities from marketable securities 83,398 39,793

Maturities of marketable securities 26,465 33,452

Proceeds from notes receivable 30 —

Purchase of property and equipment ( 355 ) ( 3,476 )

Disposal of assets 235 —

Net cash provided by (used in) investing activities ( 11,180 ) 21,352

Proceeds from disposals of assets — 63

Net cash and cash equivalents provided by (used in) investing activities 4,997 19,313

Cash flows from financing activities:

1 unchanged sentence

Common stock withheld for employee payroll taxes ( 28 ) ( 70 )

Net cash provided by (used in) financing activities ( 237 ) ( 1,534 )

Net change ( 8,640 ) 29,688

Net cash and cash equivalents provided by (used in) financing activities ( 28 ) ( 86 )

Net increase (decrease) in cash and cash equivalents 1,293 22,684

Cash and cash equivalents at the beginning of period 29,757 40,054

3 unchanged sentences

Cash paid for income taxes $ — $ —

Common stock issued for business combination $ — $ 5,750

Right-of-use assets acquired under new operating leases $ 4,173 $ 6,221

Indemnity holdback from business acquisitions $ — $ 875

Noncash repurchase of liability awards $ 653 $ —

Liability redemption associated with business acquisition $ 120 $ —

Purchase of property and equipment accrued in accounts payable $ 355 $ —

Right-of use assets obtained in exchange for new or modified operating lease liabilities $ 2,869 $ 1,310

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

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

March 31, 2024

GrowGeneration Corp.

(together with its direct and indirect wholly owned subsidiaries, collectively “GrowGeneration” or the “Company”) is a leading marketer and distributor of nutrients, growing media, lighting, benching and racking, environmental control systems, and other products for both indoor and outdoor hydroponic and organic gardening, including proprietary brands such as Charcoir, Drip Hydro, Power Si, MMI benching and racking, Ion lights, Harvest Company scissors, and more.

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

As of September 30, 2023, GrowGeneration has 56 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, Horticultural Rep Group ("HRG"), and a benching, racking, and storage solutions business, Mobile Media ("MMI").

GrowGeneration also provides facility design services to commercial growers.

(together with its direct and indirect wholly-owned subsidiaries, collectively "GrowGeneration" or the "Company") was incorporated in Colorado in 2014.

Since then, GrowGeneration has grown from a small chain of specialty retail hydroponic and organic garden centers to a multifaceted business with diverse assets.

Today, GrowGeneration operates two major lines of business:

its Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business;

and its Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business.

As of March 31, 2024, GrowGeneration has 46 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, Mobile Media or MMI.

Basis of Presentation

5 unchanged sentences

These statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("2023 Form 10-K").

There were no significant changes to the Company's significant accounting policies as disclosed in our 2022 Form 10-K.

There were no significant changes to the Company's significant accounting policies as disclosed in the 2023 Form 10-K.

The results reported in these unaudited Condensed Consolidated Financial Statements are not necessarily indicative of results for the full fiscal year.

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

All amounts included in the accompanying footnotes to the Condensed Consolidated Financial Statements, except per share data, are in thousands (000).

Reclassifications

Certain amounts in the prior period Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation.

These reclassifications had no effect on reported net income (loss) within the Condensed Consolidated Statements of Operations.

Use of Estimates

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.

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenues and expenses during the reporting period.

Actual results could vary from the estimates that were used.

RECENT ACCOUNTING PRONOUNCEMENTS

From time to time, the Financial Accounting Standard Board ("FASB") or other standard setting bodies issue new accounting pronouncements.

Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update ("ASU").

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements.

In addition to the accounting pronouncements discussed below, no other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material effect on the Company's consolidated financial statements or disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280) ("ASU 2023-07"), which requires an enhanced disclosure of segments on an annual and interim basis, including the title of the chief operating decision maker, significant segment expenses, and the composition of other segment items for each segment's reported profit.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and

GROWGENERATION CORP.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted, and adoption of ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impact of this standard.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740) - Improvements to income tax disclosures ("ASU 2023-09"), expanding the disclosures requirement for income taxes primarily by requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted, and adoption of ASU 2023-09 can be applied prospectively or retrospectively.

The Company is currently evaluating the impact of this standard.

FAIR VALUE MEASUREMENTS

9 unchanged sentences

A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

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.

Changes in fair value of marketable securities, principally derived from accretion of discounts, was $ 0.5 million and $ 1.0 million for the three and nine months ended September 30, 2023, and included in Other income (expense) on the Condensed Consolidated Statements of Operations.

The carrying amounts of cash and cash equivalents, accounts receivable, 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 net of reserves for expected credit loss.

Level September 30,

The marketable securities are classified as available-for-sale and are carried at fair value based on quoted market prices.

Changes in fair value of marketable securities, principally derived from accretion of discounts, was $ 0.4 million and immaterial for the three months ended March 31, 2024 and 2023, respectively, and included in Interest income on the Condensed Consolidated Statements of Operations.

Level March 31,

2024 December 31,

1 unchanged sentence

Marketable securities 2 $ 30,280 $ 35,212

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

RECENT ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncements

From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements.

Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”).

The Company has implemented all new accounting pronouncements that are in effect and that may impact our financial statements.

In addition to the accounting pronouncement discussed below, no other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material effect on the Company’s consolidated financial statements or disclosures.

Recently Adopted Accounting Pronouncements

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 based upon a company’s historical credit loss experience, adjusted for asset-specific risk characteristics, current economic conditions, and reasonable forecasts, 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, and the Company adopted this standard effective January 1, 2023.

The adoption of this standard primarily applied to the valuation of the Company’s accounts receivable.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures, and the Company’s estimate of expected credit losses as of January 1, 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

Disaggregation of Revenues

Net sales are disaggregated by the Company's segments, which represent its principal lines of business, as well as by the type of good or service, including sales of private label products, non-private label products or distributed brands, and sales of commercial fixtures.

See Note 13, Segments , for disaggregated revenue by segment.

Net sales are disaggregated by the Company's segments, which represent its principal lines of business, as well as by major product line, including proprietary brands, non-proprietary brands, and commercial fixtures, and by product type, including consumable and durable products.

Refer to Note 13, Segments, for disaggregated revenue disclosures.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Contract Assets and Liabilities

The opening and closing balances of the Company’s customer trade receivables and customer deposit liability are as follows:

Depending on the timing of when title of product transfers to a customer and when a customer makes payments for such product, the Company recognizes an accounts receivable (contract asset) or a customer deposit (contract liability).

The opening and closing balances of the Company's accounts receivables and customer deposits were as follows:

Accounts Receivable, Net Customer Deposits

Opening balance, January 1, 2024 $ 8,895 $ 5,359

Closing balance, September 30, 2023

Closing balance, March 31, 2024

Increase (decrease) $ ( 1,063 ) $ ( 1,479 )

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

Closing balance, September 30, 2022

Closing balance, March 31, 2023

Increase (decrease) $ ( 767 ) $ ( 422 )

Of the total amount of customer deposit liability as of January 1, 2023, $ 2.9 million was reported as revenue during the nine months ended September 30, 2023.

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, 2024, $ 2.9 million was reported as revenue during the three months ended March 31, 2024.

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.

Notes receivable at March 31, 2024 and December 31, 2023 were as follows:

2024 December 31,

Notes receivable $ 501 $ 2,031

Allowance for credit losses ( 232 ) ( 1,732 )

Notes receivable, net $ 269 $ 299

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

2024 December 31,

Notes receivable $ 232 $ 1,732

Allowance for credit losses ( 232 ) ( 1,732 )

Notes receivable, net $ — $ —

During the three months ended March 31, 2024, the Company received a $ 0.3 million settlement related to a $ 1.5 million note receivable, which had been fully reserved as of December 31, 2023.

Refer to Note 12, Commitment and Contingencies, for additional information regarding the settlement.

GROWGENERATION CORP.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

PROPERTY AND EQUIPMENT

September 30,

Property and equipment at March 31, 2024 and December 31, 2023 consisted of the following:

2024 December 31,

6 unchanged sentences

Total property and equipment, gross 47,227 47,048

Accumulated depreciation ( 19,075 ) ( 13,598 )

Accumulated depreciation and amortization ( 21,891 ) ( 19,996 )

Property and equipment, net $ 25,336 $ 27,052

Depreciation expense for the three and nine months ended September 30, 2023 was $ 2.5 million and $ 5.8 million.

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

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

Depreciation and amortization expense related to property and equipment was $ 2.1 million and $ 1.7 million for the three months ended March 31, 2024 and 2023, respectively.

GOODWILL AND INTANGIBLE ASSETS

The changes in goodwill are as follows:

September 30, 2023 December 31,

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

Goodwill additions and measurement period adjustments 830 7,234

Impairment — ( 116,657 )

Balance, end of period $ 16,808 $ 15,978

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 was contrary to prior experience.

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

These indicators, in the aggregate, required impairment testing for finite-lived intangible assets at the asset group level and goodwill at the reporting unit level as of June 30, 2022.

As a result, the Company performed a cash recoverability test on the following finite-lived intangible assets:

customer relationships, trade names, and non-competes.

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

The Company determined the fair value of its reporting units using the income approach, where estimated future returns are discounted to present value at an appropriate rate of return.

The Company recognized impairment losses for related to its finite-lived intangibles and goodwill on June 30, 2022 as disclosed in the table below.

There were no goodwill or finite-lived intangible impairments recognized during the nine months ended September 30, 2023.

The goodwill balance and impairment by segment are as follows:

Retail E-commerce Distribution Total

Gross carrying value at December 31, 2021 $ 101,811 $ 11,659 $ 11,931 $ 125,401

Acquisitions & measurement period adjustments 1,418 ( 341 ) 6,157 7,234

Gross carrying value at December 31, 2022 103,229 11,318 18,088 132,635

Acquisitions & measurement period adjustments 830 — — 830

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

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

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

Accumulated impairment losses at December 31, 2022 ( 103,094 ) ( 9,848 ) ( 3,715 ) ( 116,657 )

Impairment — — — —

Accumulated impairment losses at September 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 September 30, 2023

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

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

A summary of intangible assets is as follows:

Weighted-Average

Amortization Period

of Intangible Assets

as of September 30, 2023

Trade names 2.47

Customer relationships 3.86

Non-competes 0.59

Intellectual property 2.42

Intangible assets consist of the following:

September 30, 2023

The carrying value of goodwill at March 31, 2024 and December 31, 2023 by segment was as follows:

Cultivation and Gardening Storage Solutions Total

Balances, December 31, 2023 $ 5,920 $ 1,605 $ 7,525

Balances, March 31, 2024 $ 5,920 $ 1,605 $ 7,525

Accumulated impairment for goodwill was $ 125.9 million as of March 31, 2024 and December 31, 2023.

The changes in intangible assets by segment for the quarter ended March 31, 2024 and year ended December 31, 2023 were as follows:

Cultivation and Gardening Storage Solutions Total

Balance as of December 31, 2023 $ 13,501 $ 2,679 $ 16,180

Amortization ( 1,482 ) ( 195 ) ( 1,677 )

Balance as of March 31, 2024 $ 12,019 $ 2,484 $ 14,503

Intangible assets on the Company's Consolidated Balance Sheets consisted of the following:

March 31, 2024 December 31, 2023

Amount Accumulated

Amortization Net

Trade names $ 29,062 $ ( 15,066 ) $ 13,996

Patents 100 ( 67 ) 33

Customer relationships 17,542 ( 8,308 ) 9,234

Non-competes 932 ( 727 ) 205

Intellectual property 2,065 ( 1,067 ) 998

Total $ 49,701 $ ( 25,235 ) $ 24,466

December 31, 2022

Amount Accumulated

1 unchanged sentence

Trade names $ 28,198 $ ( 17,850 ) $ 10,348 $ 28,198 $ ( 16,488 ) $ 11,710

Patents 100 ( 56 ) 44

Patents, trademarks 69 ( 69 ) — 69 ( 69 ) —

Customer relationships 13,192 ( 9,106 ) 4,086 13,192 ( 8,813 ) 4,379

3 unchanged sentences

GROWGENERATION CORP.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

Intangibles and impairment by segment are as follows:

Retail E-commerce Distribution Total

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

Acquisitions & measurement period adjustments 229 — 3,182 3,411

Gross carrying value at December 31, 2022 38,054 2,501 19,880 60,435

Acquisitions & measurement period adjustments 440 — — 440

Gross carrying value at September 30, 2023 $ 38,494 $ 2,501 $ 19,880 $ 60,875

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

Amortization ( 5,721 ) ( 460 ) ( 3,580 ) ( 9,761 )

Accumulated amortization at December 31, 2022 ( 12,006 ) ( 814 ) ( 5,563 ) ( 18,383 )

Amortization ( 3,793 ) ( 335 ) ( 2,724 ) ( 6,852 )

Accumulated amortization at September 30, 2023 $ ( 15,799 ) $ ( 1,149 ) $ ( 8,287 ) $ ( 25,235 )

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

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

Accumulated impairment losses at December 31, 2022 ( 11,079 ) ( 95 ) — ( 11,174 )

Impairments — — — —

Accumulated impairment losses September 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 September 30, 2023 $ 11,616 $ 1,257 $ 11,593 $ 24,466

Amortization expense for the three and nine months ended September 30, 2023 was $ 2.2 million and $ 6.9 million.

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

Future amortization expense as of September 30, 2023 is as follows:

2023, remainder $ 2,229

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Amortization expense for the three months ended March 31, 2024 and 2023 was $ 1.7 million and $ 2.2 million, respectively.

Fu ture amortization expense as of March 31, 2024 was as follows:

2024 (remainder of the year) $ 5,028

Thereafter 24

Total $ 14,503

For the nine months ended September 30, 2023, the effective tax rate was ( 0.42 )%, compared to 1.74 % for the nine months ended September 30, 2022.

The effective tax rate for each of the nine months ended September 30, 2023 and 2022 is lower than the U.S.

For the three months ended March 31, 2024, the effective tax rate was ( 0.02 )%, compared to 0.00 % for the three months ended March 31, 2023.

The effective tax rate for each of the three months ended March 31, 2024 and 2023 is lower than the U.S.

federal statutory rate of 21.0% primarily due to the Company's valuation allowance against deferred tax assets.

As of September 30, 2023, the Company concluded that its deferred tax assets are not expected to be realizable, based on positive and negative evidence, therefore it has assigned a full valuation allowance against them.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

The right-of-use assets and corresponding liabilities related to the Company's operating leases are as follow:

September 30,

As of March 31, 2024 , the Company concluded that its deferred tax assets are not expected to be realizable, based on positive and negative evidence, therefore it has assigned a full valuation allowance against them.

The right-of-use assets and corresponding liabilities related to the Company's operating leases were as follows:

2024 December 31,

Operating leases right-of-use assets $ 40,408 $ 39,933

Current maturities of lease liability $ 8,374 $ 8,131

Current maturities of operating lease liability $ 7,593 $ 8,021

Operating lease liability, net of current maturities 35,431 34,448

1 unchanged sentence

The weighted-average remaining lease terms and weighted-average discount rates for operating leases were as follows:

September 30,

2023 September 30,

Three Months Ended March 31,

Weighted average remaining lease term 5.99 years 6.46 years

3 unchanged sentences

Facilities and assets which serve management and support functions are expensed through Selling, general, and administrative.

Additionally, the Company recorded sublease income of $ 0.3 million and $ 0.9 million for the three and nine months ended September 30, 2023, respectively, within Other income (expense) related to the sublease of a closed retail location.

The components of lease expense are as follows:

Three Months Ended September 30,

Operating lease costs $ 2,738 $ 2,615

Variable lease costs 176 664

Short-term lease costs 98 69

Total operating lease costs $ 3,012 $ 3,348

Nine Months Ended

September 30,

The Company recorded sublease income of $ 0.3 million and $ 0.3 million for the three mo nths ended March 31, 2024 and 2023 , respectively, within Store operations and other operational expenses related to the sublease of a closed retail location .

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

The components of lease expense were as follows:

Three Months Ended March 31,

Operating lease costs $ 2,563 $ 2,893

2 unchanged sentences

Total operating lease costs $ 3,312 $ 3,659

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

Future maturities of the Company’s operating lease liabilities as of September 30, 2023 :

Future maturities of the Company's operating lease liabilities as of March 31, 2024 were as follows :

2024 (remainder of the year) $ 7,516

2 unchanged sentences

imputed interest ( 8,495 )

Lease Liability at September 30, 2023

Operating lease liability at March 31, 2024

Supplemental and other information related to leases was as follows:

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flow from operating leases $ 2,580 $ 2,826

SHARE BASED PAYMENTS

The Company maintains long-term incentive plans for employees, non-employee members of its Board of Directors, and consultants.

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 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 nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

Restricted stock $ 938 $ 951 $ 2,452 $ 2,902

Stock options — — — 59

Warrants — 340 — 1,019

Total $ 938 $ 1,291 $ 2,452 $ 3,980

As of September 30, 2023, the Company had approximately $ 4.5 million of unamortized share-based compensation for share based awards, which are expected to be recognized over a weighted average period of approximately 1.9 years.

Restricted Stock

The Company issues shares of restricted stock to eligible employees, which are subject to forfeiture until the end of an applicable vesting period.

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

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

EARNINGS PER SHARE

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computation for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

Net income (loss) $ ( 8,837 ) $ ( 6,134 )

Weighted average shares outstanding, basic 61,499 61,028

Effect of dilutive outstanding restricted stock units, stock options, and warrants — —

Adjusted weighted average shares outstanding, dilutive 61,499 61,028

Basic earnings (loss) per share $ ( 0.14 ) $ ( 0.10 )

Dilutive earnings (loss) per share $ ( 0.14 ) $ ( 0.10 )

Diluted earnings per share calculations for the three months ended March 31, 2024 excluded 0.5 million shares of common stock issuable upon exercise of stock options and 0.8 million of non-vested restricted stock units that would have been anti-dilutive.

Diluted earnings per share calculations for the three months ended March 31, 2023 excluded 0.6 million shares of common stock issuable upon exercise of stock options, 0.7 million shares of non-vested restricted stock units, and 33 thousand shares of common stock issuable upon exercise of the stock purchase warrants that would have been anti-dilutive.

GROWGENERATION CORP.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

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

Shares Weighted Average Grant Date Fair Value

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

SHARE-BASED PAYMENTS

The Company maintains long-term incentive plans for employees, non-employee members of its Board of Directors (the "Board"), and consultants.

The plans allow the Company to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, common stock warrants, 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 awards made to employees, non-employee members of the Board, and consultants of the Company, including stock options and restricted stock units.

The Company recorded share-based compensation expense of $ 0.8 million and $ 0.6 million in the three months ended March 31, 2024 and 2023, respectively.

Restricted Stock Units

The Company issues restricted stock units to eligible employees, which are subject to forfeiture until the end of an applicable vesting period.

The awards generally vest annually or biannually over three to four years following the date of grant, subject to the employee's continuing employment as of that date.

Restricted stock units are valued using the market value on the grant date.

Restricted stock unit activity for the three months ended March 31, 2024 is presented in the following table:

Units Weighted Average Grant Date Fair Value

Nonvested, December 31, 2023

3 unchanged sentences

Forfeited ( 37,250 ) $ 2.65

Nonvested, September 30, 2023

Nonvested, March 31, 2024

832,167 $ 5.12

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

Options Shares Weighted -

Price Weighted -

Term Weighted -

As of March 31, 2024, the Company had approximately $ 2.9 million of unrecognized share-based compensation related to restricted stock units, which are expected to be recognized over a weighted average period of approximately 1.6 years.

Stock Options

Stock option activity for the three months ended March 31, 2024 is presented in the following table:

Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Weighted Average Grant Date Fair Value

Outstanding at December 31, 2023

3 unchanged sentences

Forfeited or expired ( 68,332 ) 2.76 — 1.82

Outstanding at September 30, 2023

584,498 $ 3.99 1.17 $ 2.24

Vested at September 30, 2023

584,498 $ 3.99 1.17 $ 2.24

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

Warrants Weighted Average

Exercise Price

Outstanding at December 31, 2022

Outstanding at March 31, 2024

509,666 $ 4.17 0.78 $ 2.31

Exercised — —

Forfeited ( 32,500 ) $ 10.61

Outstanding at September 30, 2023

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 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

September 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 and nine months ended September 30, 2023 and 2022:

Three Months Ended

September 30,

2023 September 30,

Net income (loss) $ ( 7,349 ) $ ( 7,202 )

Weighted average shares outstanding, basic 61,272 60,855

Effect of dilution — —

Adjusted weighted average shares outstanding, dilutive 61,272 60,855

Basic earnings (loss) per share $ ( 0.12 ) $ ( 0.12 )

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

Nine Months Ended

September 30,

2023 September 30,

Net income (loss) $ ( 19,182 ) $ ( 148,758 )

Weighted average shares outstanding, basic 61,127 60,771

Effect of dilution — —

Adjusted weighted average shares outstanding, dilutive 61,127 60,771

Basic earnings (loss) per share $ ( 0.31 ) $ ( 2.45 )

Dilutive earnings (loss) per share $ ( 0.31 ) $ ( 2.45 )

Diluted earnings per share calculations for each of three and nine month ended September 30, 2023 excluded 1.1 million shares of common stock issuable upon exercise of stock options and 0.6 million of non-vested restricted stock that would have been anti-dilutive.

Diluted earnings per share calculations for each of three and nine month ended September 30, 2022 excluded 0.6 million shares of common stock issuable upon exercise of stock options, 0.7 million of non-vested restricted stock, and 0.3 million of shares of common stock issuable upon exercise of the stock purchase warrants that would have been anti-dilutive.

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

and (ii) proprietary brands and private label brands.

The Company accounts for acquisitions in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed are recorded in the accompanying Condensed Consolidated Balance Sheets at their estimated fair values, as of the acquisition date.

For all acquisitions, the preliminary allocation of purchase price was based upon the preliminary valuation, and the Company's estimates and assumptions are subject to change within the measurement period as valuations are finalized, not to exceed one year from the acquisition date.

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 period adjustments during the current year.

During the nine months ended September 30, 2022, measurement period adjustments included increasing goodwill by $ 1.3 million offset with intangible assets, which resulted in an insignificant reduction in amortization expense.

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

Acquisitions during the nine months ended September 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.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

Additionally, the Company made other, individually immaterial acquisitions during the nine months ended September 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.

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

Alaska Other Total

Inventory $ 720 $ 867 $ 1,587

Prepaids and other current assets 292 1 293

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 577 253 830

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

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

Alaska Other Total

Acquisition date May 23, 2023

Net sales $ 1,127 $ 2,044 $ 3,171

Net income (loss) $ ( 52 ) $ ( 17 ) $ ( 69 )

The following represents the pro forma Condensed Consolidated Statement of Operations as if the acquisitions had been included in the consolidated results of the Company for the entire period for the three and nine months ended September 30, 2023, and 2022.

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

Vested and exercisable at March 31, 2024

509,666 $ 4.17 0.78 $ 2.31

Net sales $ 55,499 $ 74,747 $ 178,465 228,915

Net income (loss) $ ( 7,726 ) $ ( 7,193 ) $ ( 19,217 ) ( 148,863 )

Acquisitions during 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 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 provided for an indemnity holdback to be settled in common stock of the Company valued at $ 0.9 million.

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

HRG is included in our Distribution and other segment.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

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

Prepaids and other current assets 76

Furniture and equipment 148

Operating lease right-of-use asset 666

Operating lease liability ( 666 )

Customer relationships 2,430

Trademark 496

Non-compete 255

Goodwill 5,816

Total $ 13,391

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

Indemnity stock holdback 875

Common stock 5,710

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 nine months ended September 30, 2022.

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

Acquisition date February 1, 2022

Net sales $ 13,474

Net Income (loss) $ ( 209 )

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 nine months ended September 30, 2022.

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

Net sales $ 80,901 $ 235,443

Net income (loss) $ ( 135,514 ) $ ( 149,316 )

STOCKHOLDERS' EQUITY

On March 20, 2024, the Board authorized a share repurchase program, whereby the Company could repurchase up to $ 6.0 million worth of its common stock in open market transactions pursuant to Rule 10b-18 of the Exchange Act and a 10b5-1 trading plan.

The program began on April 1, 2024 and continues for up to one year.

This share repurchase program is intended to enhance long-term shareholder value.

The program does not obligate the Company to acquire any specific number of shares

GROWGENERATION CORP.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

or to acquire any shares over any specific period of time.

The timing and amount of any repurchases will depend on factors such as the stock price, trading volumes, market conditions, and regulatory requirements.

The stock repurchase program may be amended, suspended, or discontinued at any time by the Company.

COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is involved in lawsuits and claims that arise in the normal course of business, including the initiation and defense of proceedings related to contract and employment disputes.

In the Company's opinion, these claims individually and in the aggregate are not expected to have a material adverse effect on its financial condition, results of operations, or cash flows.

From time to time, the Company has been, and may again become involved in legal proceedings arising in the ordinary course of its business, including the initiation and defense of proceedings related to contract and employment disputes.

It is the Company's opinion that these claims individually and in the aggregate are not expected to have a material adverse effect on its financial condition, results of operations or cash flows.

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

1 unchanged sentence

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.

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.

The Company is in the process of attempting to collect the arbitration award from Total Grow.

Among other claims, Total Grow alleged that the Company was liable to Total Grow for failing to consummate the acquisition of Total Grow by the Company.

The Company asserted counterclaims for repayment of $ 1.5 million in principal loaned by the Company to Total Grow pursuant to the Note & Option, plus interest and certain costs.

In July 2023, the arbitrator rendered an arbitration award denying all of Total Grow's claims and defenses and awarding the Company more than $ 2.0 million in total, consisting of principal, interest, and certain costs.

Total Grow voluntarily filed for bankruptcy in October 2023.

In February 2024, the Company received $ 0.3 million from the bankruptcy proceedings, which it recorded as a recovery on the $ 1.5 million Note & Option.

The remainder of the Note & Option, which were fully reserved, were written off during the three months ended March 31, 2024.

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 September 30, 2023, the Company did not have any liabilities associated with indemnities.

As of March 31, 2024, 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.

3 unchanged sentences

No such losses have been recorded to date.

The Company has segmented its operations to reflect the manner in which management reviews and evaluates the results of its operations.

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 an individual segment based on that segment's profitability.

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

The hydroponic retail landscape is fragmented, which has allowed us to acquire “best of breed” hydroponic retail operations and leverage efficiencies of a centralized organization.

Some of our garden centers have multi-functions, with added capabilities that include warehousing, distribution, and fulfillment for the Company's online platforms and commercial customers.

The retail segment also includes the Company's 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 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, quantities, and sizes of products.

The Company offers commercial customers volume pricing, terms, and financing.

E-commerce – The Company's digital strategy is primarily focused on capturing the home, craft, and commercial grower online.

GrowGeneration.com offers thousands of hydroponic products, all curated by the Company's product team.

During the fourth quarter of 2023, the Company realigned its operating and reportable segments to correspond with changes to its operating model, management structure, and internal reporting and to better align with how the chief operating decision maker ("CODM") makes operating decisions, allocates resources, and assesses performance.

Accordingly, the Company identified two operating segments, each its own reportable segment, based on its major lines of business:

the Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business;

and the Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business.

Comparative prior period disclosures have been recast to conform to the current segment presentation.

GROWGENERATION CORP.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

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

GrowGeneration also sells its products through its distribution website, HRGdist.com, and online marketplaces such as Amazon and Walmart.

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

In March 2021, the Company purchased Charcoir, a line of premium coco pots, cubes and medium.

In December 2021, the Company purchased the assets of Mobile Media, Inc., a mobile shelving and storage solutions developer and manufacturer.

In February 2022, the Company purchased the assets of Horticultural Rep Group, Inc., a specialty marketing and sales organization specializing in horticultural products.

These products are integrated into the Company's retail, e-commerce, and direct sales activities, and it receive incremental revenue from their sale.

Disaggregated revenue by segment is presented in the following table:

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

2023 2022 2023 2022

Private label sales $ 6,797 $ 6,381 $ 20,598 $ 19,477

Non-private label sales 34,600 41,567 107,117 148,121

Total retail 41,397 47,948 127,715 167,598

Private label sales 553 253 1,214 953

Non-private label sales 2,207 2,820 8,541 11,083

Total e-commerce 2,760 3,073 9,755 12,036

Distribution and other

Private label sales 1,954 2,244 5,819 8,244

Non-private label sales 1,924 3,150 9,424 11,097

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

In addition to sales by operating segment, which represent the Company's principal lines of business, the CODM evaluates the Company's operations by regularly reviewing sales by major product line, including proprietary brands, non-proprietary brands, and commercial fixtures, and by product type, including consumable and durable products.

During the first quarter of 2024, the Company reviewed and reclassified certain item level designations as consumable or durable products.

Comparative prior period disclosures have been recast to conform to the current presentation.

Disaggregated revenue by segment is presented in the following tables:

Three Months Ended March 31,

Net sales 2024 2023

Cultivation and Gardening

Proprietary brand sales $ 9,726 $ 9,027

Non-proprietary brand sales 33,382 40,100

Total Cultivation and Gardening 43,108 49,127

Storage Solutions

Commercial fixture sales 4,780 7,700

Total distribution and other 11,521 19,829 38,960 44,076

Total net sales $ 55,678 $ 70,850 $ 176,430 $ 223,710

Total Storage Solutions 4,780 7,700

Total $ 47,888 $ 56,827

Three Months Ended March 31,

Net sales 2024 2023

Cultivation and Gardening

Consumables $ 30,181 $ 32,352

Durables 12,927 $ 16,775

Total Cultivation and Gardening 43,108 $ 49,127

Storage Solutions

Durables 4,780 $ 7,700

Total Storage Solutions 4,780 $ 7,700

Total $ 47,888 $ 56,827

GROWGENERATION CORP.

Notes To Unaudited Condensed Consolidated Financial Statements

September 30, 2023

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Selected information by segment is presented in the following tables:

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

2023 2022 2023 2022

Retail $ 41,397 $ 47,948 $ 127,715 $ 167,598

E-Commerce 2,760 3,073 9,755 12,036

Distribution and other 11,521 19,829 38,960 44,076

Three Months Ended March 31,

Cultivation and Gardening $ 43,108 $ 49,127

Storage Solutions 4,780 7,700

Total net sales 47,888 56,827

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

2023 2022 2023 2022

Retail $ 10,747 $ 10,354 $ 33,005 $ 41,448

E-Commerce 885 826 2,566 3,280

Distribution and other 4,556 7,154 14,043 15,973

Cultivation and Gardening 10,325 13,229

Storage Solutions 2,039 3,060

Total gross profit 12,364 16,289

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

2023 2022 2023 2022

Segment operating profit

Cultivation and Gardening 1,064 1,803

Storage Solutions 666 1,864

Total segment operating profit 1,730 3,667

Corporate expenses

Selling, general, and administrative 7,908 6,838

Estimated credit losses ( 488 ) 317

Depreciation and amortization 3,742 3,932

Income (loss) from operations $ ( 9,432 ) $ ( 7,420 )

Retail $ ( 7,584 ) $ ( 23,653 ) $ ( 21,206 ) $ ( 137,939 )

E-Commerce ( 754 ) ( 2,830 ) ( 1,682 ) ( 11,869 )

Distribution and other 36 18,389 256 ( 2,308 )

Total income (loss) from operations $ ( 8,302 ) $ ( 8,094 ) $ ( 22,632 ) $ ( 152,116 )

The Company does not evaluate segments by assets as it is not practical and does not inform any of its decision making processes.

The CODM neither reviews nor requests this information.

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