What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-08-08 · 184 added, 112 removed, 436 unchanged (40% of the section changed)

4 unchanged sentences

(Unaudited, in thousands, except shares)

September 30,

2024 December 31,

2 unchanged sentences

Marketable securities 27,787 35,212

Accounts receivable, net of allowance for credit losses of $ 1,361 and $ 1,363 at June 30, 2024 and December 31, 2023, respectively

Notes receivable, current, net of allowance for credit losses of $ 232 and $ 1,732 at June 30, 2024 and December 31, 2023, respectively

Accounts receivable, net of allowance for credit losses of $ 1,800 and $ 1,363 at September 30, 2024 and December 31, 2023, respectively

Notes receivable, current, net of allowance for credit losses of $ — and $ 1,732 at September 30, 2024 and December 31, 2023, respectively

Inventory 48,025 64,905

25 unchanged sentences

$ 0.001 par value;

100,000,000 shares authorized, 60,888,432 and 61,483,762 shares issued as of June 30, 2024 and December 31, 2023, respectively

Treasury stock, 938,949 shares and zero shares at cost as of June 30, 2024 and December 31, 2023, respectively

100,000,000 shares authorized, 59,242,200 and 61,483,762 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 375,407 373,433

7 unchanged sentences

(Unaudited, in thousands, except per share amounts)

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

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

2024 2023 2024 2023

7 unchanged sentences

Depreciation and amortization 4,972 4,721 12,329 12,477

Impairment loss 220 — 220 —

Total operating expenses 22,901 24,218 65,632 71,369

6 unchanged sentences

Net loss before taxes ( 11,478 ) ( 7,349 ) ( 26,118 ) ( 19,089 )

Provision for income taxes ( 95 ) ( 93 ) ( 93 ) ( 93 )

Benefit (provision) for income taxes 43 — ( 50 ) ( 93 )

Net loss $ ( 11,435 ) $ ( 7,349 ) $ ( 26,168 ) $ ( 19,182 )

25 unchanged sentences

Balances, June 30, 2024 60,888 $ 61 ( 939 ) $ ( 2,316 ) $ 374,737 $ ( 216,705 ) $ 155,777

Common stock issued for share based compensation 71 — — — — — —

Common stock withheld for employee payroll taxes — — — — ( 2 ) — ( 2 )

Share-based compensation — — — — 672 — 672

Repurchase of common stock — — ( 778 ) ( 1,847 ) — — ( 1,847 )

Cancellation of common stock ( 1,717 ) ( 2 ) 1,717 4,163 — ( 4,161 ) —

Net loss — — — — — ( 11,435 ) ( 11,435 )

Balances, September 30, 2024 59,242 $ 59 — $ — $ 375,407 $ ( 232,301 ) $ 143,165

Common Stock Treasury Stock Additional

15 unchanged sentences

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 loss — — — — — ( 7,349 ) ( 7,349 )

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

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

3 unchanged sentences

(Unaudited, in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

4 unchanged sentences

Estimated credit (recoveries) losses ( 210 ) 681

Loss on disposal of fixed assets 37 21

Loss on asset disposition 440 85

Change in value of marketable securities ( 1,041 ) ( 981 )

Proceeds from note receivables for sale of inventory 78 —

Impairment loss on operating lease right-of-use assets 220 —

Changes in operating assets and liabilities:

28 unchanged sentences

Cancellation of common stock $ 6,036 $ —

Purchase of property and equipment accrued in accounts payable $ 11 $ 355

Non-cash repurchase of liability awards $ — $ 653

Liability redemption associated with business acquisition $ — $ 120

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

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

September 30, 2024

GrowGeneration Corp.

4 unchanged sentences

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

As of June 30, 2024, GrowGeneration has 43 retail locations across 18 states in the U.S.

As of September 30, 2024, GrowGeneration has 31 retail locations across 12 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.

28 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

September 30, 2024

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.

The Company is currently evaluating the impact of this standard and will adopt this guidance in the fourth quarter of 2024 to provide additional disclosures as required.

In December 2023, the FASB issued ASU No.

17 unchanged sentences

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, were $ 0.3 million and $ 0.7 million for the three and six months ended June 30, 2024, respectively, and immaterial for the three and six months ended June 30, 2023.

Changes in fair value of marketable securities, principally derived from accretion of discounts, were $ 0.3 million and $ 1.0 million for the three and nine months ended September 30, 2024, respectively, and were $ 0.5 million and $ 1.0 million for the three and nine months ended September 30, 2023.

Changes in fair value of marketable securities are included in Interest income on the Condensed Consolidated Statements of Operations.

Level June 30,

Level September 30,

2024 December 31,

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

September 30, 2024

Contract Assets and Liabilities

3 unchanged sentences

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

Closing balance, June 30, 2024

Closing balance, September 30, 2024

Increase (decrease) $ 1,429 $ ( 2,728 )

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

Closing balance, June 30, 2023

Decrease $ ( 1,018 ) $ ( 592 )

Of the total amount of customer deposit liability as of January 1, 2024, $ 4.0 million was reported as revenue during the six months ended June 30, 2024.

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.

Notes receivable at June 30, 2024 and December 31, 2023 were as follows:

Closing balance, September 30, 2023

Increase $ 15 $ 588

Of the total amount of customer deposit liability as of January 1, 2024, $ 4.4 million was reported as revenue during the nine months ended September 30, 2024.

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.

Notes receivable at September 30, 2024 and December 31, 2023 were as follows:

September 30,

2024 December 31,

3 unchanged sentences

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

September 30,

2024 December 31,

2 unchanged sentences

Notes receivable, net $ — $ —

During the six months ended June 30, 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.

During the nine months ended September 30, 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 13, Commitment and Contingencies, for additional information regarding the settlement.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

September 30, 2024

PROPERTY AND EQUIPMENT

Property and equipment at June 30, 2024 and December 31, 2023 consisted of the following:

Property and equipment at September 30, 2024 and December 31, 2023 consisted of the following:

September 30,

2024 December 31,

8 unchanged sentences

Property and equipment, net $ 21,119 $ 27,052

Depreciation and amortization expense related to property and equipment was $ 1.9 million and $ 4.0 million for the three and six months ended June 30, 2024, respectively.

Depreciation and amortization expense related to property and equipment was $ 1.6 million and $ 3.3 million for the three and six months ended June 30, 2023, respectively.

Depreciation and amortization expense related to property and equipment was $ 3.3 million and $ 7.3 million for the three and nine months ended September 30, 2024, respectively.

Depreciation and amortization expense related to property and equipment was $ 2.5 million and $ 5.8 million for the three and nine months ended September 30, 2023, respectively.

In conjunction with the Company's restructuring activities as discussed in Note 16, Restructuring , the Company reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in a $ 1.5 million increase to depreciation and amortization expense related to property and equipment in the three and nine months ended September 30, 2024.

Refer to Note 16, Restructuring , for additional information on the restructuring activities.

GOODWILL AND INTANGIBLE ASSETS

The carrying value of goodwill at June 30, 2024 and December 31, 2023 by segment was as follows:

The carrying value of goodwill by segment was as follows:

Cultivation and Gardening Storage Solutions Total

Balance as of December 31, 2023 $ 5,920 $ 1,605 $ 7,525

Balance as of June 30, 2024 $ 5,920 $ 1,605 $ 7,525

Accumulated impairment for goodwill was $ 125.9 million as of June 30, 2024 and December 31, 2023.

The changes in intangible assets by segment for the six months ended June 30, 2024 and year ended December 31, 2023 were as follows:

Balance as of September 30, 2024 $ 5,920 $ 1,605 $ 7,525

Accumulated impairment for goodwill was $ 125.9 million as of September 30, 2024 and December 31, 2023.

The changes in intangible assets by segment for the nine months ended September 30, 2024 were as follows:

Cultivation and Gardening Storage Solutions Total

1 unchanged sentence

Amortization ( 4,442 ) ( 586 ) ( 5,028 )

Balance as of June 30, 2024 $ 10,539 $ 2,288 $ 12,827

Balance as of September 30, 2024 $ 9,059 $ 2,093 $ 11,152

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

September 30, 2024

Intangible assets on the Condensed Consolidated Balance Sheets consisted of the following:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Amount Accumulated

8 unchanged sentences

Total $ 43,459 $ ( 32,307 ) $ 11,152 $ 43,459 $ ( 27,279 ) $ 16,180

Amortization expense was $ 1.7 million and $ 3.4 million for the three and six months ended June 30, 2024, respectively .

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

Fu ture amortization expense as of June 30, 2024 was as follows:

Amortization expense was $ 1.7 million and $ 5.0 million for the three and nine months ended September 30, 2024, respectively.

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

Future amortization expense as of September 30, 2024 was as follows:

2024 (remainder of the year) $ 1,677

1 unchanged sentence

Total $ 11,152

For the six months ended June 30, 2024, the effective tax rate was 0.6 %, compared to 0.8 % for the six months ended June 30, 2023.

The effective tax rate for each of the six months ended June 30, 2024 and 2023 was lower than the U.S.

For the nine months ended September 30, 2024, the effective tax rate was 0.2 %, compared to 0.4 % for the nine months ended September 30, 2023.

The effective tax rate for each of the nine months ended September 30, 2024 and 2023 was 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 June 30, 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.

As of September 30, 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:

September 30,

2024 December 31,

3 unchanged sentences

Total lease liability $ 39,143 $ 42,469

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

Weighted average remaining lease term 5.8 years 6.3 years

Weighted average discount rate 6.2 % 5.8 %

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

September 30, 2024

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

September 30,

Weighted average remaining lease term 5.7 years 6.1 years

Weighted average discount rate 6.2 % 6.0 %

Lease expense is recorded within the Company's Condensed Consolidated Statements of Operations based upon the nature of the operating lease right-of-use assets.

1 unchanged sentence

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

The Company recorded sublease income of $ 0.3 million and $ 0.6 million for the three and six mo nths ended June 30, 2024 , respectively, and, $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2023, respectively, within Store operations and other operational expenses related to the sublease of a closed retail location .

The components of lease expense were as follows:

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

The Company's subleases generally do not relieve it of its primary obligations under the corresponding head lease.

As a result, the Company accounts for the head lease based on the original assessment at inception.

Additionally, the Company determines if the sublease arrangement is either a sales-type, direct financing, or operating lease at inception.

The Company's subleases are all operating leases related to the sublease of a closed retail location.

The Company recognizes sublease income within Store operations and other operational expenses.

If the total remaining lease cost on the head lease for the term of the sublease is greater than the anticipated sublease income, the right-of-use asset is assessed for impairment.

If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value.

In conjunction with the Company's restructuring activities as discussed in Note 16, Restructuring , the Company assessed and impaired the right-of-use assets of certain closed retail locations, which resulted in an impairment loss of $ 0.2 million in the three and nine months ended September 30, 2024.

Refer to Note 16, Restructuring , for additional information on the restructuring activities.

The components of lease costs were as follows:

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

2024 2023 2024 2023

2 unchanged sentences

Short-term lease costs 102 98 295 241

Sublease income ( 276 ) ( 272 ) ( 827 ) ( 877 )

Total operating lease costs $ 2,908 $ 2,740 $ 8,659 $ 9,264

Future maturities of the Company's operating lease liabilities as of June 30, 2024 were as follows :

Future maturities of the Company's operating lease liabilities and receipts from subleases as of September 30, 2024 were as follows:

Lease Payments Sublease Receipts

2024 (remainder of the year) $ 2,458 $ ( 204 )

2025 9,525 ( 1,187 )

2026 8,315 ( 1,222 )

2027 6,491 ( 1,257 )

2028 6,022 ( 1,294 )

Thereafter 13,595 ( 2,801 )

Total lease payments 49,467

Total lease payments (receipts) 46,406 ( 7,965 )

imputed interest ( 7,263 )

Operating lease liability as of June 30, 2024

Supplemental and other information related to leases was as follows:

Six Months Ended June 30,

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

Operating cash flow from operating leases $ 5,097 $ 5,583

Operating lease liability as of September 30, 2024

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

September 30, 2024

Supplemental and other information related to leases was as follows:

Nine Months Ended September 30,

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

Operating cash flow from operating leases $ 7,574 $ 8,321

EARNINGS PER SHARE

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive loss per share computation for the three months ended June 30, 2024 and 2023:

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

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive loss per share computation for the three months ended September 30, 2024 and 2023:

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

2024 2023 2024 2023

5 unchanged sentences

Dilutive loss per share $ ( 0.19 ) $ ( 0.12 ) $ ( 0.43 ) $ ( 0.31 )

Diluted loss per share calculations for each of the three and six months ended June 30, 2024 excluded 0.9 million of non-vested restricted stock units that would have been anti-dilutive and 0.5 million shares of common stock issuable upon exercise of stock options.

Diluted loss per share calculations for each of the three and six months ended June 30, 2023 excluded 1.1 million and 0.9 million shares of non-vested restricted stock units, respectively, 0.6 million shares of common stock issuable upon exercise of stock options, and 33 thousand shares of common stock issuable upon exercise of the stock purchase warrants that would have been anti-dilutive.

Diluted loss per share calculations for the three and nine months ended September 30, 2024 excluded 0.7 million and 0.8 million of non-vested restricted stock units, respectively.

In addition, for each of the three and nine months ended September 30, 2024, 0.5 million shares of common stock issuable upon exercise of stock options were excluded that would have been anti-dilutive.

Diluted loss per share calculations for the three and nine months ended September 30, 2023 excluded 1.1 million and 1.0 million shares of non-vested restricted stock units, respectively.

In addition, for each of the three and nine months ended September 30, 2023, 0.6 million shares of common stock issuable upon exercise of stock options, and 33 thousand shares of common stock issuable upon exercise of the stock purchase warrants were excluded that would have been anti-dilutive.

SHARE-BASED PAYMENTS

2 unchanged sentences

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 $ 0.7 million and $ 1.4 million in the three and six months ended June 30, 2024, respectively, and $ 0.9 million and $ 1.5 million for the three and six months ended June 30, 2023, respectively.

The Company recorded share-based compensation expense of $ 0.7 million and $ 2.1 million in the three and nine months ended September 30, 2024, respectively, and $ 0.9 million and $ 2.5 million for the three and nine months ended September 30, 2023, respectively.

Restricted Stock Units

2 unchanged sentences

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

Restricted stock unit activity for the six months ended June 30, 2024 is presented in the following table:

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

Restricted stock unit activity for the nine months ended September 30, 2024 is presented in the following table:

Units Weighted Average Grant Date Fair Value

4 unchanged sentences

Forfeited ( 108,250 ) $ 4.05

Nonvested as of June 30, 2024

Nonvested as of September 30, 2024

1,139,542 $ 3.53

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

As of June 30, 2024, the Company had approximately $ 2.6 million of unrecognized share-based compensation related to restricted stock units, which are expected to be recognized over a weighted average period of approximately 1.8 years.

As of September 30, 2024, the Company had approximately $ 2.7 million of unrecognized share-based compensation related to restricted stock units, which are expected to be recognized over a weighted average period of approximately 1.9 years.

Stock Options

Stock option activity for the six months ended June 30, 2024 is presented in the following table:

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

Stock option activity for the nine months ended September 30, 2024 is presented in the following table:

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

Outstanding as of December 31, 2023

3 unchanged sentences

Forfeited or expired ( 129,832 ) 3.65 — 2.20

Outstanding as of June 30, 2024

Outstanding as of September 30, 2024

448,166 $ 4.11 0.25 $ 2.26

Vested and exercisable as of June 30, 2024

Vested and exercisable as of September 30, 2024

448,166 $ 4.11 0.25 $ 2.26

5 unchanged sentences

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

In the six months ended June 30, 2023, the liability of $ 0.7 million was relieved to additional paid-in capital and no awards were outstanding as of June 30, 2024 and December 31, 2023.

In the nine months ended September 30, 2023, the liability of $ 0.7 million was relieved to additional paid-in capital and no awards were outstanding as of September 30, 2024 and December 31, 2023.

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 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.

During each of the three and six months ended June 30, 2024, the Company repurchased 1.7 million shares of common stock at an average price of $ 2.39 per share, exclusive of incremental direct costs.

As of June 30, 2024, approximately $ 1.8 million remained available under the stock repurchase program.

The Company recognizes the common stock repurchased as treasury stock at the amount paid to repurchase its shares, including the incremental direct costs to repurchase the common stock, as a reduction to stockholders' equity on the Condensed Consolidated Balance Sheets.

The Company retired 0.8 million shares of treasury stock under the repurchase program in the three and six months ended June 30, 2024.

The shares were returned to the status of authorized but unissued shares.

The retirement of treasury stock was recognized as a deduction from common stock for the shares' par value and any excess cost over par value was recognized as a deduction from retained earnings.

Treasury stock is retired on a first in, first out basis.

The program began on April 1, 2024.

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

The program did not obligate the Company to acquire any specific number of shares or to acquire any shares over any specific period of time.

The timing and amount of any repurchases was dependent upon factors such as the stock price, trading volumes, market conditions, and regulatory requirements.

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

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

September 30, 2024

During the three and nine months ended September 30, 2024, respectively, the Company repurchased 0.8 million and 2.5 million shares of common stock at an average price of $ 2.36 and $ 2.38 per share exclusive of incremental direct costs.

As of September 30, 2024, the Company completed all purchases available under the stock repurchase program.

The Company recognized the common stock repurchased as treasury stock at the amount paid to repurchase its shares, including the incremental direct costs to repurchase the common stock, as a reduction to stockholders' equity on the Condensed Consolidated Balance Sheets.

The Company retired 1.7 million and 2.5 million shares of treasury stock under the share repurchase program in the three and nine months ended September 30, 2024, respectively.

The shares were returned to the status of authorized but unissued shares.

The retirement of treasury stock is recognized as a deduction from common stock for the shares' par value and any excess cost over par value is recognized as a deduction from retained earnings.

Treasury stock is retired on a first in, first out basis.

The Company's acquisition strategy has been 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.

Acquisitions during the three and six months ended June 30, 2024

The Company had no acquisitions during the three and six months ended June 30, 2024.

Acquisitions during the three and six months ended June 30, 2023

Acquisitions during the nine months ended September 30, 2024

The Company had no acquisitions during the nine months ended September 30, 2024.

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 ("SGS"), a two -store chain of indoor/outdoor garden centers in Alaska.

2 unchanged sentences

SGS was included in the Company's Cultivation and Gardening segment.

Additionally, the Company made other, individually immaterial acquisitions during the three and six months ended June 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.

1 unchanged sentence

These acquisitions were included in the Company's Cultivation and Gardening segment.

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

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

SGS Other Total

12 unchanged sentences

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

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

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.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

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

6 unchanged sentences

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 six months ended June 30, 2024.

The remainder of the Note & Option, which were fully reserved, were written off during the nine months ended September 30, 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 June 30, 2024, the Company did not have any liabilities associated with indemnities.

As of September 30, 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.

6 unchanged sentences

The firm provides certain legal services.

Amounts paid to that firm in total were approximately $ 0.1 million and $ 0.1 million for the three and six months ended June 30, 2024, respectively, and were immaterial for the three and six months ended June 30, 2023.

As of June 30, 2024 and December 31, 2023, there was an immaterial amount outstanding due to the firm.

Amounts paid to that firm in total were $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2024, respectively, and were immaterial for the three and nine months ended September 30, 2023.

As of September 30, 2024 and December 31, 2023, there was an immaterial amount outstanding due to the firm.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

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.

6 unchanged sentences

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

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Disaggregated revenue by segment is presented in the following tables:

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

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

Net sales 2024 2023 2024 2023

7 unchanged sentences

Total $ 50,006 $ 55,678 $ 151,430 $ 176,430

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

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

Net sales 2024 2023 2024 2023

7 unchanged sentences

Total $ 50,006 $ 55,678 $ 151,430 $ 176,430

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

Selected information by segment is presented in the following tables:

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

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

2024 2023 2024 2023

5 unchanged sentences

Total gross profit 10,810 16,188 37,595 49,614

Segment operating profit

Segment operating (loss) profit

Cultivation and Gardening ( 1,548 ) 2,306 1,525 6,574

5 unchanged sentences

Depreciation and amortization 4,972 4,721 12,329 12,477

Impairment loss 220 — 220 —

Loss from operations $ ( 12,091 ) $ ( 8,030 ) $ ( 28,037 ) $ ( 21,755 )

1 unchanged sentence

The CODM neither reviews nor requests this information.

RESTRUCTURING

On July 22, 2024, the Company announced a strategic restructuring plan focused on long-term profitability and advancing growth initiatives in key areas of its Gardening and Cultivation segment such as its proprietary brands, commercial sales, and e-commerce business.

The restructuring plan primarily includes reductions in cost structure by closing and consolidating twelve redundant or underperforming retail locations, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.

The Company's restructuring and restructuring related charges consists of inventory disposal costs, retail location closure costs including related contract termination costs and fixed asset disposals, employee termination benefits, asset impairments including the impairment of operating lease right-of-use assets, and other associated costs.

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

SUBSEQUENT EVENTS

These restructuring plans primarily include reductions in cost structure by closing and consolidating twelve redundant or underperforming retail locations, in addition to the seven retail locations closed in the first half of 2024, workforce reductions, and other operational improvements.

The Company expects that the restructuring activities will be substantially completed by the end of fiscal year 2024.

The Company is currently unable to make a good faith determination of an estimate or range of estimates of the total expected restructuring and restructuring related costs.

September 30, 2024

Since the restructuring activities were announced in July 2024, the Company incurred aggregate restructuring and restructuring-related costs of $ 2.1 million, presented on the Condensed Consolidated Statements of Operations in the three and nine months ended September 30, 2024 as follows:

Restructuring

Cultivation and Gardening segment:

Cost of sales (1)

Gross profit ( 1,039 )

Store operations and other operational expenses (2)

Segment operating loss ( 1,697 )

Corporate expenses:

Selling, general, and administrative (3)

Impairment loss (4)

Other expense (5)

Total restructuring and restructuring related charges $ ( 2,055 )

(1) Includes inventory disposal costs

(2) Costs consist of retail location closure costs and employee termination benefits

(3) Includes employee termination benefits and other associated costs

(4) Consists of asset impairments for operating lease right-of-use assets

(5) Includes non-operating losses related to retail location closures

In conjunction with the Company's restructuring activities related to operational and administrative improvements, the Company reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in an $ 1.5 million increase to depreciation and amortization expense related to property and equipment in the three and nine months ended September 30, 2024.

Additionally, certain facilities costs related to closed retail locations for which the Company is pursuing sublease arrangements will be paid over the remaining terms which extend through 2032.

The liabilities associated with restructuring costs are included in Accrued liabilities and Payroll and payroll tax liabilities on the Condensed Consolidated Balance Sheets.

Activities related to liabilities incurred under the restructuring plan are as follows:

Retail Location Closures Termination Benefits Other Associated Costs Total

Balance as of January 1, 2024 $ — $ — $ — $ —

Additions 556 211 29 796

Payments and other adjustments ( 404 ) ( 73 ) ( 29 ) ( 506 )

Balance as of September 30, 2024 $ 152 $ 138 $ — $ 290

Overall, the Company expects to incur a total of approximately $ 2.4 million in restructuring and restructuring-related costs, including the $ 2.1 million previously incurred.

The remainder of the expected charges primarily relate to corporate operational and administrative contract terminations and other associated costs.

The Company expects that these restructuring activities will be substantially completed by the end of the first quarter of 2025.

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