grwg-20230630

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended: June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission File Number: 333-207889

GROWGENERATION CORP.

(Exact name of registrant as specified in its charter)


Colorado						46-5008129
(State of other jurisdiction of incorporation)						(IRS Employer ID No.)

5619 DTC Parkway, Suite 900

Greenwood Village, Colorado 80111

(Address of principal executive offices)

(800) 935-8420

(Issuer’s Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

GRWG

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2023 there were 61,231,786 shares of the registrant’s common stock issued and outstanding.

TABLE OF CONTENTS


		Page No.

	PART I FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Stockholders' Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
	Signatures	35

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GROWGENERATION CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except shares and per share amounts)


	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	29,587	$	40,054
Marketable securities	40,986		31,852
Accounts receivable, net of allowance for credit losses of $0.8 million and $0.7 million at June 30, 2023 and December 31, 2022	7,318		8,336
Notes receivable, current, net of allowance for credit losses of $1.7 million and $1.3 million at June 30, 2023 and December 31, 2022	—		1,214
Inventory	76,689		77,091
Prepaid income taxes	477		5,679
Prepaids and other current assets	7,864		6,455
Total current assets	162,921		170,681

Property and equipment, net	30,682		28,669
Operating leases right-of-use assets	42,692		46,433
Intangible assets, net	26,707		30,878
Goodwill	16,808		15,978
Other assets	881		803
TOTAL ASSETS	$	280,691	$	293,442

LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	17,905	$	15,728
Accrued liabilities	2,575		1,535
Payroll and payroll tax liabilities	2,828		4,671
Customer deposits	3,746		4,338
Sales tax payable	1,473		1,341
Current maturities of lease liability	8,152		8,131
Current portion of long-term debt	17		50
Total current liabilities	36,696		35,794
Commitments and contingencies (Note 12)
Operating lease liability, net of current maturities	37,191		40,659
Other long-term liabilities	316		593
Total liabilities	74,203		77,046

Stockholders’ equity:
Common stock; $0.001 par value; 100,000,000 shares authorized, 61,229,051 and 61,010,155 shares issued and outstanding as of June 30, 2023 and December 31, 2022	61		61
Additional paid-in capital	371,863		369,938
Retained earnings (deficit)	(165,436)		(153,603)
Total stockholders’ equity	206,488		216,396
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	280,691	$	293,442

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

GROWGENERATION CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except shares and per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Net sales	$	63,925	$	71,093	$	120,752	$	152,860
Cost of sales (exclusive of depreciation and amortization shown below)	46,788		50,866		87,326		110,493
Gross profit	17,137		20,227		33,426		42,367

Operating expenses:
Store operations and other operational expenses	12,269		13,767		25,235		28,299
Selling, general, and administrative	7,503		9,759		14,341		19,368
Bad debt expense	107		888		424		1,602
Depreciation and amortization	3,824		4,783		7,756		9,289
Impairment loss	—		127,831		—		127,831

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

Income (Loss) from operations	(6,566)		(136,801)		(14,330)		(144,022)

Other income (expense):
Other income (expense)	1,391		104		2,595		513
Interest income	—		45		—		47
Interest expense	(431)		(10)		(5)		(13)
Total non-operating income (expense), net	960		139		2,590		547

Net income (loss) before taxes	(5,606)		(136,662)		(11,740)		(143,475)

Benefit (provision) for income taxes	(93)		283		(93)		1,919

Net income (loss)	$	(5,699)	$	(136,379)	$	(11,833)	$	(141,556)

Net income (loss) per share, basic	$	(0.09)	$	(2.24)	$	(0.19)	$	(2.33)
Net income (loss) per share, diluted	$	(0.09)	$	(2.24)	$	(0.19)	$	(2.33)

Weighted average shares outstanding, basic	61,077		60,756		61,053		60,742
Weighted average shares outstanding, diluted	61,077		60,756		61,053		60,742

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

GROWGENERATION CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)

(in thousands, except shares and per share amounts)


	Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Total Stockholders’ Equity
	Shares	Amount
Balances, March 31, 2023	61,035	$	61	$	370,379	$	(159,737)	$	210,703
Common stock issued for share based compensation	159	—		—		—		—
Common stock withheld for employee payroll taxes	—	—		(105)		—		(105)
Share based compensation	—	—		816		—		816
Noncash repurchase of liability awards	—	$	—	$	653	$	—	$	653
Liability redemption associated with business acquisition	35	$	—	$	120	$	—	$	120
Net income (loss)	—	—		—		(5,699)		(5,699)
Balances, June 30, 2023	61,229	$	61	$	371,863	$	(165,436)	$	206,488


	Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Total Stockholders’ Equity
	Shares	Amount
Balances, March 31, 2022	60,728	$	61	$	367,064	$	4,967	$	372,092
Common stock issued for share-based compensation	28	—		—		—		—
Common stock withheld for employee payroll taxes	—	—		(93)		—		(93)
Share based compensation	—	—		1,106		—		1,106
Common stock issued upon cashless exercise of options	12	—		—		—		—
Common stock issued upon cashless exercise of warrants	14	—		—		—		—
Net income (loss)	—	—		—		(136,379)		(136,379)
Balances, June 30, 2022	60,782	$	61	$	368,077	$	(131,412)	$	236,726


	Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Total Stockholders’ Equity
	Shares	Amount
Balances, December 31, 2022	61,010	61		369,938		(153,603)		$	216,396
Common stock issued for share based compensation	184	—		—		—		$	—
Common stock withheld for employee payroll taxes	—	—		(175)		—		$	(175)
Share based compensation	—	—		1,327		—		$	1,327
Noncash repurchase of liabilty awards	—	—		653		—		$	653
Liability redemption associated with business acquisition	35	—		120		—		$	120
Net income (loss)	—	$	—	$	—	$	(11,833)	$	(11,833)
Balances, June 30, 2023	61,229	$	61	$	371,863	$	(165,436)	$	206,488


	Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Total Stockholders’ Equity
	Shares	Amount
Balances, December 31, 2021	59,929	$	60	$	361,087	$	10,144	$	371,291
Common stock issued in connection with business combination	650	1		5,749		—		5,750
Common stock issued for share-based compensation	177	—		—		—		—
Common stock withheld for employee payroll taxes	—	—		(1,448)		—		(1,448)
Share based compensation	—	—		2,689		—		2,689
Common stock issued upon cashless exercise of options	12	—		—		—		—
Common stock issued upon cashless exercise of warrants	14	—		—		—		—
Net income (loss)	—	—		—		(141,556)		(141,556)
Balances, June 30, 2022	60,782	$	61	$	368,077	$	(131,412)	$	236,726

SEC Form 10-Q filed by GrowGeneration Corp.