grwg-20220331

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: March 31, 2022


☐			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 small business issuer 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 May 16, 2022 there were 60,744,195 shares of the registrant’s common stock issued and outstanding.

TABLE OF CONTENTS


		Page No.

	PART I FINANCIAL INFORMATION

Item 1.	Unaudited Interim 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	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
	Signatures	28

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GROWGENERATION CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except shares and per share amounts)


	March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	47,273	$	41,372
Marketable securities	19,035		39,793
Accounts receivable, net of allowance for doubtful accounts of $0.6 million and $0.6 million at March 31, 2022 and December 31, 2021	7,386		5,741
Notes receivable, current, net of allowance for doubtful accounts of $0.9 million and $0.5 million at March 31, 2022 and December 31, 2021	1,967		2,440
Inventory	105,941		105,571
Prepaid income taxes	5,856		5,856
Prepaids and other current assets	7,035		16,116
Total current assets	194,493		216,889

Property and equipment, net	26,928		24,116
Operating leases right-of-use assets	45,839		43,730
Intangible assets, net	48,786		48,402
Goodwill	132,500		125,401
Other assets	807		800
TOTAL ASSETS	$	449,353	$	459,338

LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,221	$	17,033
Accrued liabilities	1,143		2,044
Payroll and payroll tax liabilities	4,302		7,440
Customer deposits	7,190		11,686
Sales tax payable	1,928		1,923
Current maturities of lease liability	7,740		6,858
Current portion of long-term debt	94		92
Total current liabilities	36,618		47,076
Commitments and ontingencies (Note 15)
Deferred tax liability	723		2,359
Operating lease liability, net of current maturities	39,879		38,546
Long-term debt, net of current portion	41		66
Total liabilities	77,261		88,047

Stockholders’ equity:
Common stock; $0.001 par value; 100,000,000 shares authorized, 60,727,888 and 59,928,564 shares issued and outstanding as of March 31, 2022 and December 31, 2021	61		60
Additional paid-in capital	367,064		361,087
Retained earnings	4,967		10,144
Total stockholders’ equity	372,092		371,291
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	449,353	$	459,338

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

GROWGENERATION CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2022		2021

Net sales	$	81,767	$	90,022
Cost of sales	59,627		64,645
Gross profit	22,140		25,377

Operating expenses:
Store operations and other operational expenses	14,532		8,182
Selling, general, and administrative	10,323		7,405
Depreciation and amortization	4,506		2,054
Total operating expenses	29,361		17,641

Income (Loss) from operations	(7,221)		7,736

Other income (expense):
Other income (expense)	409		(38)
Interest income	2		4
Interest expense	(3)		(2)
Total non-operating income (expense), net	408		(36)

Net income (loss) before taxes	(6,813)		7,700

Benefit (provision) for income taxes	1,636		(1,553)

Net income (loss)	$	(5,177)	$	6,147

Net income (loss) per share, basic	$	(0.09)	$	0.11
Net income (loss) per share, diluted	$	(0.09)	$	0.10

Weighted average shares outstanding, basic	60,126		58,394
Weighted average shares outstanding, diluted	60,126		60,317

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

GROWGENERATION CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(in thousands)

(Unaudited)


	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	149	—		—				—
Common stock withheld for employee payroll taxes				(1,355)				(1,355)
Share based compensation				1,583				1,583
Net income (loss)						(5,177)		(5,177)
Balances, March 31, 2022	60,728	$	61	$	367,064	$	4,967	$	372,092


	Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Total Stockholders’ Equity
	Shares	Amount
Balances, December 31, 2020	57,151	$	57	$	319,582	$	(2,642)	$	316,997
Common stock issued upon warrant exercise	40	—		111		—		111
Common stock issued upon cashless warrant exercise	535	1		(1)		—		—
Common stock issued upon exercise of options	1	—		2		—		2
Common stock issued upon cashless exercise of options	5	—		—		—		—
Common stock issued in connection with business combinations	548	—		29,249		—		29,249
Common stock issued for assets	300	—		—		—		—
Common stock issued for services	(90)	—		—		—		—
Common stock issued for share based compensation	(96)	—		(3,954)		—		(3,954)
Share based compensation	—	—		1,187		—		1,187
Net income (loss)	—	—		—		6,147		6,147
Balances, March 31, 2021	58,394	$	58	$	346,176	$	3,505	$	349,739

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

GROWGENERATION CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	(5,177)	$	6,147
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,506		2,054
Stock-based compensation expense	1,583		1,327
Bad debt expense, net of recoveries	(471)		(184)
Gain on asset disposition	20		—
Deferred taxes	(1,636)		384
Changes in operating assets and liabilities (net of the effect of acquisitions):
Accounts and notes receivable	(701)		(1,165)
Inventory	3,761		(16,716)
Prepaid expenses and other assets	9,740		(8,175)
Accounts payable and accrued liabilities	(5,082)		10,613
Operating leases	106		(87)
Payroll and payroll tax liabilities	(3,138)		261
Income taxes payable	—		455
Customer deposits	(5,738)		4,615
Sales tax payable	5		1,213
Net cash provided by (used in) operating activities	(2,222)		742
Cash flows from investing activities:
Acquisitions, net of cash acquired	(6,806)		(39,307)
Purchase of marketable securities	—		(41,077)
Maturities from marketable securities

SEC Form 10-Q filed by GrowGeneration Corp.