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, ~~2022~~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 ~~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 ~~August 4, 2022~~July 31, 2023 there were ~~60,794,463~~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 ~~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	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2623
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3329
Item 4.	Controls and Procedures	3329

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	3533
Item 1A.	Risk Factors	3533
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3533
Item 3.	Defaults Upon Senior Securities	3533
Item 4.	Mine Safety Disclosures	3533
Item 5.	Other Information	3533
Item 6.	Exhibits	3634
	Signatures	3735

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, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	55,594	$	41,372	Cash and cash equivalents	$	29,587	$	40,054
Marketable securities	Marketable securities	10,000		39,793		Marketable securities	40,986		31,852
Accounts receivable, net of allowance for doubtful accounts of $0.9 million and $0.6 million at June 30, 2022 and December 31, 2021		8,313		5,741
Notes receivable, current, net of allowance for doubtful accounts of $1.3 million and $0.5 million at June 30, 2022 and December 31, 2021		1,372		2,440
Accounts receivable, net of allowance for credit losses of $0.8 million and $0.7 million at June 30, 2023 and December 31, 2022						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						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	Inventory	99,086		105,571		Inventory	76,689		77,091
Prepaid income taxes	Prepaid income taxes	5,872		5,856		Prepaid income taxes	477		5,679
Prepaids and other current assets	Prepaids and other current assets	9,209		16,116		Prepaids and other current assets	7,864		6,455
Total current assets	Total current assets	189,446		216,889		Total current assets	162,921		170,681

Property and equipment, net	Property and equipment, net	29,338		24,116		Property and equipment, net	30,682		28,669
Operating leases right-of-use assets	Operating leases right-of-use assets	47,367		43,730		Operating leases right-of-use assets	42,692		46,433
Intangible assets, net	Intangible assets, net	34,798		48,402		Intangible assets, net	26,707		30,878
Goodwill	Goodwill	15,843		125,401		Goodwill	16,808		15,978
Other assets	Other assets	875		800		Other assets	881		803
TOTAL ASSETS	TOTAL ASSETS	$	317,667	$	459,338	TOTAL ASSETS	$	280,691	$	293,442

LIABILITIES & STOCKHOLDERS’ EQUITY	LIABILITIES & STOCKHOLDERS’ EQUITY					LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	17,373	$	17,033	Accounts payable	$	17,905	$	15,728
Accrued liabilities	Accrued liabilities	1,268		2,044		Accrued liabilities	2,575		1,535
Payroll and payroll tax liabilities	Payroll and payroll tax liabilities	4,374		7,440		Payroll and payroll tax liabilities	2,828		4,671
Customer deposits	Customer deposits	6,294		11,686		Customer deposits	3,746		4,338
Sales tax payable	Sales tax payable	1,739		1,923		Sales tax payable	1,473		1,341
Current maturities of lease liability	Current maturities of lease liability	8,312		6,858		Current maturities of lease liability	8,152		8,131
Current portion of long-term debt	Current portion of long-term debt	96		92		Current portion of long-term debt	17		50
Total current liabilities	Total current liabilities	39,456		47,076		Total current liabilities	36,696		35,794
Commitments and contingencies (Note 14)		0		0
Deferred tax liability		440		2,359
Commitments and contingencies (Note 12)						Commitments and contingencies (Note 12)
Operating lease liability, net of current maturities	Operating lease liability, net of current maturities	41,028		38,546		Operating lease liability, net of current maturities	37,191		40,659
Long-term debt, net of current portion		17		66
Other long-term liabilities						Other long-term liabilities	316		593
Total liabilities	Total liabilities	80,941		88,047		Total liabilities	74,203		77,046

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock; $0.001 par value; 100,000,000 shares authorized, 60,782,525 and 59,928,564 shares issued and outstanding as of June 30, 2022 and December 31, 2021		61		60
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						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	Additional paid-in capital	368,077		361,087		Additional paid-in capital	371,863		369,938
Retained earnings (deficit)	Retained earnings (deficit)	(131,412)		10,144		Retained earnings (deficit)	(165,436)		(153,603)
Total stockholders’ equity	Total stockholders’ equity	236,726		371,291		Total stockholders’ equity	206,488		216,396
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	317,667	$	459,338	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,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

Net sales	Net sales	$	71,093	$	125,885	$	152,860	$	215,907	Net sales	$	63,925	$	71,093	$	120,752	$	152,860
Cost of sales (exclusive of depreciation and amortization shown below)	Cost of sales (exclusive of depreciation and amortization shown below)	50,866		90,172		110,493		154,817		Cost of sales (exclusive of depreciation and amortization shown below)	46,788		50,866		87,326		110,493
Gross profit	Gross profit	20,227		35,713		42,367		61,090		Gross profit	17,137		20,227		33,426		42,367

Operating expenses:	Operating expenses:									Operating expenses:
Store operations and other operational expenses	Store operations and other operational expenses	13,767		12,624		28,299		20,806		Store operations and other operational expenses	12,269		13,767		25,235		28,299
Selling, general, and administrative	Selling, general, and administrative	10,647		10,563		20,970		17,968		Selling, general, and administrative	7,503		9,759		14,341		19,368
Bad debt expense										Bad debt expense	107		888		424		1,602
Depreciation and amortization	Depreciation and amortization	4,783		2,917		9,289		4,971		Depreciation and amortization	3,824		4,783		7,756		9,289
Impairment loss	Impairment loss	127,831		—		127,831		—		Impairment loss	—		127,831		—		127,831

Total operating expenses	Total operating expenses	157,028		26,104		186,389		43,745		Total operating expenses	23,703		157,028		47,756		186,389

Income (Loss) from operations	Income (Loss) from operations	(136,801)		9,609		(144,022)		17,345		Income (Loss) from operations	(6,566)		(136,801)		(14,330)		(144,022)

Other income (expense):	Other income (expense):									Other income (expense):
Other income (expense)	Other income (expense)	104		(8)		513		(46)		Other income (expense)	1,391		104		2,595		513
Interest income	Interest income	45		36		47		40		Interest income	—		45		—		47
Interest expense	Interest expense	(10)		(4)		(13)		(6)		Interest expense	(431)		(10)		(5)		(13)
Total non-operating income (expense), net	Total non-operating income (expense), net	139		24		547		(12)		Total non-operating income (expense), net	960		139		2,590		547

Net income (loss) before taxes	Net income (loss) before taxes	(136,662)		9,633		(143,475)		17,333		Net income (loss) before taxes	(5,606)		(136,662)		(11,740)		(143,475)

Benefit (provision) for income taxes	Benefit (provision) for income taxes	283		(2,920)		1,919		(4,473)		Benefit (provision) for income taxes	(93)		283		(93)		1,919

Net income (loss)	Net income (loss)	$	(136,379)	$	6,713	$	(141,556)	$	12,860	Net income (loss)	$	(5,699)	$	(136,379)	$	(11,833)	$	(141,556)

Net income (loss) per share, basic	Net income (loss) per share, basic	$	(2.24)	$	0.11	$	(2.33)	$	0.22	Net income (loss) per share, basic	$	(0.09)	$	(2.24)	$	(0.19)	$	(2.33)
Net income (loss) per share, diluted	Net income (loss) per share, diluted	$	(2.24)	$	0.11	$	(2.33)	$	0.22	Net income (loss) per share, diluted	$	(0.09)	$	(2.24)	$	(0.19)	$	(2.33)

Weighted average shares outstanding, basic	Weighted average shares outstanding, basic	60,756		59,061		60,742		58,588		Weighted average shares outstanding, basic	61,077		60,756		61,053		60,742
Weighted average shares outstanding, diluted	Weighted average shares outstanding, diluted	60,756		60,223		60,742		59,794		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, ~~2022~~2023 AND ~~2021~~2022

(Unaudited)

(in thousands, except shares and per share amounts)


		Common Stock			Additional Paid-In Capital				Retained Earnings (Deficit)					Total Stockholders’ Equity			Common Stock				Additional Paid-In Capital			Retained Earnings (Deficit)			Total Stockholders’ Equity
		Shares	Amount										Shares					Amount
Balances, March 31, 2022		60,728	$	61			$	367,064			$	4,967					$	372,092
Balances, March 31, 2023																Balances, March 31, 2023	61,035		$	61		$	370,379		$	(159,737)		$	210,703
Common stock issued for share based compensation	Common stock issued for share based compensation	28	—		—				—					—		Common stock issued for share based compensation	159		—		—			—			—
Common stock withheld for employee payroll taxes	Common stock withheld for employee payroll taxes	—	—		(93)				—					(93)		Common stock withheld for employee payroll taxes	—		—		(105)			—			(105)
Share based compensation	Share based compensation	—	—		1,106				—					1,106		Share based compensation	—		—		816			—			816
Common stock issued upon cashless exercise of options		12	—		—				—					—
Common stock issued upon cashless exercise of warrants		14	—		—				—					—
Noncash repurchase of liability awards																Noncash repurchase of liability awards	—		$	—	$	653		$	—		$	653
Liability redemption associated with business acquisition																Liability redemption associated with business acquisition	35		$	—	$	120		$	—		$	120
Net income (loss)	Net income (loss)	—	—		—				(136,379)					(136,379)		Net income (loss)	—		—		—			(5,699)			(5,699)
Balances, June 30, 2022		60,782	$	61	$	368,077			$	(131,412)				$	236,726
Balances, June 30, 2023																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, 2021 58,394 $ 58 $ 346,176 $ 3,505 $ 349,739
Common stock issued upon warrant exercise 216 $ — $ 224 — 224
Common stock issued upon cashless warrant exercise 119 — — — —
Common stock issued upon exercise of options 460 1 1,729 — 1,730
Common stock issued upon cashless exercise of options 272 — — — —
Common stock issued in connection with business combinations 101 1 3,938 — 3,939
Share based compensation — — 1,508 — 1,508
Net income — — — 6,713 6,713
Balances, June 30, 2021 59,562 $ 60 $ 353,575 $ 10,218 $ 363,853


	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, 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


	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, 2020 57,151 $ 57 $ 319,582 $ (2,642) $ 316,997
Common stock issued upon warrant exercise 256 — 335 — 335
Common stock issued upon cashless warrant exercise 654 1 (1) — —
Common stock issued upon exercise of options 461 1 1,731 — 1,732
Common stock issued upon cashless exercise of options 277 — — — —
Common stock issued in connection with business combinations 649 1 33,187 — 33,188
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 — — 2,695 — 2,695
Net income — — — 12,860 12,860
Balances, June 30, 2021 59,562 $ 60 $ 353,575 $ 10,218 $ 363,853


	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

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

GROWGENERATION CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands, except shares and per share amounts)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)	Net income (loss)	$	(141,556)	$	12,860	Net income (loss)	$	(11,833)	$	(141,556)
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	9,289		4,971		Depreciation and amortization	7,756		9,289
Stock-based compensation expense	Stock-based compensation expense	2,689		3,241		Stock-based compensation expense	1,514		2,689
Bad debt expense, net of recoveries	Bad debt expense, net of recoveries	1,602		313		Bad debt expense, net of recoveries	424		1,602
Gain on asset disposition		12		—
Gain (loss) on asset disposition						Gain (loss) on asset disposition	21		12
Impairment loss	Impairment loss	127,831		—		Impairment loss	—		127,831
Deferred taxes	Deferred taxes	(1,919)		947		Deferred taxes	—		(1,919)
Changes in operating assets and liabilities (net of the effect of acquisitions):	Changes in operating assets and liabilities (net of the effect of acquisitions):					Changes in operating assets and liabilities (net of the effect of acquisitions):
Accounts and notes receivable	Accounts and notes receivable	(3,106)		(2,883)		Accounts and notes receivable	1,808		(3,106)
Inventory	Inventory	10,616		(32,763)		Inventory	1,989		10,616
Prepaid expenses and other assets	Prepaid expenses and other assets	7,482		(14,487)		Prepaid expenses and other assets	4,008		7,482
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(1,805)		23,280		Accounts payable and accrued liabilities	3,526		(1,805)
Operating leases	Operating leases	299		838		Operating leases	469		299
Payroll and payroll tax liabilities	Payroll and payroll tax liabilities	(3,066)		1,757		Payroll and payroll tax liabilities	(1,843)		(3,066)
Income taxes payable		—		1,846
Customer deposits	Customer deposits	(6,634)		1,469		Customer deposits	(592)		(6,634)
Sales tax payable	Sales tax payable	(184)		885		Sales tax payable	132		(184)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	1,550		2,274		Net cash provided by (used in) operating activities	7,379		1,550
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(6,806)		(48,045)		Acquisitions, net of cash acquired	(3,197)		(6,806)
Purchase of marketable securities	Purchase of marketable securities	—		(57,357)		Purchase of marketable securities	(51,700)		—
Maturities from marketable securities	Maturities from marketable securities	29,793		—		Maturities from marketable securities	42,566		29,793
Purchase of property and equipment	Purchase of property and equipment	(8,822)		(4,428)		Purchase of property and equipment	(5,533)		(8,822)
Purchase of intangibles		—		(1,262)
Disposal of assets						Disposal of assets	226		—
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	14,165		(111,092)		Net cash provided by (used in) investing activities	(17,638)		14,165
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Principal payments on long term debt	Principal payments on long term debt	(45)		(52)		Principal payments on long term debt	(33)		(45)
Common stock withheld for employee payroll taxes	Common stock withheld for employee payroll taxes	(1,448)		(3,954)		Common stock withheld for employee payroll taxes	(175)		(1,448)
Proceeds from the sale of common stock and exercise of warrants, net of expenses		—		2,067
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(1,493)		(1,939)		Net cash provided by (used in) financing activities	(208)		(1,493)
Net change	Net change	14,222		(110,757)		Net change	(10,467)		14,222
Cash and cash equivalents at the beginning of period	Cash and cash equivalents at the beginning of period	41,372		177,912		Cash and cash equivalents at the beginning of period	40,054		41,372
Cash and cash equivalents at the end of period	Cash and cash equivalents at the end of period	$	55,594	$	67,155	Cash and cash equivalents at the end of period	$	29,587	$	55,594

Supplemental disclosures of non-cash activities:	Supplemental disclosures of non-cash activities:					Supplemental disclosures of non-cash activities:
Cash paid for interest	Cash paid for interest	$	13	$	6	Cash paid for interest	$	5	$	13
Common stock issued for business combination	Common stock issued for business combination	$	5,750	$	33,187	Common stock issued for business combination	$	—	$	5,750
Right of use assets acquired under new operating leases	Right of use assets acquired under new operating leases	$	6,221	$	19,573	Right of use assets acquired under new operating leases	$	2,748	$	6,221

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

GrowGeneration Corp.

Notes To Condensed Consolidated Financial Statements

June 30, ~~2022~~2023

(Unaudited)

1.GENERAL

GrowGeneration Corp. ~~(the~~(together with its direct and indirect wholly owned subsidiaries, collectively “GrowGeneration” or the “Company”~~, “we”, or “our”~~) ~~is the largest chain of hydroponic garden centers in North America and~~ is a leading marketer and distributor of nutrients, growing media, ~~advanced~~lighting, benching and racking, environmental control systems, and other products for both indoor and ~~greenhouse lighting, ventilation systems,~~outdoor hydroponic and ~~accessories for~~organic gardening, including proprietary brands such as Charcoir, Drip Hydro, Power Si, MMI benching and racking, Ion lights, Durabreeze fans, and more. Incorporated in Colorado in 2014, GrowGeneration is the largest chain of specialty retail hydroponic ~~gardening.~~and organic garden centers in the U.S. As of June 30, ~~2022,~~2023, GrowGeneration has 62 retail locations across 18 states in the U.S. The Company ~~owns and~~also operates ~~a chain of 64 retail hydroponic/gardening stores across 14 states,~~ an online ~~e-commerce platform,~~superstore for cultivators at growgeneration.com, as well as a wholesale business for resellers, HRG Distribution, and ~~proprietary businesses that market grow~~a benching, racking, and storage solutions ~~through our platforms and other wholesale customers. The Company’s plan is~~business, MMI. GrowGeneration also provides facility design services to ~~continue to acquire, open and operate hydroponic/gardening stores and related businesses throughout the United States.~~ commercial growers.

Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022 (“2022 Form 10-K”). There were no significant changes to our significant accounting policies as disclosed in our ~~2021~~2022 Form ~~10-K, except for the immaterial out-of-period adjustments discussed below.~~10-K. The results of operations for our interim periods are not necessarily indicative of results for the full fiscal year.

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

Reclassifications

Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported consolidated net income.

Use of Estimates

Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with ~~generally accepted accounting principles.~~U.S. GAAP. 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. Actual results could vary from the estimates that were used.

~~Risk and Uncertainties~~

The COVID-19 pandemic has created significant public health concerns as well as economic disruption, uncertainty, and volatility that may negatively affect our business operations and financial results. As a result, if the pandemic or its effects persist or worsen, our accounting estimates and assumptions could be impacted in subsequent interim reports and upon final determination at year-end, and it is reasonably possible such changes could be significant (although the potential effects cannot be estimated at this time). The Company has experienced minimal business interruption as a result of the COVID-19 pandemic. We have been deemed an “essential” business by state and local authorities in the areas in which we operate and as such have not been subject to business closures. The COVID-19 pandemic to date has resulted in supply chain delays of our inventory, higher operating costs and increased shipping costs, among other impacts. As events surrounding the COVID-19 pandemic can change rapidly we cannot predict how it may disrupt our operations or the full extent of the disruption.

~~Immaterial out-of-period adjustments~~

During the six months ended June 30, 2022, the Company recorded an immaterial out-of period adjustment that impacted the prior year Consolidated Balance Sheets. The adjustment related to a change in the calculation of operating lease right-of-use assets and operating lease liabilities. This adjustment corrected an understatement of operating lease right-of-use assets of $1.3 million and an understatement of operating lease liabilities of $1.3 million as of December 31, 2021 during the period ended June 30, 2022. The Company assessed the materiality of this adjustment on the previously issued annual financial statements in accordance with SEC Staff Accounting Bulletin No. 99. The Company concluded that the changes were not material to any of the previously issued consolidated financial statements.

During the six months ended June 30, 2022, the Company identified an omission regarding the disclosure of reportable segments under ASC 280 related to the year ended December 31, 2021. During the year ended December 31, 2021 the Company inappropriately ~~reported a single segment, aggregating multiple operating segments. The impact at June 30, 2021 was that~~ ~~$25.8 million~~ ~~of revenue,~~ ~~$8.6 million~~ ~~of gross margin, and~~ ~~$2.4 million~~ ~~of operating income should have been reported as a separate~~ ~~“Distribution~~ ~~and other segment.~~” The Company assessed the materiality of this omission on the previously issued interim and annual financial statements in accordance with SEC Staff Accounting Bulletin No. 99. The Company concluded that the omission was not material to any of the previously issued consolidated financial statements and will begin reporting segments results in accordance with ASC 280 on a prospective basis starting with the quarter ending March 31, 2022.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~

2023

2.FAIR VALUE MEASUREMENTS

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•Level 1—Quoted prices in active markets for identical assets or liabilities.

•Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgement. Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. 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. The fair value of notes receivable approximates the outstanding balance and ~~are~~is reviewed for impairment at least annually. The fair value of impaired notes receivable is determined based on estimated future payments discounted back to present value using the notes' effective interest rate.

Level June 30,
2022 December 31,
2021
Marketable securities 2 $ 10,000 $ 39,793


	Level	June 30, 2023		December 31, 2022
Cash equivalents	1	$	10,160	$	25,087
Marketable securities	2	$	40,986	$	31,852

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~

2023

3.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”). We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements. We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position or results of operations.

~~Accounting Pronouncements Not Yet Adopted~~

In June 2016, ~~the~~ 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, rather than incurred losses as required ~~currently~~previously by the other-than-temporary impairment model. The ASU ~~will apply~~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. ASU No. 2016-13 was effective January 1, 2020. The Company ~~is in the process of evaluating the impact~~has adopted this standard effective January 1, 2023. The adoption of this ~~standard.~~

~~Refer to Note 3~~standard primarily applied to the ~~Consolidated Financial Statements reported~~valuation of the Company’s accounts receivable. Based on the composition of the Company’s accounts receivable, investment portfolio, and other financial assets, including current market conditions and historical credit loss activity, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures. Specifically, the Company’s estimate of expected credit losses as of June 30, 2023, using the expected credit loss evaluation process described above, resulted in ~~Form 10-K~~no adjustments to the provision for credit losses and no cumulative-effect adjustment to accumulated deficit on the ~~year ended December 31, 2021 for recently issued accounting pronouncements that are pending adoption.~~ adoption date of the standard.

4.REVENUE RECOGNITION

~~The following table disaggregates revenue by source:~~Disaggregation of Revenues

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Six Months Ended June 30, 2022 Six Months Ended June 30, 2021
Sales at company owned stores $ 55,354 $ 108,911 $ 119,650 $ 190,138
Distribution and other 12,044 4,988 24,247 7,823
E-commerce sales 3,695 11,986 8,963 17,946
Total Net Sales $ 71,093 $ 125,885 $ 152,860 $ 215,907
Sales are disaggregated by our segments, which represent our principal lines of business, as well as by our private label products versus distributed brands, or by commercial fixture revenue. See Note 13, Segments, for disaggregated revenue by segment.

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


							Receivables		Customer Deposit Liability
Opening balance, January 1, 2023						Opening balance, January 1, 2023	$	8,336	$	4,338
Closing balance, June 30, 2023						Closing balance, June 30, 2023	7,318		3,746
Increase (decrease)						Increase (decrease)	$	(1,018)	$	(592)
		Receivables		Customer Deposit Liability
Opening balance, January 1, 2022	Opening balance, January 1, 2022	$	5,741	$	11,686	Opening balance, January 1, 2022	$	5,741	$	11,686
Closing balance, June 30, 2022	Closing balance, June 30, 2022	8,313		6,294		Closing balance, June 30, 2022	8,313		6,294
Increase (decrease)	Increase (decrease)	$	2,572	$	(5,392)	Increase (decrease)	$	2,572	$	(5,392)

Opening balance, January 1, 2021		$	3,901	$	5,155
Closing balance, June 30, 2021		4,377		6,793
Increase (decrease)		$	476	$	1,638

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. Of the total amount of customer deposit liability as of January 1, 2022, $11.1 million was reported as revenue during the six months ended June 30, 2022. Of

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2023

5.PROPERTY AND EQUIPMENT


	June 30, 2023		December 31, 2022
Vehicles	$	2,603	$	2,176
Building	2,121		2,121
Leasehold improvements	12,341		12,562
Furniture, fixtures and equipment	14,334		13,195
Capitalized software	2,761		2,644
Construction-in-progress	13,267		9,569
Total property and equipment, gross	47,427		42,267
Accumulated depreciation	(16,745)		(13,598)
Property and equipment, net	$	30,682	$	28,669

Depreciation expense for the ~~total amount of customer deposit liability as of January 1, 2021, $2.9 million was reported as revenue during the~~three and six months ended June 30, ~~2021.~~2023 was $1.6 million and $3.3 million. Depreciation expense for the three and six months ended June 30, 2022 was $2.0 million and $3.7 million.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~

2023

5.~~INVESTMENTS~~

~~Marketable securities have maturities of less than one year as of June 30, 2022. There were no significant realized or unrealized gains or losses for the six months ended June 30, 2022.~~

~~The components of investments, available for sale securities, as of June 30, 2022 were as follows:~~

Adjusted Cost Basis Unrealized Gain (Loss) Recorded
Basis
Corporate notes and bonds $ 10,000 $ — $ 10,000

6.~~NOTES RECEIVABLE~~

The Company also has notes receivables under longer term financing arrangements at interest rates ranging from 8% to 12% with repayment terms ranging for 12 to 18 months. Notes receivables as of June 30, 2022 and December 31, 2021 are as follows:

June 30,
2022 December 31,
2021
Notes receivable $ 2,605 $ 2,962
Allowance for losses (1,233) (522)
Notes receivable, net $ 1,372 2,440

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

June 30,
2022 December 31,
2021
Note receivable $ 1,500 $ 1,500
Allowance for losses (1,233) (522)
Notes receivable, net $ 267 978

7.~~PROPERTY AND EQUIPMENT~~

June 30,
2022 December 31,
2021
Vehicles $ 2,451 $ 2,258
Building 2,121 1,187
Leasehold improvements 11,536 9,186
Furniture, fixtures and equipment 12,937 10,992
Capitalized software 2,585 4,753
Construction-in-progress 8,618 2,948
Total property and equipment, gross 40,248 31,324
Accumulated depreciation (10,910) (7,208)
Property and equipment, net $ 29,338 $ 24,116

Depreciation expense for the three and six months ended June 30, 2022 was $2.0 million and $3.7 million. Depreciation expense for the three and six months ended June 30, 2021 was $0.8 million and $1.4 million.

~~GrowGeneration Corp.~~

~~Notes To Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

8.GOODWILL AND INTANGIBLE ASSETS

The Company performs its goodwill impairment testing annually during the fourth quarter, or more frequently if events or if circumstances were to occur that would more likely than not reduce the fair value of our reporting unit below its carrying amount. The Company would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill. The adjusted carrying amount of goodwill shall be its new accounting basis.

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 iswas contrary to prior experience. Management reassessed business performance expectations following persistent adverse developments in equity markets, deterioration in the environment in which we operate, 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.

Under ASC 360, we performed a cash recoverability test on the following intangible assets: customer relationships, trade name, and non-compete. The carrying amounts of any assets that are not within the scope of ASC 360-10, other than goodwill, were adjusted for impairment, as necessary, prior to testing long-lived assets and goodwill. The Company recognized impairment losses as disclosed in the table below.

For goodwill impairment testing purposes, the Company determined four reporting units, three of which were subject to a quantitative assessment. We determined fair value using the income approach, where estimated future returns are discounted to present value at an appropriate rate of return. The Company completed its interim goodwill impairment test as of June 30, 2022 and recognized impairment losses as disclosed in the table below. There were no goodwill impairments recognized during the six months ended June 30, 2023.

The changes in goodwill are as follows:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Balance, beginning of period	Balance, beginning of period	$	125,401	$	62,951	Balance, beginning of period	$	15,978	$	125,401
Goodwill additions and measurement period adjustments	Goodwill additions and measurement period adjustments	7,099		62,450		Goodwill additions and measurement period adjustments	830		7,234
Impairment	Impairment	$	(116,657)	$	—	Impairment	—		(116,657)
Balance, end of period	Balance, end of period	$	15,843	$	125,401	Balance, end of period	$	16,808	$	15,978

The goodwill balance and impairment by segment are as follows:

Retail E-commerce Distribution Total
Gross carrying value December 31, 2020 $ 55,180 $ 2,911 $ 4,860 $ 62,951
Acquisitions & measurement period adjustments 47,583 8,748 6,119 62,450
Gross carrying value December 31, 2021 102,763 11,659 10,979 125,401
Acquisitions & measurement period adjustments 331 (341) 7,109 7,099
Gross carrying value June 30, 2022 $ 103,094 $ 11,318 $ 18,088 $ 132,500
Accumulated impairment losses December 31, 2020 $ — $ — $ — $ —
Impairment — — — —
Accumulated impairment losses December 31, 2021 — — — —
Impairment (103,094) (9,848) (3,715) (116,657)
Accumulated impairment losses June 30, 2022 $ (103,094) $ (9,848) $ (3,715) $ (116,657)
Net carrying value at December 31, 2021 $ 102,763 $ 11,659 $ 10,979 $ 125,401
Net carrying value at June 30, 2022 $ — $ 1,470 $ 14,373 $ 15,843


	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 June 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 June 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 June 30, 2023	$	965	$	1,470	$	14,373	$	16,808

1110

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~2023

A summary of intangible assets is as follows:


						Weighted-Average
						Amortization Period
						of Intangible Assets
						as of June 30, ~~2022~~2023
						(in years)
Trade names						~~3.68~~2.71
Patents						~~3.59~~2.50
Customer relationships						~~5.00~~4.11
Non-competes						~~2.33~~0.58
Intellectual property						~~3.67~~2.67
Total						~~3.90~~3.21

Intangible assets consist of the following:


		June 30, 2022							June 30, 2023
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trade names	Trade names	$	28,774	$	(7,815)	$	20,959	Trade names	$	29,063	$	(13,613)	$	15,450
Patents	Patents	100		(49)		51		Patents	100		(63)		37
Customer relationships	Customer relationships	17,102		(5,317)		11,785		Customer relationships	17,542		(7,686)		9,856
Non-competes	Non-competes	932		(444)		489		Non-competes	932		(669)		263
Intellectual property	Intellectual property	2,065		(551)		1,514		Intellectual property	2,065		(964)		1,101
Total	Total	$	48,973	$	(14,176)	$	34,798	Total	$	49,702	$	(22,995)	$	26,707


		December 31, 2021							December 31, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trade names	Trade names	$	28,300	$	(4,948)	$	23,352	Trade names	$	29,062	$	(10,517)	$	18,545
Patents	Patents	100		(42)		58		Patents	100		(56)		44
Customer relationships	Customer relationships	25,175		(3,055)		22,120		Customer relationships	17,102		(6,501)		10,601
Non-competes	Non-competes	1,384		(233)		1,151		Non-competes	932		(551)		381
Intellectual property	Intellectual property	2,065		(344)		1,721		Intellectual property	2,065		(758)		1,307
Total	Total	$	57,024	$	(8,622)	$	48,402	Total	$	49,261	$	(18,383)	$	30,878

1211

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~2023

Intangibles and impairment by segment are as follows:

Retail E-commerce Distribution Total
Gross carrying value December 31, 2020 $ 17,635 $ — $ 3,481 $ 21,116
Acquisitions & measurement period adjustments 20,190 2,501 13,217 35,908
Gross carrying value December 31, 2021 37,825 2,501 16,698 57,024
Acquisitions & measurement period adjustments (57) — 3,181 3,124
Gross carrying value June 30, 2022 $ 37,768 $ 2,501 $ 19,879 $ 60,148
Accumulated amortization December 31, 2020 $ (540) $ — $ (27) $ (567)
Amortization (5,745) (354) (1,956) (8,055)
Accumulated amortization December 31, 2021 (6,285) (354) (1,983) (8,622)
Amortization (3,554) (237) (1,763) (5,554)
Accumulated amortization June 30, 2022 $ (9,839) $ (591) $ (3,746) $ (14,176)
Accumulated impairment losses December 31, 2020 $ — $ — $ — $ —
Impairments — — — —
Accumulated impairment losses December 31, 2021 — — — —
Impairments (11,079) (95) — (11,174)
Accumulated impairment losses June 30, 2022 $ (11,079) $ (95) $ — $ (11,174)
Net carrying value at December 31, 2021 $ 31,540 $ 2,147 $ 14,715 $ 48,402
Net carrying value at June 30, 2022 $ 16,850 $ 1,815 $ 16,133 $ 34,798


	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	441		—		—		441
Gross carrying value at June 30, 2023	$	38,495	$	2,501	$	19,880	$	60,876

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	(2,572)		(224)		(1,816)		(4,612)
Accumulated amortization at June 30, 2023	$	(14,578)	$	(1,038)	$	(7,379)	$	(22,995)

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 June 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 June 30, 2023	$	12,838	$	1,368	$	12,501	$	26,707

Amortization expense for the three and six months ended June 30, 2023 was $2.4 million and $4.6 million. Amortization expense for the three and six months ended June 30, 2022 was $2.8 million and $5.6 million. ~~Amortization~~

Future amortization expense ~~for the three and six months ended June 30, 2021 was $2.1 million and $3.5 million.~~

Future amortization expense is as follows:
2022, remainder $ 4,383
2023 8,785
2024 8,668
2025 8,295
2026 3,532
Thereafter 1,135
Total $ 34,798
is as follows:



2023, remainder	$	4,470
2024	8,799
2025	8,426
2026	3,663
2027	1,217
Thereafter	132
Total	$	26,707

9.7. INCOME TAXES

For the six months ended June 30, ~~2022,~~2023, the effective tax rate ~~is 1.34%~~was zero%, ~~which decreased from 25.80% at~~compared to 1.42% for the six months ended June 30, ~~2021.~~2022. The decrease in the effective tax rate is primarily due to the Company recording a valuation allowance against deferred tax assets. The effective tax rate for the six months ended June 30, ~~2022~~2023 is lower than the USU.S. federal statutory rate of 21.0%, which is also primarily due to the Company recording a valuation allowance against deferred tax ~~assets.The~~assets. The Company has evaluated positive and negative evidence and has concluded that its deferred tax assets are not expected to be realizable and has recorded a valuation allowance in the current period.

1312

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~

2023

~~10.~~8. LEASES

We determine if a contract contains a lease at inception. Our material operating leases consist of retail and warehouse locations as well as office space. Our leases generally have remaining terms of 1 to 10 years, most of which include options to extend the leases for additional 3 to 5-year periods. Generally, the lease term is the minimum of the non-cancellable period of the lease or the lease term inclusive of reasonably certain renewal periods.

Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of remaining lease payments over the lease term. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases. Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term.

We have elected the practical expedient to account for lease and non-lease components as a single component for our entire population of leases.

Short-term disclosures include only those leases with a term greater than one month and less than or equal to 12 months, ~~or less,~~ and expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less that do not include an option to purchase the underlying asset that we are reasonably certain to exercise are not recorded on the balance sheet.

Lease expense is recorded within our consolidated statements of operations based upon the nature of the assets. Where assets are used to directly serve our customers, such as facilities dedicated to customer contracts, lease costs are recorded in “store operating costs.” Facilities and assets which serve management and support functions are expensed through general and administrative expenses.


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Right of use assets, operating lease assets	Right of use assets, operating lease assets	$	47,367	$	43,730	Right of use assets, operating lease assets	$	42,692	$	46,433

Current lease liability	Current lease liability	$	8,312	$	6,858	Current lease liability	$	8,152	$	8,131
Non-current lease liability	Non-current lease liability	41,028		38,546		Non-current lease liability	37,191		40,659
Total lease liability	Total lease liability	$	49,340	$	45,404	Total lease liability	$	45,343	$	48,790

June 30,
2022

June 30,
2021

June 30,
2023

June 30,
2022

Weighted average remaining lease term

6.60 years

7.17 years

Weighted average remaining lease term

6.26 years

6.60 years

Weighted average discount rate

5.6

6.0

Weighted average discount rate

5.8

5.6


		Six Months Ended June 30,					Three Months Ended June 30,
		2022		2021			2023		2022
Operating lease costs	Operating lease costs	$	5,445	$	3,548	Operating lease costs	$	2,803	$	2,783
Variable lease costs	Variable lease costs	1,340		—		Variable lease costs	570		477
Short-term lease costs	Short-term lease costs	237		1,109		Short-term lease costs	97		111
Total operating lease costs	Total operating lease costs	$	7,022	$	4,657	Total operating lease costs	$	3,470	$	3,371

1413

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~2023


	Six Months Ended June 30,
	2023		2022
Operating lease costs	$	5,696	$	5,445
Variable lease costs	1,169		1,340
Short-term lease costs	264		237
Total operating lease costs	$	7,129	$	7,022

The following table presents the maturity of the Company’s operating lease liabilities as of June 30, ~~2022~~2023:


2022 (remainder of the year)		$	5,452
2023		10,527
2023 (remainder of the year)				2023 (remainder of the year)	$	5,418
2024	2024	9,346		2024	9,923
2025	2025	8,299		2025	9,135
2026	2026	6,687		2026	7,562
2027				2027	5,534
Thereafter	Thereafter	18,985		Thereafter	16,771
Total lease payments	Total lease payments	59,296		Total lease payments	54,343
Less: Imputed interest	Less: Imputed interest	(9,956)		Less: Imputed interest	(9,000)
Lease Liability at June 30, 2022		$	49,340
Lease Liability at June 30, 2023				Lease Liability at June 30, 2023	$	45,343

~~11.~~9. SHARE BASED PAYMENTS

The Company maintains long-term incentive plans for employees, non-employee members of our Board of Directors, and consultants. The plans ~~allows~~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)~~"share-based awards").

The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based ~~payment~~ awards made to employees and directors of the Company, including stock options and restricted shares. The Company also issues ~~share based payments~~share-based awards in the form of common stock warrants to non-employees.

The following table presents share-based ~~payment~~award expense for the three and six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


		Six months ended June 30,					Three months ended June 30,				Six months ended June 30,
		2022		2021			2023		2022		2023		2022
Restricted stock	Restricted stock	$	1,951	$	1,935	Restricted stock	$	947	$	750	$	1,514	$	1,951
Stock options	Stock options	59		559		Stock options	—		16		—		59
Warrants	Warrants	679		747		Warrants	—		340		—		679
Total	Total	$	2,689	$	3,241	Total	$	947	$	1,106	$	1,514	$	2,689

As of June 30, ~~2022,~~2023, the Company had approximately ~~$7.6~~$5.4 million of unamortized share-based compensation for option awards and restricted stock awards, which isare expected to be recognized over a weighted average period of approximately 3.5 years. As of June 30, 2022, the Company also had approximately $1.9 million of unamortized share-based compensation for common stock warrants issued to consultants, which is expected to be recognized over a weighted average period of 1.53.1 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.

1514

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~

2023

Restricted stock activity for the six months ended June 30, ~~2022~~2023 is presented in the following table:


		Shares	Weighted Average Grant Date Fair Value			Shares	Weighted Average Grant Date Fair Value
Nonvested, December 31, 2021		483,750	$	20.19
Nonvested, December 31, 2022					Nonvested, December 31, 2022	614,875	$	9.41
Granted	Granted	611,500	$	10.76	Granted	1,000,000	$	3.80
Vested	Vested	(279,500)	$	9.94	Vested	(223,166)	$	6.51
Forfeited	Forfeited	(304,500)	$	17.51	Forfeited	(318,750)	$	4.23
Nonvested, June 30, 2022		511,250	$	18.36
Nonvested, June 30, 2023					Nonvested, June 30, 2023	1,072,959	$	5.64

The table below summarizes all option activity under all plans during the six months ended June 30, ~~2022:~~2023:


Options	Options	Shares	Weighted - Average Exercise Price		Weighted - Average Remaining Contractual Term	Weighted - Average Grant Date Fair Value		Options	Shares	Weighted - Average Exercise Price		Weighted - Average Remaining Contractual Term	Weighted - Average Grant Date Fair Value
Outstanding at December 31, 2021		906,425	$	4.38	2.85	$	2.45
Outstanding at December 31, 2022								Outstanding at December 31, 2022	604,498	$	3.97	1.87	$	2.24
Granted	Granted	—	—		—	—		Granted	—	—		—	—
Exercised	Exercised	(26,000)	4.14		—	1.92		Exercised	—	—		—	—
Forfeited or expired	Forfeited or expired	(197,427)	5.68		—	3.19		Forfeited or expired	—	—		—	—
Outstanding at June 30, 2022		682,998	$	4.00	2.32	$	2.24
Options vested at June 30, 2022		688,998	$	4.00	2.32	$	2.24
Outstanding at June 30, 2023								Outstanding at June 30, 2023	604,498	$	3.97	1.38	$	2.24
Vested at June 30, 2023								Vested at June 30, 2023	604,498	$	3.97	1.38	$	2.24

A summary of the status of the Company’s outstanding stock purchase warrants for the six months ended June 30, ~~2022~~2023 is as follows:


		Warrants	Weighted Average Exercise Price			Warrants	Weighted Average Exercise Price
Outstanding at December 31, 2021		330,884	$	22.14
Outstanding at December 31, 2022					Outstanding at December 31, 2022	32,500	$	15.82
Issued	Issued	—	—		Issued	—	—
Exercised	Exercised	(48,387)	3.50		Exercised	—	—
Forfeited	Forfeited	—	—		Forfeited	—	—
Outstanding at June 30, 2022		282,497	$	25.33
Outstanding at June 30, 2023					Outstanding at June 30, 2023	32,500	$	15.82

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

June 30, ~~2022~~

2023

~~12.~~10. 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 six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended					Three Months Ended
		June 30, 2022		June 30, 2021			June 30, 2023		June 30, 2022
Net income (loss)	Net income (loss)	$	(136,379)	$	6,713	Net income (loss)	$	(5,699)	$	(136,379)
Weighted average shares outstanding, basic	Weighted average shares outstanding, basic	60,756		59,061		Weighted average shares outstanding, basic	61,077		60,756
Effect of dilution	Effect of dilution	—		1,162		Effect of dilution	—		—
Adjusted weighted average shares outstanding, dilutive	Adjusted weighted average shares outstanding, dilutive	60,756		60,223		Adjusted weighted average shares outstanding, dilutive	61,077		60,756
Basic earnings (loss) per share	Basic earnings (loss) per share	$	(2.24)	$	0.11	Basic earnings (loss) per share	$	(0.09)	$	(2.24)
Dilutive earnings (loss) per share	Dilutive earnings (loss) per share	$	(2.24)	$	0.11	Dilutive earnings (loss) per share	$	(0.09)	$	(2.24)


		Six Months Ended					Six Months Ended
		June 30, 2022		June 30, 2021			June 30, 2023		June 30, 2022
Net income (loss)	Net income (loss)	$	(141,556)	$	12,860	Net income (loss)	$	(11,833)	$	(141,556)
Weighted average shares outstanding, basic	Weighted average shares outstanding, basic	60,742		58,588		Weighted average shares outstanding, basic	61,053		60,742
Effect of dilution	Effect of dilution	—		1,206		Effect of dilution	—		—
Adjusted weighted average shares outstanding, dilutive	Adjusted weighted average shares outstanding, dilutive	60,742		59,794		Adjusted weighted average shares outstanding, dilutive	61,053		60,742
Basic earnings (loss) per share	Basic earnings (loss) per share	$	(2.33)	$	0.22	Basic earnings (loss) per share	$	(0.19)	$	(2.33)
Dilutive earnings (loss) per share	Dilutive earnings (loss) per share	$	(2.33)	$	0.22	Dilutive earnings (loss) per share	$	(0.19)	$	(2.33)

The following potentially outstanding restricted stock and stock options were excluded from the computation of diluted earnings per share because the effect would have been antidilutive:


	~~Three Months Ended~~
	June 30, 2022	June 30, 2021
~~Restricted stock~~	~~511~~	—
~~Stock options~~	~~202~~	—
~~Total~~	~~713~~	—


	Three Months Ended
	June 30, 2023	June 30, 2022
Restricted stock	1,868	511
Stock options	—	202
Total	1,868	713


	~~Six Months Ended~~
	June 30, 2022	June 30, 2021
~~Restricted stock~~	~~511~~	—
~~Stock options~~	~~320~~	—
~~Total~~	~~831~~	—


	Six Months Ended
	June 30, 2023	June 30, 2022
Restricted stock	1,949	511
Stock options	—	320
Total	1,949	831

1716

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~

2023

~~13.~~11. ACQUISITIONS

Our acquisition strategy is primarily to acquire (i) ~~well established~~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 six months ended June 30, 2022, our measurement period adjustments included increasing goodwill by $1.3 million offset with intangible assets. As a result of these measurement period adjustments, we made an insignificant reduction in amortization expense. All acquisition costs are expensed as incurred and recorded in general and administrative expenses in the Condensed Consolidated Statements of Operations.

~~Acquisition~~Acquisitions during the six months ended June 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.

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

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2023

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


	Alaska		Other		Total
Inventory	$	720	$	867	$	1,587
Prepaids and other current assets	292		2		294
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		252		829
Total	$	2,029	$	1,168	$	3,197

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


	Alaska		Other		Total
Acquisition date	May 23, 2023
Revenue	$	392	$	916	$	1,308
Net income (loss)	$	(83)	$	(32)	$	(114)

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 six months ended June 30, 2023, and June 30, 2022.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue	$	122,966	$	154,168	$	122,966	154,168
Net income (loss)	$	(11,491)	$	(141,670)	$	(11,491)	(141,670)

Acquisitions during 2022

On February 1, 2022, the Company purchased all of the assets of Horticultural Rep Group, Inc. ~~(“HRG��~~("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 provides 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

June 30, 2023

The table below represents the allocation of the purchase price to the acquired net assets during the six months ended June 30, 2022.


	HRG
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.~~combinations during the six months ended June 30, 2022.


	HRG
Cash	$	6,806
Indemnity stock holdback	875
Common stock	5,710
Total	$	13,391

~~GrowGeneration Corp.~~

~~Notes To Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

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 ~~period~~six months ended June 30, 2022. Revenue and earnings amounts include other proprietary brands now being included under HRG for operations.


	HRG
Acquisition date	February 1, 2022
Revenue	$	8,086
Net Income (loss)	$	130


		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Revenue	Revenue	$	70,939	$	130,535	$	154,542	$	223,993	Revenue	$	70,939	$	154,542
Net income (loss)	Net income (loss)	$	(8,626)	$	6,899	$	(13,802)	$	13,046	Net income (loss)	$	(8,626)	$	(13,802)

~~Acquisitions during 2021~~

On January 25, 2021, the Company purchased all of the assets of Indoor Garden & Lighting, Inc, a two-store chain of hydroponic and equipment and indoor gardening supply stores serving the Seattle and Tacoma, Washington area. The total consideration for the purchase of Garden & Lighting was approximately $1.7 million, including $1.2 million in cash and common stock valued at approximately $0.5 million. Acquired goodwill of approximately $0.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. Indoor Garden & Lighting, Inc. is included in our Retail segment.

On February 1, 2021, the Company purchased all of the assets of J.A.R.B., Inc d/b/a Grow Depot Maine, a two-store chain in Auburn and Augusta, Maine. The total consideration for the purchase of Grow Depot Maine was approximately $2.1 million, including $1.7 million in cash and common stock valued at approximately $0.4 million. Acquired goodwill of approximately $0.9 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. Grow Depot Maine is included in our Retail segment.

On February 15, 2021, the Company purchased all of the assets of Grow Warehouse LLC, a four-store chain of hydroponic and organic garden stores in Colorado (3) and Oklahoma (1). The total consideration for the purchase of Grow Warehouse LLC was approximately $17.8 million, including $8.1 million in cash and common stock valued at approximately $9.7 million. Acquired goodwill of approximately $11.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. Grow Warehouse LLC is included in our Retail segment.

On February 22, 2021, the Company purchased all of the assets of San Diego Hydroponics & Organics, a four-store chain of hydroponic and organic garden stores in San Diego, California. The total consideration for the purchase of San Diego Hydroponics was approximately $9.3 million, including $4.8 million in cash and common stock valued at approximately $4.5 million. Acquired goodwill of approximately $5.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. San Diego Hydroponics & Organics is included in our Retail segment.

On March 12, 2021, the Company purchased all of the assets of Charcoir Corporation, which sells an RHP-certified growing medium made from the highest-grade coconut fiber. The total consideration for the purchase of Charcoir was approximately $16.4 million, including $9.9 million in cash and common stock valued at approximately $6.5 million. Acquired goodwill of approximately $6.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established distribution market for the Company of a proprietary brand. Charcoir is included in our Distribution and other segment.

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~

2023

On March 15, 2021, the Company purchased all of the assets of 55 Hydroponics, a hydroponic and organic superstore located in Santa Ana, California. The total consideration for the purchase of 55 Hydroponics was approximately $6.5 million, including $5.4 million in cash and common stock valued at approximately $1.1 million. Acquired goodwill of approximately $3.9 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. 55 Hydroponics is included in our Retail segment.

On March 15, 2021, the Company purchased all of the assets of Aquarius, a hydroponic and organic garden store in Springfield, Massachusetts. The total consideration for the purchase of Aquarius was approximately $3.6 million, including $2.4 million in cash and common stock valued at approximately $1.2 million. Acquired goodwill of approximately $1.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. Aquarius is included in our Retail segment.

On March 19, 2021, the Company purchased all of the assets of Agron, LLC, an online seller of growing equipment. The total consideration for the purchase of Agron was approximately $11.3 million, including $6.0 million in cash and common stock valued at approximately $5.3 million. Acquired goodwill of approximately $8.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established e-commerce market for the Company targeting the commercial customer. Agron is included in our E-commerce segment.

On April 19, 2021, the Company purchased the assets of Grow Depot LLC ("Down River Hydro"), a hydroponic and indoor gardening supply store in Brownstown, Michigan. The total consideration for the purchase of Down River Hydro was approximately $4.4 million, including approximately $3.2 million in cash and common stock valued at approximately $1.2 million. Acquired goodwill of approximately $2.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. Down River Hydro is included in our Retail segment.

On May 24, 2021, the Company purchased the assets of The Harvest Company ("Harvest"), a northern California-based hydroponic supply center and cultivation design innovator with stores in Redding and Trinity Counties. The total consideration for the purchase of Harvest was approximately $8.3 million, including approximately $5.6 million in cash and common stock valued at approximately $2.8 million. Acquired goodwill of approximately $4.6 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. Harvest is included in our Retail segment.

On July 19, 2021, the Company purchased the assets of Aqua Serene, Inc., ("Aqua Serene"), an Oregon corporation which consists of an indoor/outdoor garden center with stores in Eugene and Ashland, Oregon. The total consideration for the purchase was approximately $11.7 million, including approximately $9.9 million in cash and common stock valued at approximately $1.8 million. Acquired goodwill of approximately $7.0 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. Aqua Serene is included in our Retail segment.

On July 3, 2021, the Company purchased the assets of Mendocino Greenhouse & Garden Supply, Inc, ("Mendocino") a Northern California-based hydroponic garden center located in Mendocino, California. The purchase agreement was modified on July 19, 2021 to amend the purchase price. The total consideration for the purchase was approximately $4.0 million in cash. This acquisition allows the Company to expand its footprint in the Northern California. Acquired goodwill of approximately $2.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company. Mendocino is included in our Retail segment.

On August 24, 2021, the Company purchased the assets of Commercial Grow Supply, Inc. ("CGS"), a hydroponic superstore located in Santa Clarita, California. The total consideration for the purchase was approximately $7.2 million, including approximately $6.0 million in cash and common stock valued at approximately $1.3 million. Acquired goodwill of approximately $4.0 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. CGS is included in our Retail segment.

On August 23, 2021 the Company purchased the assets of Hoagtech Hydroponics, Inc. ("Hoagtech"), a Washington -based corporation consisting of a hydroponic and garden supply center serving the Bellingham, Washington area. The total consideration for the purchase was approximately $3.9 million in cash. The Asset Purchase Agreement contains a contingent payment equal to approximately $0.6 million to be settled in common stock of the Company if this garden supply center reaches $8.0 million in revenue within a 12-month calendar period from the date of close. The Company used a third-party specialist to value this contingent consideration. The probability that the target will be reached was determined to be 5% which resulted in a value of approximately $28.5 thousand of contingent consideration which was added to

~~GrowGeneration Corp.~~

~~Notes To Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

goodwill. This acquisition expands our footprint in the Pacific Northwest. Acquired goodwill represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. Hoagtech is included in our Retail segment.

On October 15, 2021, the Company purchased the assets of Indoor Store, LLC ("All Seasons Gardening"), an indoor-outdoor garden supply center specializing in hydroponics systems, lighting, and nutrients. All Seasons Gardening is the largest hydroponics retailer in New Mexico. The total consideration for the purchase was approximately $0.9 million, including approximately $0.7 million in cash and common stock valued at approximately $0.2 million. Acquired goodwill of approximately $0.5 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. All Seasons is included in our Retail segment.

On December 31, 2021, the Company purchased the assets of Mobile Media, Inc and MMI Agriculture ("MMI"), a mobile shelving design and build facility. The total consideration for the purchase was approximately $9.1 million, including approximately $8.3 million in cash and common stock valued at approximately $0.8 million. Acquired goodwill of approximately $1.2 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company. The measurement of the intangible assets for MMI is still provisional and may be subject to future adjustments as the Company obtains additional information to finalize the accounting for the acquisition. MMI is included in our Distribution and other segment.

~~The table below represents the allocation of the purchase price to the acquired net assets during 2021.~~

Agron Aquarius 55 Hydro Charcoir San Diego Hydro Grow Warehouse Grow Depot Maine Indoor Garden Downriver
Inventory $ — $ 957 $ 780 $ 839 $ 1,400 $ 2,450 $ 326 $ 372 $ 824
Prepaids and other current assets 46 12 29 534 36 30 3 — 3
Furniture and equipment 29 63 50 — 315 250 25 94 50
Liabilities — — — — — (169) — — —
Operating lease right of use asset 98 108 861 — 1,079 641 92 137 273
Operating lease liability (98) (108) (861) — (1,079) (641) (92) (137) (273)
Customer relationships 832 339 809 5,712 605 1,256 549 210 634
Trade name 1,530 485 870 1,099 1,192 2,748 344 353 698
Non-compete 139 — 26 — 6 94 36 2 16
Intellectual property — — — 2,065 — — — — —
Goodwill 8,673 1,702 3,915 6,119 5,728 11,120 866 661 2,126
Total $ 11,249 $ 3,558 $ 6,479 $ 16,368 $ 9,282 $ 17,779 $ 2,149 $ 1,692 $ 4,351

~~GrowGeneration Corp.~~

~~Notes To Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

Harvest Aquaserene Mendocino CGS Hoagtech All Seasons MMI Total
Inventory $ 1,204 1,696 753 875 751 100 3,530 $ 16,857
Prepaids and other current assets 7 2 1 1 37 1 — 742
Furniture and equipment 100 500 160 100 144 25 328 2,233
Liabilities — — — — (29) — (250) (448)
Operating lease right to use asset 3,782 1,177 408 746 1,569 37 2,332 13,340
Operating lease liability (3,782) (1,177) (408) (746) (1,569) (37) (2,332) (13,340)
Customer relationships 1,016 1,235 575 1,382 493 154 2,964 18,765
Trade name 1,392 1,231 414 852 428 117 1,039 14,792
Non-compete — 11 6 11 3 — 238 588
Intellectual property — — — — — — — 2,065
Goodwill 4,606 6,976 2,091 4,027 2,105 545 1,202 62,462
Total $ 8,325 11,651 4,000 $ 7,248 3,932 942 9,051 $ 118,056

~~The table below represents the consideration paid for the net assets acquired in business combinations.~~

Agron Aquarius 55 Hydro Charcoir San Diego Hydro Grow Warehouse Grow
Depot Maine Indoor Garden Downriver
Cash $ 5,973 $ 2,331 $ 5,347 $ 9,902 $ 4,751 $ 8,100 $ 1,738 $ 1,165 $ 3,177
Common stock 5,276 1,227 1,132 6,466 4,531 9,679 411 527 1,174
Total $ 11,249 $ 3,558 $ 6,479 $ 16,368 $ 9,282 $ 17,779 $ 2,149 $ 1,692 $ 4,351

Harvest Aquaserene Mendocino CGS Hoagtech All Seasons MMI Total
Cash $ 5,561 $ 9,860 $ 4,000 $ 5,976 $ 3,932 $ 701 $ 8,270 $ 80,784
Common stock 2,764 1,791 — 1,272 — 241 781 37,272
Total $ 8,325 $ 11,651 $ 4,000 $ 7,248 $ 3,932 $ 942 $ 9,051 $ 118,056

~~GrowGeneration Corp.~~

~~Notes To Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

~~The following table discloses the date of the acquisitions noted above and the revenue and earnings included in the consolidated income statement for the period ended June 30, 2021.~~

Agron Aquarius 55 Hydro Charcoir San Diego Hydro Grow Warehouse Grow Depot Maine Indoor Garden Downriver
Acquisition date 3/19/2021 3/15/2021 3/15/2021 3/12/2021 2/22/2021 2/15/2021 2/1/2021 1/25/2021 3/31/2021
Revenue $ 6,105 $ 2,684 $ 2,222 $ 1,880 $ 3,446 $ 6,753 $ 2,779 $ 2,308 $ 1,200
Net Income $ 324 $ 365 $ 314 $ 518 $ 547 $ 1,297 $ 555 $ 433 $ 176

Harvest Aquaserene Mendocino CGS Hoagtech All Seasons MMI Total
Acquisition date 5/3/21 7/19/21 7/19/21 8/24/21 8/23/21 10/15/21 12/31/21
Revenue $ 1,489 — — — — — — $ 30,866
Net Income (loss) $ 268 — — — — — — $ 4,797

The following table discloses the pro forma consolidated statement of operations as if the acquisition had been included in the consolidated results of the Company for the six months ended June 30, 2021.

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
(Unaudited) (Unaudited)
Revenue $ 130,504 $ 229,599
Net income $ 12,446 $ 19,849

~~14.~~12. COMMITMENTS AND CONTINGENCIES

Legal Matters

~~From time to time, the Company has been, and may again become~~We are involved in ~~legal proceedings arising~~lawsuits and claims which arise in the ~~ordinary~~normal course of ~~its business. The Company is~~our business, including the initiation and defense of proceedings related to contract and employment disputes. In our opinion, these claims individually and in the aggregate are not ~~presently a party~~expected to ~~any litigation, and is not aware of any pending or threatened litigation, against the Company that it believes could~~ have a material adverse effect on ~~its business, operating results,~~our financial condition, results of operations, or cash flows.

In December 2021, the Company was sued in the U.S. District Court for the Southern District of Texas related to a Promissory Note & Asset Acquisition Rights Option (“Note & Option”) with TGC Systems, LLC (“Total Grow”). 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. As discussed in Note 14, Subsequent Events, 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.

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. We believe that our assessment of contingencies is reasonable and that the related accruals, in the aggregate, are adequate; however, there can be no assurance that the final resolution of these matters will not have a material effect on our financial condition, results of operations, or cash flows.

Indemnifications

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, ~~2022,~~2023, 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. The duration of these indemnifications varies. The Company has a director and officer insurance policy that may enable it to recover a portion of any future amounts paid. The Company accrues for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable. No such losses have been recorded to date.

~~GrowGeneration Corp.~~

~~Notes To Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

~~15.~~13. SEGMENTS

As discussed in Note 1, at December 31, 2021, the Company had 2 reportable segments which increased to 3 at March 31, 2022, based on quantitative and qualitative analyses. The Company now also reports E-commerce as a reportable segment. The Company has 3 primary reportable segments including retail operations, e-commerce and all other which includes the distribution of proprietary brands to wholesale accounts. 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 ~~segments~~segment based on that ~~segments~~segment's profitability.

Retail – AsThe core of ~~June 30, 2022,~~our business strategy is to operate the ~~Company owns and operates a~~largest chain of ~~64 hydroponic/gardening~~retail garden centers ~~focused on serving growers~~in the U.S. The hydroponic retail landscape is fragmented, which allows us to acquire “best of breed” hydroponic retail operations and ~~cultivators. Inclusive~~leverage efficiencies of ~~commercial sales organizations selling directly to customers outside of the physical retail network.~~a centralized organization. Some of our garden centers have multi-functions, with added capabilities that include warehousing, distribution, and fulfillment for ~~direct shipments of products to garden center locations, pick, pack and ship for~~ our online platforms and direct fulfillment to our commercial customers.

Our retail segment also includes our 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. We offer commercial customers volume pricing, terms, and financing.

E-commerce – Our digital strategy is primarily focused on capturing the home, craft, and commercial grower online. GrowGeneration.com offers ~~over 10,000~~thousands of hydroponic products, all curated by our product team. GrowGeneration.com offers

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2023

customers the option to have their orders shipped directly to their locations, anywhere in North America. ~~The Company~~GrowGeneration also sells its products through its distribution website, HRGdist.com, and ~~distributes product through third-party marketplaces.~~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. OnIn March ~~12,~~ 2021, the Company purchased ~~CharCoir,~~Charcoir, a line of premium coco pots, cubes and medium. OnIn December ~~31,~~ 2021, the Company purchased the assets of Mobile Media, Inc. ~~(“MMI”~~("MMI"), a mobile shelving ~~design~~ and ~~build facility. On~~storage solutions developer and manufacturer. In February 1, 2022, the Company purchased the assets of Horticultural Rep Group, Inc. ~~(“HRG”~~("HRG"), a specialty marketing and sales organization ofspecializing in horticultural ~~products based in Ogden, Utah.~~products. The Company is in the process of combining the operations and management of these non-retail enterprises. The products these companies provide are integrated into our retail, e-commerce, and direct sales activities, and we receive incremental ~~gross profit~~revenue from the sale of these products. ~~The profit generated from those sales are recorded~~

Disaggregated revenue by segment is presented in ~~our retail and e-commerce segments.~~the following table:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Sales, net
Retail
Private label sales	$	7,200	$	6,000	$	13,801	$	13,096
Non-private label sales	39,717		49,354		72,517		106,554
Total retail	46,917		55,354		86,318		119,650
E-Commerce
Private label sales	400		300		661		700
Non-private label sales	3,334		3,395		6,334		8,263
Total e-commerce	3,734		3,695		6,995		8,963
Distribution and other
Private label sales	1,700		3,200		3,865		6,000
Non-private label sales	3,200		3,744		7,500		7,947
Commercial fixture sales	8,374		5,100		16,074		10,300
Total distribution and other	13,274		12,044		27,439		24,247
Total	$	63,925	$	71,093	$	120,752	$	152,860

Selected information by segment is presented in the following tables:

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net sales
Retail 55,354 108,911 $ 119,650 $ 190,138
E-Commerce 3,695 11,986 8,963 17,946
Distribution and other 12,044 4,988 24,247 7,823
Total $ 71,093 $ 125,885 $ 152,860 $ 215,907

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Gross profit
Retail $ 15,601 $ 30,572 $ 31,094 $ 52,473
E-Commerce 709 2,930 2,454 4,927
Distribution and other 3,917 2,211 8,819 3,690
Total $ 20,227 $ 35,713 $ 42,367 $ 61,090


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net sales
Retail	$	46,917	$	55,354	$	86,318	$	119,650
E-Commerce	3,734		3,695		6,995		8,963
Distribution and other	13,274		12,044		27,439		24,247
Total	$	63,925	$	71,093	$	120,752	$	152,860

2421

GrowGeneration Corp.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, ~~2022~~2023


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Gross profit
Retail	$	11,521	$	15,601	$	22,258	$	31,094
E-Commerce	819		709		1,681		2,454
Distribution and other	4,797		3,917		9,487		8,819
Total	$	17,137	$	20,227	$	33,426	$	42,367


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Income (Loss) from operations
Retail	$	(6,547)	$	(107,103)	$	(13,622)	$	(114,286)
E-Commerce	(444)		(8,607)		(928)		(9,039)
Distribution and other	425		(21,091)		220		(20,697)
Total	$	(6,566)	$	(136,801)	$	(14,330)	$	(144,022)

14. SUBSEQUENT EVENTS

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Income (Loss) from operations
Retail $ (107,103) $ 8,647 $ (114,286) $ 14,905
E-Commerce (8,607) (15) (9,039) 426
Distribution and other (21,091) 977 (20,697) 2,014
Total $ (136,801) $ 9,609 $ (144,022) $ 17,345

On July 26, 2023, the arbitrator denied all of Total Grow’s claims and defenses, determined that the Company prevailed in its counterclaim, and granted the Company an award of $1.5 million, with interest at the rate of 8% compounded annually beginning on March 15, 2021 until paid in full, and certain other costs. The Award is in full settlement of all claims and counterclaims related to the matter.

2522

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this report as well as our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC on March ~~10, 2022.~~16, 2023. We caution readers regarding certain ~~forward looking~~forward-looking statements, within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, in the following discussion and elsewhere in this report. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward looking statements, particularly those identified with the words, “anticipates,” “believes,” “expects,” “plans,” “intends,” “objectives,” and similar expressions, are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. We disclaim any obligation to update forward looking statements, except as required by law.

OVERVIEW

GrowGeneration Corp. (together with all of its direct and indirect ~~wholly owned~~wholly-owned subsidiaries, collectively “GrowGeneration” or the “Company”) was incorporated in Colorado in 2014. GrowGeneration is the largest chain of hydroponic garden centers in ~~North America~~the United States and is a leading marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting, environmental control systems, and accessories for hydroponic gardening. GrowGeneration also owns and operates an e-commerce platform, www.growgeneration.com, Mobile Media, a vertical racking and storage solutions business, Horticultural Rep Group, a horticultural products sales representative and distributor organization, and ~~PowerSi, CharCoir, and several other~~ proprietary ~~private-label~~ brands across multiple product categories, from ~~LED~~ lighting to nutrients and additives ~~and~~to environmental control ~~systems for indoor cultivation.~~systems.

~~Markets~~

Our business is driven by a wide selection of products, facility design services, solutions driven staff, and pick, pack and ship distribution and fulfillment capabilities. GrowGeneration carries and sells thousands of products, including nutrients, growing media, ~~advanced indoor and greenhouse~~ lighting, environmental control systems, vertical benching, and accessories for hydroponic gardening, as well as other indoor and outdoor growing products, that are ~~designed~~capable of growing and ~~intended for growing~~maximizing yield and quality of a wide range of plants. ~~In addition, vertical farms producing organic fruits~~Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, MMI benching and ~~vegetables~~racking, Ion lights, Durabreeze fans, and more. GrowGeneration also ~~utilize hydroponics due~~provides facility design services to ~~a rising shortage of farmland as well as environmental vulnerabilities including drought, other severe weather conditions and insect pests.~~

Our retail operations are driven by a wide selection of all hydroponic products, service and solutions driven staff and pick, pack and ship distribution and fulfillment capabilities. We employed approximately 570 employees ascommercial growers. As of June 30, ~~2022,~~2023, we employed approximately 481 employees, a majority of ~~them we~~whom have been branded by us as “Grow ~~Pros.” Currently,~~Pros”, and our operations span over ~~958,000~~953,000 square feet of retail and warehouse space.

Markets and Business Segments

Our target customer segments include the commercial growers in the plant-based medicine market, the craft grower, and vertical and urban farmers who grow organic herbs, fruits, and vegetables. Additionally, we sell products from our distribution and other segment to wholesalers, resellers, and retailers. Unlike the traditional agricultural industry, these cultivators use innovative indoor and outdoor growing techniques to produce specialty crops in highly controlled environments. This enables them to produce crops at higher yields and quality, regardless of the season or weather conditions.

The Company has three primary reportable segments, including retail operations, e-commerce, and all other. 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.

We recognize specifically identifiable operating costs such as cost of sales, distribution expenses, and selling and general administrative expenses within each segment. Certain general and administrative expenses, such as administrative and management expenses, salaries and benefits, share based compensation, director fees, legal expenses, accounting and consulting expenses, and technology costs, are not allocated to the specific segments and are reflected in the enterprise results.

2623

Competitive Advantages

AsThe markets in which we sell our products are highly competitive. Our key competitors include many local and national vendors of gardening supplies, local product resellers of hydroponic and other specialty growing equipment, and online product resellers and large online marketplaces such as Amazon and eBay. Our industry is highly fragmented, with around 1,000 hydroponic retailers throughout the U.S. by management's estimates.

Notwithstanding the foregoing, we are the largest chain of hydroponic garden centers ~~by revenue and number of stores~~ in the ~~United States based on management’s~~U.S. by management's estimates, and our pricing, inventory and product availability, and overall customer service provide us the ability to compete in our industry. In addition, as we ~~believe~~continue to increase the scope of our operations, including both retail and distribution, we expect to be able to continue to purchase inventory at lower volume prices, which we expect will enable us to price competitively and deliver the products that ~~we have the following core competitive advantages over~~ our ~~competitors:~~

•~~We offer~~customers are seeking. The Company competes by delivering a one-stop shopping experience tothat includes the widest selection of hydroponics products, end-to-end solutions for all types of ~~growers by providing “selection, service,~~cultivation environments, in-store sales and ~~solutions”;~~

•~~We provide end-to-end solutions for our commercial customers from capex built-out to consumables to nourish their plants;~~

•~~We have a knowledge-based sales team, all with horticultural experience;~~

•~~We offer the options to transact online, in store, or buy online~~product support, direct manufacturer pricing, and ~~pick up;~~

•~~We consider ourselves to be a leader of the products we offer, from launching new technologies to the development of our private label products;~~industry-leading expertise and

•~~We have a professional team for mergers and acquisitions, and to acquire and open new locations and successfully add them to our company portfolio.~~ customer service.

Growth Strategy

Core to our growth strategy is to expand the number of our retail garden centers ~~throughout North America. In addition to~~in the ~~14 states~~U.S., especially in ~~which~~markets where we ~~are currently operating, we~~do not already have ~~identified new market opportunities in states that include Connecticut, Ohio, Illinois, Pennsylvania, New York, New Jersey, Missouri and Virginia. The~~a physical presence or where our existing physical presence is limited. During the first six months of 2023, the Company acquired 235 new locations ~~in 2021~~ and ~~expects~~expanded into two new states. Our plan is to continue to acquire, open, ~~additional stores in 2022.~~and operate garden centers.

~~Secondary to this~~GrowGeneration will also pursue growth ~~strategy is the~~through expansion of its commercial sales and distribution ~~and sales~~ capabilities to sell more product to commercial cultivators for ~~products that the Company owns, distributes, or represents to~~large grow operations and independent retail garden centers for ~~resale.~~resale, as well as by promoting and expanding its portfolio of proprietary brands to increase its market share, product offerings, and profitability.

RESULTS OF OPERATIONS

Comparison of the three months ended June 30, ~~2022~~2023 and ~~2021~~2022

Net Sales

Net ~~revenue~~sales for the three months ended June 30, 2023 was approximately $63.9 million, compared to $71.1 million for the three months ended June 30, 2022, ~~was approximately $71.1 million, compared to $125.9 million for the three months ended June 30, 2021,~~ a decrease of approximately ~~$54.8~~$7.2 million or ~~44%~~10.1%. The decrease was primarily attributed to a decrease of approximately ~~$59.3~~$7.9 million related to same store sales, which represented aan approximate 15.1% decrease ~~of 56.9%~~ year over year. Overall sales in our retail segment declined from ~~$108.9~~$55.4 million for the three months ended June 30, 2022 to ~~$55.4 million.~~$46.9 million for the same period in 2023. Distributed sales ~~were~~increased to $13.3 million for the three months ended June 30, 2023, compared to $12.0 million for the three months ended June 30, ~~2022, up 141% year-over-year.~~2022. E-commerce sales ~~decreased~~were relatively flat from ~~$12.0~~$3.7 million for the three months ended June 30, ~~2021~~2022, to $3.7 million for the same period in 2023.

Cost of Sales

Cost of sales for the three months ended June 30, 2023 was approximately $46.8 million, compared to approximately $50.9 million for the three months ended June 30, 2022, a decrease of approximately $4.1 million or 8.0%. The decrease in cost of sales was primarily due to the 10.1% decrease in sales comparing the three months ended June 30, 2023 to the three months ended June 30, 2022.

Gross Profit

Gross profit was approximately $17.1 million for the three months ended June 30, 2023, compared to approximately $20.2 million for the three months ended June 30, 2022, a decrease of approximately $3.1 million or 15.3%. The decrease in gross profit is primarily related to the 10.1% decrease in net sales comparing the three months ended June 30, 2023 to the three months ended June 30, 2022. Gross profit as a percentage of net sales was 26.8% for the three months ended June 30, 2023, compared to 28.5% for the three months ended June 30, 2022. Gross profit in our retail segment declined from $15.6 million for the three months ended June 30, 2022, to $11.5 million for the same period in 2023. Gross profit from distributed sales increased to $4.8 million for the three months ended June 30, 2023, compared to $3.9 million for the three months ended June 30, 2022. Gross profit from our e-commerce segment was $0.8 million for the three months ended June 30, 2023, compared to $0.7 million for the three months ended June 30, 2022.

~~Cost of Goods Sold~~

Cost of goods sold for the three months ended June 30, 2022 was approximately $50.9 million, compared to approximately $90.2 million for the three months ended June 30, 2021, a decrease of approximately $39.3 million or 44%. The decrease in cost of goods sold was primarily due to the 44% decrease in sales comparing the three months ended June 30, 2022 to the three months ended June 30, 2021.

~~Gross Profit~~

Gross profit was approximately $20.2 million for the three months ended June 30, 2022, compared to approximately $35.7 million for the three months ended June 30, 2021, a decrease of approximately $15.5 million or 43%. The decrease in gross profit is primarily related to the 44% decrease in revenues comparing the three months ended June 30, 2022 to the three months ended June 30, 2021. Gross profit as a percentage of revenues was 28.5% for the three months ended June 30, 2022, compared to 28.4% for the three months ended June 30, 2021. Gross profit in our retail segment declined from $30.6 million for the three months ended June 30, 2021 to $15.6 million for the same period in 2022. Gross profit from distributed sales was $3.9 million for the three months ended June 30, 2022 up from $2.2 million for the same period in 2021. Gross profit from e-commerce revenue was $0.7 million for the three months ended June 30, 2022.

Operating Expenses

Operating expenses are comprised of store operations, selling, general, and administrative, and depreciation and amortization. Operating costs were approximately $23.7 million for the three months ended June 30, 2023 and approximately $157.0 million for the three months ended June 30, 2022, ~~and approximately $26.1 million for the three months ended June 30, 2021, an increase~~a decrease of approximately ~~$130.9~~$133.3 million or ~~502%~~85%. The ~~increase~~decrease in operating

expenses is primarily attributable to the impairment loss of $127.8 million recorded during the three months ended June 30, 2022.

Store operating costs were approximately $12.3 million for the three months ended June 30, 2023, compared to $13.8 million for the three months ended June 30, 2022, ~~compared to $12.6 million for the three months ended June 30, 2021, an increase~~a decrease of ~~$1.1~~$1.5 million or 9%11%. The ~~increase~~decrease in store operating costs was directly attributable to ~~the addition of 23 locations that were added during 2021, including seven stores that were added subsequent to June 30, 2021.~~payroll reductions and expense savings recognized from store consolidations.

Total corporate overhead, which is comprised of ~~Selling,~~selling, general, and administrative expense and ~~Depreciation~~depreciation and amortization expense, was approximately $11.4 million for the three months ended June 30, 2023, compared to $15.4 million for the three months ended June 30, 2022, ~~compared to $13.5~~a decrease of $4.0 million or 26%. Selling, general, and administrative costs were approximately $7.5 million for the three months ended June 30, ~~2021, an increase of $2.0 million or 14%. Selling, general, and administrative costs were~~2023, compared to approximately ~~$10.6~~$9.8 million for the three months ended June 30, ~~2022, compared~~2022. Salaries expense decreased to ~~approximately $10.6~~$3.4 million for the three months ended June 30, ~~2021. Salaries expense~~2023, from $5.4 million for the same period in 2022. General and administrative expenses decreased to ~~$5.4 million from $5.6 million primarily due to a decrease in corporate staff. General administrative expenses increased to $4.1~~$3.2 million for the three months ended June 30, ~~2022~~2023, from ~~$3.0~~$4.1 million for the same period in ~~2021 to support expanding operations.~~

Impairment loss was approximately $127.8 million for the three months ended June 30, 2022 following goodwill impairment testing performed as a result of, the Company’s market capitalization falling below total net assets. In addition, financial performance continued to weaken during the quarter. Refer to Critical Accounting Policies, Judgements, and Estimates and Note 8, Goodwill and Intangible Assets.2022.

Other Income/Expense

Total other income was approximately $1.0 million for the three months ended June 30, 2023, compared to expense of $0.1 million for the three months ended June 30, ~~2022, compared to expense of $24 thousand for the three months ended June 30, 2021.~~2022. This increase is primarily attributable to ~~a gain recorded in the three months ended June 30, 2022 related to an earnout revaluation adjustment related to The Harvest Company acquisition.~~interest income driven from capital investments.

Segment Operating Income

Operating ~~income~~loss in our retail segment dropped from ~~$8.6~~$107.1 million to an operating loss of ~~$107.1~~$6.5 million. The operating loss for our e-commerce segment decreased from $8.6 million asfor the three months ended June 30, 2022 to a ~~result~~loss of ~~impairment expense, lower sales volume, lower gross margins and higher expenses at existing stores combined with operating losses at seven stores not in operation in~~$0.4 million for the same period in ~~2021, including acquired and new retail locations.~~2023. Operating income in ~~our e-commerce~~the distribution and other segment ~~declined from a loss of $15.0 thousand~~other increases to a loss of ~~$8.6~~$0.4 million ~~as a result of impairment expense, lower revenue and higher operating expenses as well as integration costs of Agron.IO that was consolidated with our core e-commerce webstore~~ in the ~~period. Operating income in all other decreased~~three months ended June 30, 2023, compared to a loss of of $21.1 million in the three months ended June 30, ~~2022 compared to income of $1.0 million in the three months ended June 30, 2021.~~2022.

Income Taxes

Income tax benefit was $0.1 million for the three months ended June 30, 2023, compared to income tax expense of $0.3 million for the three months ended June 30, ~~2022, compared to income~~2022. The effective tax ~~expense of $2.9 million~~rate for the ~~three~~six months ended June 30, ~~2021. Effective~~2023 is lower than the U.S. federal statutory rate of 21.0%, which is also primarily due to the Company recording a valuation allowance against deferred tax rate is impacted by differences in timing of expenses for share based compensation, depreciation, amortization and the impact of 162(m) on deductible wages. As such, the Company’s taxable income varies from reported income in a material way.Theassets. The Company has evaluated positive and negative evidence and has concluded that its deferred tax assets are not expected to be realizable and has recorded a valuation allowance in the current period.

Net Income

Net loss for the three months ended June 30, ~~2022~~2023 was approximately ~~$136.4~~$5.7 million, compared to net ~~income~~loss of approximately ~~$6.7~~$136.4 million for the three months ended June 30, ~~2021, a decrease~~2022, an increase of approximately ~~$143.1~~$130.7 million.

Comparison of the six months ended June 30, ~~2022~~2023 and ~~2021~~2022

Net Sales

Net ~~revenue~~sales for the six months ended June 30, 2023 was approximately $120.8 million, compared to $152.9 million for the six months ended June 30, 2022, ~~was approximately $152.9 million, compared to $215.9 million for the six months ended June 30, 2021,~~ a decrease of approximately ~~$63.0~~$32.1 million or ~~29%~~21%. The decrease was primarily attributed to a decrease of approximately ~~$85.5~~$29.7 million related to same store sales, which represented an approximate ~~48.0%~~26.5% decrease year over year. Overall sales in our retail segment declined from ~~$190.1~~$119.7 million for the six months ended June 30, ~~2021,~~2022, to ~~$119.7~~$86.3 million for the same period in ~~2022.~~2023. Distributed sales ~~were $24.2 million. E-commerce sales decreased from $17.9~~increased to $27.4 million for the six months ended June 30, ~~2021,~~2023 compared to ~~$9.0~~$24.2 million for the ~~same period in~~six months ended June 30, 2022.

~~Cost of Goods Sold~~

~~Cost of goods sold~~ E-commerce sales decreased from $9.0 million for the six months ended June 30, 2022, to $7.0 million for the same period in 2023.

Cost of Sales

Cost of sales for the six months ended June 30, 2023 was approximately ~~$110.5~~$87.3 million, compared to approximately ~~$154.8~~$110.5 million for the six months ended June 30, ~~2021,~~2022, a decrease of approximately ~~$44.3~~$23.2 million or ~~29%~~21%. The decrease in cost of ~~goods sold~~sales was primarily due to the ~~29%~~21% decrease in sales comparing the six months ended June 30, ~~2022~~2023 to the six months ended June 30, ~~2021.~~2022.

Gross Profit

Gross profit was approximately $33.4 million for the six months ended June 30, 2023, compared to approximately $42.4 million for the six months ended June 30, 2022, ~~compared to approximately $61.1 million for the six months ended June 30, 2021,~~ a decrease of approximately ~~$18.7~~$8.9 million or ~~31%~~21%. The decrease in gross profit is primarily related to the ~~29%~~21% decrease in ~~revenues~~net sales comparing the six months ended June 30, ~~2022~~2023 to the six months ended June 30, ~~2021.~~2022. Gross profit as a percentage of ~~revenues~~net sales was 27.7% for the six months ended June 30, ~~2022,~~2023, compared to ~~28.3%~~27.7% for the six months ended June 30, ~~2021.~~2022. Gross profit in our retail segment declined from ~~$52.5~~$31.1 million for the six months ended June 30, ~~2021,~~2022, to ~~$31.1~~$22.3 million for the same period in ~~2022.~~2023. Gross profit from distributed sales increased to $9.5 million for the six months ended June 30, 2023, compared to $8.8 million for the six months ended June 30, ~~2022 compared to $3.7~~2022. Gross profit from our e-commerce segment was $1.7 million for the six months ended June 30, ~~2021. Gross profit from our e-commerce segment was~~2023, compared to $2.5 million for the six months ended June 30, ~~2022 compared to $4.9 million for the six months ended June 30, 2021.~~2022.

Operating Expenses

Operating expenses are comprised of store operations, selling, general, and administrative, and depreciation and amortization. Operating costs were approximately $47.8 million for the six months ended June 30, 2023 and approximately $186.4 million for the six months ended June 30, 2022, ~~and~~a decrease of approximately ~~$43.7~~$138.6 million or 74%. The decrease in operating expenses is primarily attributable to a $127.8 million impairment loss recognized in the prior year.

Store operating costs were approximately $25.2 million for the six months ended June 30, ~~2021, an increase of approximately $142.6 million or 326%. The increase in operating expenses is primarily attributable~~2023, compared to ~~the impairment loss of $127.8 million recorded during the six months ended June 30, 2022.~~

~~Store operating costs were approximately~~ $28.3 million for the six months ended June 30, 2022, ~~compared to $20.8 million for the six months ended June 30, 2021, an increase~~a decrease of ~~$7.5~~$3.1 million or ~~36%~~11%. The ~~increase~~decrease in store operating costs was directly attributable to ~~the addition of 23 locations that were added during 2021, including seven stores that were added subsequent to June 30, 2021.~~payroll reductions and expense savings recognized from store consolidations.

Total corporate overhead, which is comprised of ~~Selling,~~selling, general, and administrative expense and ~~Depreciation~~depreciation and amortization expense, was approximately $22.5 million for the six months ended June 30, 2023, compared to $30.3 million for the six months ended June 30, 2022, ~~compared to $22.9~~a decrease of $7.7 million or 26%. Selling, general, and administrative costs were approximately $14.3 million for the six months ended June 30, ~~2021, an increase of $7.3 million or 32%. Selling, general, and administrative costs were~~2023, compared to approximately ~~$21.0~~$19.4 million for the six months ended June 30, ~~2022, compared~~2022. Salaries expense decreased to ~~approximately $18.0~~$6.9 million for the six months ended June 30, ~~2021. Salaries expense increased~~2023, from $10.6 million for the same period in 2022. General and administrative expenses decreased to ~~$10.6~~$6.4 million for the six months ended June 30, ~~2022,~~2023, from ~~$9.6~~$7.7 million for the same period in 2021, primarily due to an increase in corporate staff. General administrative expenses increased to $7.7 million for the six months ended June 30, 2022, from $5.1 million for the same period in 2021, to support expanding operations.

Impairment loss was approximately $127.8 million for the six months ended June 30, 2022 following goodwill impairment testing performed as a result of, the Company’s market capitalization falling below total net assets. In addition, financial performance continued to weaken during the quarter. Refer to Critical Accounting Policies, Judgements, and Estimates and Note 8, Goodwill and Intangible Assets.2022.

Other Income/Expense

Total other income was approximately $2.6 million for the six months ended June 30, 2023, compared to expense of $0.5 million for the six months ended June 30, ~~2022, compared to expense of $12.0 thousand for the six months ended June 30, 2021.~~2022. This increase is primarily attributable to ~~a gain recorded during the six months ended June 30, 2022, related to an earnout revaluation adjustment related to The Harvest Company acquisition.~~income generated from capital investments.

Segment Operating Income

Operating ~~income~~loss in our retail segment ~~dropped~~decreased from ~~$14.9~~$114.3 million to an operating loss of ~~$114.3 million as a result of lower sales volume and higher expenses at existing stores combined with~~$13.6 million. The operating ~~losses at nine stores not in operation in the same period in 2021, including acquired and new retail locations. Operating income in~~loss for our e-commerce segment ~~declined~~decreased from ~~$0.4~~$9.0 million for the six months ended June 30, ~~2021~~2022 to a loss of ~~$9.0~~$0.9 million for the same period in ~~2022, as a result~~2023. Operating income in the distribution and other segment decreased to income of ~~lower revenue and higher operating expenses as well as integration costs of Agron.IO that was consolidated with our core e-commerce webstore~~$0.2 million in the six months ended June 30, ~~2022. Operating~~2023, compared to income ~~in all other decreased to a loss~~ of $20.7 million in the six months ended June 30, ~~2022 compared to income of $2.0 million in the six months ended June 30, 2021.~~2022.

Income Taxes

Income tax expense was $0.1 million for the six months ended June 30, 2023, compared to income tax benefit ~~was~~of $1.9 million for the six months ended June 30, ~~2022, compared to income~~2022. The effective tax ~~expense of $4.5 million~~rate for the six months ended June 30, ~~2021. Effective~~2023 is lower than the U.S. federal statutory rate of 21.0%, which is also primarily due to the Company recording a valuation allowance against deferred tax rate is impacted by differences in timing of expenses for share based compensation, depreciation, amortization and the impact of 162(m) on deductible wages. As such, the Company’s taxable income varies from reported income in a material way.Theassets. The Company has evaluated positive and negative evidence and has concluded that its deferred tax assets are not expected to be realizable and has recorded a valuation allowance in the current period.

Net Income

Net loss for the six months ended June 30, ~~2022~~2023 was approximately ~~$141.6~~$11.8 million, compared to net ~~income~~loss of approximately ~~$12.9~~$141.6 million for the six months ended June 30, ~~2021, a decrease~~2022, an increase of approximately ~~$154.4~~$129.7 million.

Operating Activities

Net cash provided by operating activities for the six months ended June 30, ~~2022~~2023 was approximately ~~$1.6~~$7.4 million, compared to ~~$2.3~~$1.6 million ~~provided~~used for the six months ended June 30, ~~2021.~~2022. The Company ~~reduced prepaid~~continued to decrease inventory ~~by $8.5 million in the current year as well as inventory by $10.7 million, which was more that~~and improve on receivable collection, partially offset by ~~payments for accounts payable~~reductions to customer deposits and ~~deferred compensation, including annual cash bonuses.~~payroll and payroll tax liabilities.

Net cash used by investing activities was approximately $17.6 million for the six months ended June 30, 2023, compared to cash provided by investing activities ~~was~~of approximately $14.2 million for the six months ended June 30, ~~2022 compared to cash used of approximately $111.1 million for the six months ended June 30, 2021.~~2022. Investing activities in ~~2022~~2023 were primarily attributable to ~~the~~investment of excess cash into marketable securities of $51.7 million, partially offset by maturity of marketable securities of ~~$29.8 million partially offset by acquisitions of $6.8 million and vehicles~~$42.6 million. The Company also had vehicle and store equipment purchases of ~~$8.8~~$5.5 million and business acquisitions of $3.2 million. Investing activities for the six months ended June 30, ~~2021~~2022 were primarily related to ~~store acquisitions of $48.0 million, purchase~~maturities of marketable securities of ~~$57.4~~$29.8 million, partially offset by store acquisitions of $6.8 million and the purchase of vehicles and store equipment to support new store operations of ~~$4.4 million, and intangible assets of $1.3~~$8.8 million.

Net cash used in financing activities for the six months ended June 30, ~~2022~~2023 was approximately ~~$1.5~~$0.2 million and was primarily attributable to common stock withheld for employee payroll taxes. Net cash used by financing activities for the six months ended June 30, ~~2021~~2022 was ~~$1.9~~$1.5 million and was primarily attributable to stock ~~redemptions.~~withheld to cover payroll taxes.

Use of Non-GAAP Financial Information

The Company believes that the presentation of results excluding certain items in “Adjusted EBITDA,” such as non-cash equity compensation charges, provides meaningful supplemental information to both management and investors, facilitating the evaluation of performance across reporting periods. The Company uses these non-GAAP measures for internal planning and reporting purposes. These non-GAAP measures are not in accordance with, or an alternative for, ~~generally accepted accounting principles~~U.S. GAAP and may be different from non-GAAP measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or net income per share prepared in accordance with generally accepted accounting principles.

3027

Set forth below is a reconciliation of Adjusted EBITDA to net income (loss):

Three Months Ended
June 30,
2022 2021
(000) (000)
Net income $ (136,379) $ 6,713
Income taxes (283) 2,920
Interest 10 4
Depreciation and amortization 4,783 2,917
EBITDA $ (131,869) $ 12,554
Impairment loss 127,831 —
Share based compensation (option compensation, warrant compensation, stock issued for services) 1,106 1,914
Adjusted EBITDA $ (2,932) $ 14,468
Adjusted EBITDA per share, basic $ (0.05) $ 0.24
Adjusted EBITDA per share, diluted $ (0.05) $ 0.24


	Three Months Ended June 30,
	2023		2022
	(000)		(000)
Net income (loss)	$	(5,699)	$	(136,379)
Income taxes	93		(283)
Interest income	—		(45)
Interest expense	431		10
Depreciation, and amortization	3,824		4,783
EBITDA	$	(1,351)	$	(131,914)
Impairment loss	—		127,831
Share based compensation (option compensation, warrant compensation, stock issued for services)	947		1,106
Restructuring charges	1,220		—
Fixed asset disposal	40		(12)
Adjusted EBITDA	$	856	$	(2,989)

Adjusted EBITDA per share, basic	$	0.01	$	(0.05)
Adjusted EBITDA per share, diluted	$	0.01	$	(0.05)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
		(000)		(000)			(000)		(000)
Net income		$	(141,556)	$	12,860
Net income (loss)						Net income (loss)	$	(11,833)	$	(141,556)
Income taxes	Income taxes	(1,919)		4,473		Income taxes	93		(1,919)
Interest		13		6
Interest income						Interest income	—		(47)
Interest expense						Interest expense	5		13
Depreciation, and amortization	Depreciation, and amortization	9,289		4,971		Depreciation, and amortization	7,756		9,289
EBITDA	EBITDA	$	(134,173)	$	22,310	EBITDA	$	(3,979)	$	(134,220)
Impairment loss	Impairment loss	127,831		—		Impairment loss	—		127,831
Share based compensation (option compensation, warrant compensation, stock issued for services)	Share based compensation (option compensation, warrant compensation, stock issued for services)	2,689		3,241		Share based compensation (option compensation, warrant compensation, stock issued for services)	1,514		2,689
Restructuring charges						Restructuring charges	1,498		—
Fixed asset disposal						Fixed asset disposal	21		(84)
Adjusted EBITDA	Adjusted EBITDA	$	(3,653)	$	25,551	Adjusted EBITDA	$	(946)	$	(3,784)

Adjusted EBITDA per share, basic	Adjusted EBITDA per share, basic	$	(0.06)	$	0.44	Adjusted EBITDA per share, basic	$	(0.02)	$	(0.06)
Adjusted EBITDA per share, diluted	Adjusted EBITDA per share, diluted	$	(0.06)	$	0.43	Adjusted EBITDA per share, diluted	$	(0.02)	$	(0.06)

~~LIQUIDITY AND CAPITAL RESOURCES~~Liquidity and Capital Resources

As of June 30, ~~2022,~~2023, we had working capital of approximately ~~$150.0~~$126.2 million, compared to working capital of approximately ~~$169.8~~$134.9 million as of December 31, ~~2021,~~2022, a decrease of approximately ~~$19.8~~$8.7 million. The decrease in working capital from December 31, ~~2021~~2022 to June 30, ~~2022~~2023 was due primarily to a decrease in ~~marketable securities, inventory~~accounts receivable and ~~prepaid inventory~~income taxes receivable, partially offset by ~~decreases~~an increase in current liabilities. At June 30, ~~2022,~~2023, we had cash and cash equivalents of approximately ~~$55.6 million and available for sale debt securities of $10.0~~$29.6 million. Currently, we have no extraordinary demands, commitments or uncertainties that would reduce our current working capital. Our core strategy continues to focus on expanding our geographic reach across the United States and building our store and brand portfolio through organic growth and acquisitions. ~~Based on our strategy we may need to raise additional capital in the future through equity offerings and/or debt financings.~~ We believe that some of our store acquisitions and new store openings can come from cash flow from operations.

We anticipate that we may need additional financing through equity offerings and/or debt financings in the future to continue to acquire and open new stores and related businesses. To date, we have financed our operations through the issuance and sale of common stock, convertible notes, and warrants.

Critical Accounting Policies, Judgements, and Estimates

~~Business Combinations~~

~~Note 1 - Operations~~For a summary of the Company’s critical accounting policies, judgements, and ~~Summary of Significant Accounting Policies~~estimates, please refer to ~~the consolidated financial statements included in Part II.~~ Item 87 of our Form 10-K for the year ended December 31, 2021 describes the significant accounting policies used in preparation of these consolidated financial statements. We believe the following critical accounting policy and assumptions may have a material impact on reported financial condition and operating performance and involve significant levels of judgement to account for highly uncertain matters or are susceptible to significant change. In each of these areas, management makes estimates based on historical results, current trends and future projections. Therefore, these are considered to be our critical accounting policies and estimates.

We account for transactions that represent business combinations under the acquisition method of accounting, which requires us to allocate the total consideration paid for each acquisition to the assets we acquire and liabilities we assume based on their fair values as of the date of acquisition, including identifiable intangible assets. The allocation of the purchase price utilizes significant estimates in determining the fair values of identifiable assets acquired and liabilities assumed, especially with respect to intangible assets. We may refine our estimates and make adjustments to the assets acquired and liabilities assumed over a measurement period, not to exceed one year.

The Company has financial liabilities resulting from our business combinations, including contingent consideration arrangements. We estimate the fair value of these financial liabilities using Level 3 inputs that require the use of numerous assumptions, which may change based on the occurrence of future events and lead to increased or decreased operating income in future periods. Estimating the fair value at an acquisition date and in subsequent periods involves significant judgements, including projecting the future financial performance of the acquired businesses. The Company will update its assumptions each reporting period based on new developments and record such amounts at fair value based on the revised assumptions. Changes in the fair value of these financial liabilities are recorded in the Consolidated Statements of Operations within other income (expense).

~~Impairment of Goodwill and Intangible Assets~~

Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. The Company reviews goodwill for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate the asset might be impaired. The Company performs impairment reviews for its reporting units using a fair value method based on management's judgments and assumptions or third-party valuations. For goodwill impairment testing purposes, the Company determined four reporting units, three of which were subject to a quantitative assessment. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. In estimating the fair value, the Company uses the income approach in which discounted cash flow analyses are used to derive estimates of fair value of each reporting unit. Multiples of earnings based on the average of historical, published multiples of earnings of comparable entities with similar operations and economic characteristics are also used in developing estimated fair values. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." These calculations contain uncertainties as they require management to make assumptions about market comparables, future cash flows and appropriate discount rates (based on weighted average cost of capital ranging from 13% to 16% at June 30, 2022) to reflect the risk inherent in the future cash flows and to derive a reasonable enterprise value and related premium. The estimated future cash flows reflect management's latest assumptions of the financial projections based on current and anticipated competitive landscape, including estimates of revenue based on production volumes over the foreseeable future and long-term growth rates, and operating margins based on historical trends and future cost containment activities. A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on the results of the goodwill impairment test and on the Company's results of operations. The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill. The Company is subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value. As a result of the tests, the Company recorded an impairment to goodwill during the second quarter of 2022. ~~Refer to Note 8, "Goodwill and Intangible Assets," of the notes to the condensed consolidated financial statements for additional information.~~

The Company reviews long-lived assets, including property, plant and equipment and other intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that the asset's carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived Assets." ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the

asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. Intangible assets with definite lives continue to be amortized over their estimated useful lives and are subject to impairment testing as part of their asset group if events or changes in circumstances indicate that the asset might be impaired. A considerable amount of management judgment and assumptions are required in performing the impairment tests. During the second quarter of 2022, the Company concluded it had a triggering event. The Company’s market capitalization fell below total net assets. In addition, financial performance continued to weaken during the quarter, which is 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. These impairments were measured either under an income approach utilizing forecasted discounted cash flows to determine fair values of the impaired assets. These methods are consistent with the methods the Company employed in prior periods to value intangible assets. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement," and primarily consist of expected future operating margins and cash flows, weighted average cost of capital rates (13.3%), estimated salable values and third-party appraisal techniques such as market comparables. To the extent that profitability declines as compared to forecasted profitability or if adverse changes occur to key assumptions or other fair value measurement inputs, further impairment of long-lived assets could occur in the future. Refer to Note 8, "Goodwill and Intangible Assets," of the notes to the condensed consolidated financial statements for additional information.

~~OFF-BALANCE SHEET ARRANGEMENTS~~Off Balance-Sheet Arrangements

We do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISK.~~RISK

For a summary of the Company’s quantitative and qualitative disclosures about market risk, please refer to Item 7A of our Form 10-K for the year ended December 31, ~~2021.~~2022.

ITEM 4. CONTROLS AND ~~PROCEDURES.~~PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~"Exchange Act")) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, including the possibility of human error, the circumvention or overriding of controls, or fraud, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if any, within our organization have been or will be prevented or detected.

As of the period covered by this Quarterly Report on Form 10-Q, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Our management concluded that as of June 30, ~~2022,~~2023, our disclosure controls and procedures were not effective because of the material weaknesses in our internal control over financial reporting identified by management as of December 31, 2021 (described below). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.

Material Weaknesses in Control Activities

~~The following~~Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act are controls and other procedures designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

As of December 31, 2022, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Our management concluded that as of

June 30, 2023, our disclosure controls and procedures were not effective because of the material weaknesses in our internal control ~~activities~~over financial reporting described below.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed by or under the supervision of ~~December 31, 2021, several~~the Company’s Chief Executive Officer and Chief Financial Officer, and overseen by the Board of ~~which also were determined~~Directors, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes policies and procedures that:

•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with the authorization of its management and directors; and

•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s consolidated financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material ~~weaknesses at December 31, 2020 and still exist~~weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Management conducted an evaluation of the effectiveness of the Company’s internal control ~~environment~~over financial reporting using the criteria in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). As a result of this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of June 30, ~~2022:~~2023 because of the material weaknesses in internal control over financial reporting discussed below.

•Control Environment: The Company did not maintain an effective control environment based on the criteria established in the COSO framework, which resulted in deficiencies in principles associated with the control environment.

In addition, the following material weaknesses were previously identified and contributed to the material weakness in the control environment:

•Insufficient resources within the accounting and financial reporting department to review the accounting ~~for~~of complex financial reporting transactions including areas such as business combinations, share based compensation and the related income tax reporting

•Ineffective controls over updating and distributing accounting policies and procedures across the organization.

The control environment material weaknesses contributed to other material weaknesses within our system of internal controls over financial reporting related to the following COSO components:

•Risk Assessment: The Company did not design and implement an effective risk assessment based on the criteria established in the COSO framework and identified deficiencies in the principles associated with the risk assessment component of the COSO framework.

•Information and Communication: The Company did not have an effective information and communication process that identified and assessed the source of and controls necessary to ensure the reliability of information used in financial reporting and that communicates relevant information about roles and responsibilities for internal control over financial reporting.

•~~There are inadequate segregation~~Monitoring Activities: The Company did not have effective monitoring activities to assess the operation of ~~duties within~~internal control over financial reporting, including the ~~various bank accounts~~continued appropriateness of control design and level of documentation maintained to support control effectiveness.

•Control Activities: As a consequence of the ~~Company~~material weaknesses described above, internal control deficiencies related to ~~prevent~~the design and ~~detect unauthorized transactions~~operation of process-level controls and general information technology controls were determined to be pervasive throughout the Company’s financial reporting processes.

In addition, the following material weaknesses were previously identified and contributed to the material weakness in ~~a timely manner. Additionally, there are deficiencies in the segregation of duties issues within IT, human resources, and manual journal entry posting processes.~~control activities:

•~~There are inadequate~~Inadequate information and technology general controls, including segregation of duties, change management, and user access, which were inadequate to support financial reporting applications and support automated controls and functionality.

•~~There are inadequate~~Inadequate controls over physical inventory counts.

•

~~During the review process related to the six months ended June 30, 2022, the Company identified a material weakness in one of the Company’s internal~~Inadequate controls ~~related to the review of valuations. Specifically, in the second quarter of 2022, there were ineffective controls regarding~~over valuations, inclusive of appropriate valuation model inputs and appropriate forecasting for prospective financial information.

•Inadequate segregation of duties within human resources, manual journal entry posting processes, and various bank accounts of the Company to prevent and detect unauthorized transactions in a timely manner.

~~Deficiencies~~While these material weaknesses did not result in ~~control activities contributed to~~ material ~~accounting errors identified~~misstatements of the Company’s consolidated financial statements as of and ~~corrected through~~for the year ended December 31, 2022, ~~and prior years. These corrected design deficiencies in control activities were previously considered to contribute to the potential for there to have been~~these material ~~accounting errors in multiple financial statement~~weaknesses create a reasonable possibility that a material misstatement of account balances ~~and disclosures.~~or disclosures in annual or interim consolidated financial statements may not be prevented or detected in a timely manner.

The ~~Company is~~Company’s independent registered public accounting firm, Grant Thornton LLP, which audited the 2022 consolidated financial statements included in the ~~process~~Form 10-K, has expressed an adverse opinion on the Company's internal control over financial reporting.

Remediation Plan and Status

Our management is committed to remediating identified control deficiencies (including both those that rise to the level of ~~remediating the above~~a material weakness ~~for 2022.~~

~~Changes in Internal Control Over Financial Reporting~~

~~There were no changes~~and those that do not), fostering continuous improvement in our internal controls and enhancing our overall internal controls environment.

Through the full year of 2023, the Company initiated and will continue efforts toward implementation of certain steps in its remediation plan, including:

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

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

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

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

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

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

The following remaining activities are scheduled to occur in the first half of 2023 in anticipation of conducting management’s testing that will begin in the first half of 2023 in support of issuing management’s assessment of internal control over financial reporting ~~except~~ as noted above, during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except for the implementation of ~~remediation plans to address the material weaknesses discussed above.~~

~~Material Weakness Remediation Plan and Status~~

Our remediation efforts are ongoing and we will continue our initiatives to implement and document policies, procedures, and internal controls. In 2021, the Company completed the following remedial actions:December 31, 2023:

•In 2021 and into 2022, the Company hired and trained additional resources within the accounting and financial reporting departments to review the accounting for warrant compensation accounting, share-based compensation accounting, and rebates.

•~~Hired and trained additional resources to specifically manage cash and ensure adequate segregation of duties.~~

•~~Implemented numerous general and access controls over~~Conduct initial organization-wide training sessions with all ~~information technology (IT) systems that supports the Company's financial reporting processes.~~control owners.

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

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

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

•Implementation of controls ~~over inventory count procedures.~~across all financial reporting processes and information technology environments.

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

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

•Ongoing training with control owners, as necessary.

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

Our management believes that these remediation actions, ~~and additional actions to be taken, are reasonably designed to~~when fully implemented, will remediate the ~~control deficiencies~~material weaknesses we have identified and strengthen our internal control over financial reporting. ~~As we~~Our remediation efforts are ongoing and additional remediation initiatives may be necessary. We will continue our initiatives to ~~evaluate~~implement and ~~work to improve our~~document the strengthening of existing, and development of new policies, procedures, and internal ~~control over financial reporting, management may determine to take additional measures to address control deficiencies or modify certain of the remediation measures described above.~~controls.

Remediation of the identified material weaknesses and strengthening our internal control environment ~~has continued during the period ended June 30, 2022 and~~ will ~~continue~~require a substantial effort throughout ~~2022 and beyond, as necessary.~~2023. We will test the ongoing operating effectiveness of the new and existing controls in future periods. The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

While we believe the steps taken to date and those planned for implementation will remediate the ineffectiveness of our internal control over financial reporting, we have not completed all remediation efforts identified herein. Accordingly, as we continue to monitor the effectiveness of our internal control over financial reporting in the areas affected by the material weaknesses described above, we have and will continue to perform additional procedures prescribed by management, including the use of manual mitigating control procedures and employing any additional tools and resources deemed necessary, to ensure that our consolidated financial statements are fairly stated in all material respects.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, except for the implementation of remediation plans to address the material weaknesses discussed above, during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3432

PART II – OTHER INFORMATION

~~Item~~ITEM 1. ~~Legal Proceedings~~LEGAL PROCEEDINGS

None.

~~Item~~ITEM 1A. ~~Risk Factors~~RISK FACTORS

For a summary of the Company’s risk factors, please refer to Item 9A of our Form 10-K for the year ended December 31, ~~2021.~~

2022.

~~Item~~ITEM 2. ~~Unregistered Sales of Equity Securities and Use of Proceeds~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None.~~On October 12, 2022, the Company purchased certain assets from V&W Ag Consulting, LLC (“VW”). The total consideration for the purchase was common stock of the Company worth approximately $0.3 million, including an indemnity holdback of common stock worth approximately $0.1 million. 35,000 shares of common stock for the indemnity holdback payment were issued on June 1, 2023. These shares were issued in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act.

~~Item~~ITEM 3. ~~Defaults upon Senior Securities~~DEFAULTS UPON SENIOR SECURITIES

None.

~~Item~~ITEM 4. ~~Mine Safety Disclosures~~MINE SAFETY DISCLOSURES

Not applicable.

~~Item~~ITEM 5. ~~Other Information~~OTHER INFORMATION

~~None.~~During the three months ended June 30, 2023, no director or officer of the Company adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of SEC Rule 10b5–1(c) or any “non-Rule 10b5–1 trading arrangement,” as defined in Item 408(c) of Regulation S-K.

3533

~~Item~~ITEM 6. ~~Exhibits~~EXHIBITS

The following exhibits are included and filed with this report.


Exhibit						Exhibit Description
3.1						Certificate of Incorporation of GrowGeneration Corp. (Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 as filed on November 9, 2015)
3.2						Bylaws of GrowGeneration Corp. (Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 as filed on November 9, 2015)
31.1						Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer
31.2						Rule 13a-14(a)/15d-14(a) certification of principal financial and accounting officer
32.1						Section 1350 certification of Chief Executive Officer*
32.2						Section 1350 certification of principal financial and accounting officer*
101						Interactive Data Files
101.INS						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Definition


			*			Furnished and not filed.

3634

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on August ~~9, 2022.~~8, 2023.


			GrowGeneration Corp.


			By:			/s/ Darren Lampert
						Darren Lampert, Chief Executive Officer (Principal Executive Officer)


			By:			/s/ ~~Jeff Lasher~~Gregory Sanders
						~~Jeff Lasher,~~Gregory Sanders, Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer)

3735


	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021		Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
Sales at company owned stores	$	55,354	$	108,911	$	119,650	$	190,138
Distribution and other	12,044		4,988		24,247		7,823
E-commerce sales	3,695		11,986		8,963		17,946
Total Net Sales	$	71,093	$	125,885	$	152,860	$	215,907


	Adjusted Cost Basis		Unrealized Gain (Loss)		Recorded Basis
Corporate notes and bonds	$	10,000	$	—	$	10,000


	June 30, 2022		December 31, 2021
Notes receivable	$	2,605	$	2,962
Allowance for losses	(1,233)		(522)
Notes receivable, net	$	1,372	2,440


	June 30, 2022		December 31, 2021
Note receivable	$	1,500	$	1,500
Allowance for losses	(1,233)		(522)
Notes receivable, net	$	267	978


Future amortization expense is as follows:
2022, remainder	$	4,383
2023	8,785
2024	8,668
2025	8,295
2026	3,532
Thereafter	1,135
Total	$	34,798


	Agron		Aquarius		55 Hydro		Charcoir		San Diego Hydro		Grow Warehouse		Grow Depot Maine		Indoor Garden		Downriver
Inventory	$	—	$	957	$	780	$	839	$	1,400	$	2,450	$	326	$	372	$	824
Prepaids and other current assets	46		12		29		534		36		30		3		—		3
Furniture and equipment	29		63		50		—		315		250		25		94		50
Liabilities	—		—		—		—		—		(169)		—		—		—
Operating lease right of use asset	98		108		861		—		1,079		641		92		137		273
Operating lease liability	(98)		(108)		(861)		—		(1,079)		(641)		(92)		(137)		(273)
Customer relationships	832		339		809		5,712		605		1,256		549		210		634
Trade name	1,530		485		870		1,099		1,192		2,748		344		353		698
Non-compete	139		—		26		—		6		94		36		2		16
Intellectual property	—		—		—		2,065		—		—		—		—		—
Goodwill	8,673		1,702		3,915		6,119		5,728		11,120		866		661		2,126
Total	$	11,249	$	3,558	$	6,479	$	16,368	$	9,282	$	17,779	$	2,149	$	1,692	$	4,351


	Harvest		Aquaserene	Mendocino	CGS		Hoagtech	All Seasons	MMI	Total
Inventory	$	1,204	1,696	753	875		751	100	3,530	$	16,857
Prepaids and other current assets	7		2	1	1		37	1	—	742
Furniture and equipment	100		500	160	100		144	25	328	2,233
Liabilities	—		—	—	—		(29)	—	(250)	(448)
Operating lease right to use asset	3,782		1,177	408	746		1,569	37	2,332	13,340
Operating lease liability	(3,782)		(1,177)	(408)	(746)		(1,569)	(37)	(2,332)	(13,340)
Customer relationships	1,016		1,235	575	1,382		493	154	2,964	18,765
Trade name	1,392		1,231	414	852		428	117	1,039	14,792
Non-compete	—		11	6	11		3	—	238	588
Intellectual property	—		—	—	—		—	—	—	2,065
Goodwill	4,606		6,976	2,091	4,027		2,105	545	1,202	62,462
Total	$	8,325	11,651	4,000	$	7,248	3,932	942	9,051	$	118,056


	Three Months Ended June 30,
	2022		2021
	(000)		(000)
Net income	$	(136,379)	$	6,713
Income taxes	(283)		2,920
Interest	10		4
Depreciation and amortization	4,783		2,917
EBITDA	$	(131,869)	$	12,554
Impairment loss	127,831		—
Share based compensation (option compensation, warrant compensation, stock issued for services)	1,106		1,914
Adjusted EBITDA	$	(2,932)	$	14,468

Adjusted EBITDA per share, basic	$	(0.05)	$	0.24
Adjusted EBITDA per share, diluted	$	(0.05)	$	0.24