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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, 2021
OR
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 CORPORATION
(Exact name of small business issuer as specified in its charter)
 
Colorado 46-5008129
(State of other jurisdiction
of incorporation)
 (IRS Employer
ID No.)
 
5619 DTC Parkway, Suite 900
Greenwood Village, Colorado 80111
(Address of principal executive offices)
 
(800) 935-8420
(Issuer’s Telephone Number)
 
Securities registered pursuant to Section 12(b) of the Act: 
Title of each class Trading symbol Name of each exchange on which registered
Common Stock, par value $0.001 per share GRWG The NASDAQ Stock Market LLC
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ 
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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 12, 2021 there were 59,607,234 shares of the registrant’s common stock issued and outstanding. 




TABLE OF CONTENTS
 
  Page No.
   
  
   
 
 
 
 
 
   
   
 

i


PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GROWGENERATION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

 June 30,
2021
December 31,
2020
 (Unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$67,155 $177,912 
Marketable securities57,357  
Accounts receivable, net4,377 3,901 
Notes receivable, current4,535 2,612 
Inventory, net95,937 54,024 
Income taxes receivable 655 
Prepaids and other current assets26,286 11,125 
Total current assets255,647 250,229 
Property and equipment, net10,455 6,475 
Operating leases right-of-use assets, net31,661 12,088 
Notes receivables, net of current portion1,371 1,200 
Intangible assets, net44,279 21,490 
Goodwill108,740 62,951 
Other assets694 301 
TOTAL ASSETS$452,847 $354,734 
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$36,481 $14,623 
Accrued liabilities2,639 672 
Payroll and payroll tax liabilities4,412 2,655 
Customer deposits6,793 5,155 
Sales tax payable2,046 1,161 
Income taxes payable1,846  
Current maturities of lease liability5,464 3,001 
Current portion of long-term debt83 83 
Total current liabilities59,764 27,350 
Deferred tax liability1,697 750 
Operating lease liability, net of current maturities27,427 9,479 
Long-term debt, net of current portion106 158 
Total liabilities88,994 37,737 
Stockholders’ Equity:
Common stock60 57 
Additional paid-in capital353,575 319,582 
Retained earnings (deficit)10,218 (2,642)
Total stockholders’ equity363,853 316,997 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$452,847 $354,734 
 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
1


GROWGENERATION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2021202020212020
Sales$125,885 $43,451 $215,907 $76,433 
Cost of sales90,172 31,866 154,817 55,902 
Gross profit35,713 11,585 61,090 20,531 
Operating expenses:
Store operations12,624 3,877 20,806 7,516 
Selling, general, and administrative10,563 4,431 17,968 11,496 
Depreciation and amortization2,917 468 4,971 827 
Total operating expenses26,104 8,776 43,745 19,839 
Income from operations9,609 2,809 17,345 692 
Other income (expense):
Other expense(8)(66)(46)(61)
Interest income36  40 25 
Interest expense(4)(13)(6)(20)
Total non-operating income (expense), net24 (79)(12)(56)
Net income before taxes9,633 2,730 17,333 636 
Provision for income taxes(2,920)(156)(4,473)(156)
Net income $6,713 $2,574 $12,860 $480 
Net income per share, basic$0.11 $0.07 $0.22 $0.01 
Net income per share, diluted$0.11 $0.06 $0.22 $0.01 
Weighted average shares outstanding, basic59,061 38,617 58,588 38,224 
Weighted average shares outstanding, diluted60,223 41,016 59,794 40,241 
 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
2


GROWGENERATION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(in thousands)
(Unaudited) 
  
Common StockAdditional
Paid-In Capital
Retained
Earnings (Deficit)
Total
Stockholders’ Equity
 SharesAmount
Balances, December 31, 202057,151 $57 $319,582 $(2,642)$316,997 
Common stock issued upon warrant exercise40 — 111 — 111 
Common stock issued upon cashless warrant exercise535 1 (1)—  
Common stock issued upon exercise of options1 — 2 — 2 
Common stock issued upon cashless exercise of options5 — — —  
Common stock issued in connection with business combinations548 — 29,249 — 29,249 
Common stock issued for share based compensation300 — — —  
Common stock redeemed in litigation settlement(90)— — —  
Common stock redemption(96)— (3,954)— (3,954)
Share based compensation— — 1,187  1,187 
Net income— — — 6,147 6,147 
Balances, March 31, 202158,394 $58 $346,176 $3,505 $349,739 
Common stock issued upon warrant exercise216 — 224 — 224 
Common stock issued upon cashless warrant exercise119 — — —  
Common stock issued upon exercise of options460 1 1,729 — 1,730 
Common stock issued upon cashless exercise of options272 — — —  
Common stock issued in connection with business combinations101 1 3,938 — 3,939 
Share based compensation— — 1,508 — 1,508 
Net income— — — 6,713 6,713 
Balances, June 30, 202159,562 $60 $353,575 $10,218 $363,853 
 
3


Common StockAdditional
Paid-In Capital
Retained
Earnings (Deficit)
Total
Stockholders’ Equity
 SharesAmount
Balances, December 31, 201936,876 $37 $60,742 $(7,970)$52,809 
Common stock issued upon warrant exercise191 — 510 — 510 
Common stock issued upon cashless warrant exercise19 — — —  
Common stock issued upon cashless exercise of options280 — — —  
Common stock issued in connection with business combinations250 — 1,102 — 1,102 
Common stock issued for assets24 — 101 — 101 
Common stock issued for services50 — — —  
Common stock issued for share based compensation519 1 1,760 — 1,761 
Share based compensation— — 2,209 — 2,209 
Net loss— — — (2,094)(2,094)
Balances, March 31, 202038,209 $38 $66,424 $(10,064)$56,398 
Common stock issued upon warrant exercise81 — 282 — 282 
Common stock issued upon cashless warrant exercise78 — — —  
Common stock issued upon cashless exercise of options30 — — —  
Common stock issued in connection with business combinations108 — 705 — 705 
Common stock issued for assets10 — 67 — 67 
Common stock issued for services325 — 717 — 717 
Common stock issued for share based compensation5 — 25 — 25 
Share based compensation— — 1,162 — 1,162 
Net income— — — 2,574 2,574 
Balances, June 30, 202038,846 $38 $69,382 $(7,490)$61,930 
 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4


GROWGENERATION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
 
 Six Months Ended June 30,
 20212020
Cash flows from operating activities:  
Net income $12,860 $480 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization4,971 827 
Stock-based compensation expense3,241 5,302 
Bad debt expense, net of recoveries313 195 
Deferred taxes947  
Changes in operating assets and liabilities:
Accounts and notes receivable(2,883)652 
Inventory(32,763)(6,154)
Prepaid expenses and other assets(14,487)(2,550)
Accounts payable and accrued liabilities23,280 6,608 
Operating leases838 157 
Payroll and payroll tax liabilities1,757 272 
Income taxes payable1,846 156 
Customer deposits1,469 (169)
Sales tax payable885 345 
Net cash provided by operating activities2,274 6,121 
Cash flows from investing activities:  
Assets acquired in business combinations(48,045)(3,032)
Purchase of marketable securities(57,357) 
Purchase of property and equipment(4,428)(1,280)
Purchase of intangibles(1,262)(709)
Net cash used in investing activities(111,092)(5,021)
Cash flows from financing activities:  
Principal payments on long term debt(52)(47)
Common stock redeemed(3,954) 
Proceeds from the sale of common stock and exercise of warrants, net of expenses2,067 792 
Net cash provided by (used in) financing activities(1,939)745 
Net change(110,757)1,845 
Cash at the beginning of period177,912 12,979 
Cash at the end of period$67,155 $14,824 
Supplemental disclosures of non-cash activities:  
Cash paid for interest$6 $20 
Common stock issued for accrued payroll$ $718 
Common stock issued for business combination$33,187 $1,808 
Assets acquired by issuance of common stock$ $168 
Right to use assets acquired under new operating leases$19,573 $1,095 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5


GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
 
1.GENERAL
 
GrowGeneration Corp (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 indoor and greenhouse lighting, ventilation systems and accessories for hydroponic gardening. Currently, the Company owns and operates a chain of fifty-eight (58) retail hydroponic/gardening stores across 12 states, an online e-commerce platform, and proprietary businesses that market grow solutions through our platforms and other wholesale customers. The Company’s plan is to continue to acquire, open and operate hydroponic/gardening stores and related businesses throughout the United States. 

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, 2020.  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 per share data, is in thousands (000).
 
Risk and Uncertainties
 
The COVID-19 pandemic has created significant public health concerns as well as economic disruption, uncertainty, and volatility which may negatively affect our business operations. As a result, if the pandemic persists or worsens, 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 temporary supply chain delays of our inventory. 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.

New Accounting Policies Adopted During the Six Months Ended June 30, 2021
 
Securities
 
The Company classifies its commercial paper and debt securities as marketable securities. Marketable securities with available fair market values are stated at fair market values. Unrealized gains and unrealized losses on these marketable securities are reported, net of applicable income taxes, in other comprehensive income. Realized gains or losses on sale of marketable securities are computed using primarily the moving average cost and reported in net income. For the six months ended June 30, 2021, there were no significant unrealized gains or losses recorded.
 


6

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
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 judgment. Accordingly, the degree of judgment 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 sales 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 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.
 
 LevelJune 30,
2021
December 31,
2020
Cash equivalents2$67,155 $177,912 
Marketable securities2$57,357 $ 
Notes receivable2$5,906 $2,937 
Notes receivable impaired3$ $875 
Accounts receivable2$4,377 $3,901 

7

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
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. 
 
As an emerging growth company, the Company is permitted to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies. The Company has chosen to take advantage of the extended transition period for complying with new or revised accounting standards.
 
Refer to Note 3 to the Consolidated Financial Statements reported in Form 10-K for the year ended December 31, 2020 for recently issued accounting pronouncements that are pending adoption. 
 
Recently Adopted Accounting Pronouncements
 
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this new guidance, effective January 1, 2020, did not have a material impact on our Financial Statements.
 
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The standard was effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those periods. There was no material impact on our consolidated financial statements and related disclosures as a result of adopting this standard.
 
4.REVENUE RECOGNITION
 
The following table disaggregates revenue by source:
 Three Months Ended
June 30, 2021
Three Months Ended
June 30, 2020
Six Months Ended June 30, 2021Six Months Ended June 30, 2020
Sales at company owned stores$108,911 $40,128 $190,138 $71,912 
Distribution4,988  7,823  
E-commerce sales11,986 3,323 17,946 4,521 
Total Revenues$125,885 $43,451 $215,907 $76,433 
 
8

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
4.REVENUE RECOGNITION, continued

The opening and closing balances of the Company’s customer trade receivables and customer deposit liability are as follows:
 
 ReceivablesCustomer Deposit Liability
Opening balance, January 1, 2021$7,713 $5,155 
Closing balance, June 30, 2021
10,283 6,793 
Increase (decrease)$2,570 $1,638 
Opening balance, January 1, 2020$4,455 $2,504 
Closing balance, June 30, 2020
3,609 2,335 
Increase (decrease)$(846)$(169)
 
Of the total amount of customer deposit liability as of January 1, 2021, $2,873 was reported as revenue during the six months ended June 30, 2021. Of the total amount of customer deposit liability as of January 1, 2020, $1,599 was reported as revenue during the six months ended June 30, 2020.
 
The Company also has customer trade receivables under longer term financing arrangements at interest rates ranging from 9% to 12% with repayment terms ranging for 12 to 18 months. Long term trade receivables as of June 30, 2021 and December 31, 2020 are as follows:
 
 June 30,
2021
December 31,
2020
Note receivable$6,172 $4,104 
Allowance for losses(266)(292)
Notes receivable, net$5,906 3,812 
 
The following table summarizes changes in notes receivable balances that have been deemed impaired.
 
 June 30,
2021
December 31,
2020
Note receivable$266 $1,166 
Allowance for losses(266)(292)
Notes receivable, net$ 874 

9

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
5.INVESTMENTS
 
Marketable securities have maturities of less than one year as of June 30, 2021. There were no significant realized or unrealized gains or losses for the six months ended June 30, 2021.

The components of investments, available for sales securities, as of June 30, 2021 were as follows:
 
 Fair Value LevelAdjusted Cost BasisUnrealized Gain (Loss)Recorded
Basis
Commercial paperLevel 2$9,994 $ $9,994 
Corporate notes and bondsLevel 247,363  47,363 
Marketable securities $57,357 $ $57,357 
 
6.NOTES RECEIVABLE
 
Notes receivable include customer trade receivables under long term financing arrangements and other note receivables not associated with customer transactions.
 
 June 30,
2021
December 31,
2020
Trade receivables under longer term financing arrangements$5,906 $3,812 
Note receivable, non-customer related  
Subtotal5,906 3,812 
Less, current portion(4,535)(2,612)
Notes receivable, noncurrent$1,371 1,200 
 
7.PROPERTY AND EQUIPMENT
 
 June 30,
2021
December 31,
2020
Vehicles$2,256 $1,342 
Building1,107 477 
Leasehold improvements3,381 1,988 
Furniture, fixtures and equipment8,223 5,739 
Total property and equipment, gross14,967 9,546 
Accumulated depreciation and amortization(4,512)(3,071)
Property and equipment, net$10,455 $6,475 
 
Depreciation expense for the three and six months ended June 30, 2021 was $782 thousand and $1.4 million, respectively. Depreciation expense for the three and six months ended June 30, 2020 was $374 thousand and $705 thousand, respectively.

10

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
8.GOODWILL AND INTANGIBLE ASSETS
 
The changes in goodwill are as follows:
 
 June 30, 2021December 31,
2020
Balance, beginning of period$62,951 $17,799 
Goodwill additions and measurement period adjustments45,789 45,152 
Balance, end of period$108,740 $62,951 
 
Intangible assets consist of the following:
 
 June 30, 2021December 31, 2020
 Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Tradenames$24,184 $(2,298)$13,923 $(398)
Patents, trademarks100 (35)100 (9)
Customer relationships18,372 (1,260)6,297 (138)
Non-competes1,115 (118)796 (22)
Intellectual property2,065 (138)  
Capitalized software2,762 (470)1,163 (222)
 $48,598 $(4,319)$22,279 $(789)
 
Amortization expense for the six months ended June 30, 2021 and 2020 was $2,135 and $3,530, respectively.
 
Future amortization expense is as follows: 
2021, remainder$4,714 
20229,525 
20239,164 
20248,817 
20258,283 
Thereafter3,776 
Total$44,279 
 
11

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
9.LONG-TERM DEBT
 
June 30,
2021
December 31,
2020
Long term debt is as follows:  
Wells Fargo Equipment Finance, interest at 3.5% per annum, payable in monthly installments of $518.96 beginning April 2016 through March 2021, secured by warehouse equipment with a book value of $25
$ $1 
Notes payable issued in connection with seller financing of assets acquired, interest at 8.125%, payable in 60 installments of $8,440.00, Due August 2023
189 240 
 $189 $241 
Less Current Maturities(83)(83)
Total Long-Term Debt$106 $158 
 
Interest expense for the three months ended June 30, 2021 and 2020 was $4 thousand and $13 thousand, respectively. 
  
Interest expense for the six months ended June 30, 2021 and 2020 was $6 thousand and $20 thousand, respectively. 

10.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 1-5 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 noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods.
 
 June 30,
2021
December 31,
2020
Right to use assets, operating lease assets$31,661 $12,088 
Current lease liability$5,464 $3,001 
Non-current lease liability27,427 9,479 
 $32,891 $12,480 
 
 June 30,
2021
June 30,
2020
Weighted average remaining lease term7.17 years3.44 years
Weighted average discount rate6.0 %7.6 %
 
 Six Months Ended
June 30,
 20212020
Operating lease costs$3,548 $1,714 
Short-term lease costs1,109 31 
Total operating lease costs$4,657 $1,745 
 
12

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
10.LEASES, continued

The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2021: 

2021 (remainder of the year)$3,769 
20226,720 
20236,021 
20244,884 
20254,246 
Thereafter15,170 
Total lease payments40,810 
Less: Imputed interest(7,919)
Lease Liability at June 30, 2021
$32,891 
 
11.SHARE BASED PAYMENTS
 
The Company maintains long-term incentive plans for employee, non-employee members of our Board of Directors and consultants. The plans allows us to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, or a combination of awards (collectively, share-based awards).
 
The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based payment awards made to employees and directors of the Company, including stock options and restricted shares. The Company also issues share based payments in the form of common stock warrants to non-employees.
 
The following table presents share-based payment expense for the six months ended June 30, 2021 and 2020.
 
 Six months ended June 30,
 20212020
Restricted stock$1,935 $3,316 
Stock options559 1,986 
Warrants747  
Total$3,241 $5,302 
  
As of June 30, 2021, the Company had approximately $10.4 million of unamortized share-based compensation for option awards and restricted stock awards, which is expected to be recognized over a weighted average period of approximately 3.3 years. As of June 30, 2021, the Company also had approximately $3.3 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 2.5 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 second or third anniversary of the date of grant, subject to the employee’s continuing employment as of that date.
 
13

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
11.SHARE BASED PAYMENTS AND STOCK OPTIONS, continued

Restricted stock activity for the six months ended June 30, 2021 is presented in the following table:
 
 SharesWeighted Average Grant Date Fair Value
Nonvested, December 31, 2020
630 $4.15 
Granted201 $45.56 
Vested(291)$4.39 
Forfeited(9)$18.54 
Nonvested, June 30, 2021
531 $20.40 
 
The table below summarizes all option activity under all plans during the six months ended June 30, 2021:
 
OptionsSharesWeight -
Average
Exercise
Price
Weighted -
Average
Remaining
Contractual
Term
Weighted -
Average
Grant Date
Fair Value
Outstanding at December 31, 2020
1,803 $3.92 3.47$2.38 
Granted —  
Exercised(753)3.05 1.65 
Forfeited or expired(50)4.16 — 2.28 
Outstanding at June 30, 2021
1,000 $4.56 3.31$2.46 
Options vested at June 30, 2021
774 $4.29 2.80$3.31 
   
A summary of the status of the Company’s outstanding stock purchase warrants for the six months ended June 30, 2021 is as follows:
 
 WarrantsWeighted Average
Exercise Price
Outstanding at December 31, 2020
1,393 $7.49 
Issued 
Exercised(968)$2.84 
Forfeited 
Outstanding at June 30, 2021
425 $17.25 
 
14

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
12.EARNINGS PER SHARE
   
The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computation for the three and six months ended June 30, 2021 and 2020.
 
 Three Months Ended
 June 30,
2021
June 30,
2020
Net income $6,713 $2,574 
Weighted average shares outstanding, basic59,061 38,617 
Effect of dilution1,162 2,399 
Adjusted weighted average shares outstanding, dilutive60,223 41,016 
Basic earnings per shares$0.11 $0.07 
Dilutive earnings per share$0.11 $0.06 
 Six Months Ended
 June 30,
2021
June 30,
2020
Net income $12,860 $480 
Weighted average shares outstanding, basic58,588 38,224 
Effect of dilution1,206 2,017 
Adjusted weighted average shares outstanding, dilutive59,794 40,241 
Basic earnings per shares$0.22 $0.01 
Dilutive earnings per share$0.22 $0.01 

13.ACQUISITIONS
 
Our acquisition strategy is to acquire (i) well established profitable hydroponic garden centers in markets where the Company does not have a market presence or in markets where it is increasing its market presence; and (ii) proprietary brands and private label brands. The Company accounts for acquisitions in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed are recorded in the accompanying consolidated balance sheets at their estimated fair values, as of the acquisition date. For all acquisitions, the preliminary allocation of the purchase price was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period as valuations are finalized. The Company has made adjustments to the preliminary valuations of the acquisition based on valuation analysis prepared by independent third-party valuation consultants. All acquisition costs are expensed as incurred and recorded in general and administrative expenses in the consolidated statements of operations.
 
Acquisitions during the six months ended June 30, 2021.
 
On January 25, 2021, the Company purchased 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 $0.8 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
 
On February 1, 2021, the Company purchased 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 $1.3 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.
 




15

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
13.ACQUISITIONS, continued

On February 15, 2021, the Company purchased 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.
 
On February 22, 2021, the Company purchased the assets of San Diego Hydroponics & Organics, a four-store chain of hydroponic and organic garden stores in San Diego, CA. 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.
 
On March 12, 2021, the Company purchased the assets of Charcoir Corporation, who 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.
 
On March 15, 2021, the Company purchased the assets of 55 Hydroponics, a hydroponic and organic superstore located in Santa Ana, CA. 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.
 
On March 15, 2021, the Company purchased the assets of Aquarius, a hydroponic and organic garden store in Springfield, MA. 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.
 
On March 19, 2021, the Company purchased 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 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.

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, MI. 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.

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 County. The total consideration for the purchase if 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.
 
16

GrowGeneration Corporation and Subsidiaries
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2021
13.ACQUISITIONS, continued

The table below represents the allocation of the purchase price to the acquired net assets during the six months ended June 30, 2021.
 

 AgronAquarius55 HydroCharcoirSan Diego Hydro
Inventory$ $957 $780 $839 $1,400 
Prepaids and other current assets29 12 29 534 36 
Furniture and equipment46 63 50  315 
Liabilities     
Operating lease right to use asset87  853  970 
Operating lease liability(87)