GrowGeneration Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Correction of Error in Previously Reported Consolidated Financial Statements

Correction of Error in Previously Reported Consolidated Financial Statements

12 Months Ended

Dec. 31, 2020

Correction of Error in Previously Reported Consolidated Financial Statements [Abstract]

CORRECTION OF ERROR IN PREVIOUSLY REPORTED CONSOLIDATED FINANCIAL STATEMENTS

18.

CORRECTION OF ERROR IN PREVIOUSLY REPORTED CONSOLIDATED FINANCIAL STATEMENTS

Revision

During the fourth quarter of 2020, we identified amounts presented in our inventory and costs of sales reported in prior years that required revision. The revised amounts resulted from an accumulation of errors related to rebates issued from vendors. We determined these errors accumulated in 2019 and prior years. Retained earnings as of January 1, 2019, was also revised to reflect the impact of the error on prior periods. The impact of the error for periods prior 2019 was $525,786.

Pursuant to the guidance of Staff Accounting Bulletin No. 99, Materiality, we concluded that the errors were not material to any of our prior year consolidated financial statements. The accompanying consolidated balance sheet and income statement as of December 31, 2019 includes a cumulative revision relating to this error.

This revision did not have any material effect on income from operations, net income, or cash flows. This revision had no effect on our cash balances.

The following table compares previously reported balances, adjustments, and revised balances as of December 31, 2019.

The revised consolidated financial statements for the year ended December 31, 2019 with the adjustment is detailed below.

	December 31, 2019
	As Previously Reported			Adjustment			Revised
ASSETS
Current assets:
Cash and cash equivalents	$	12,979,444					$	12,979,444
Accounts receivable, net		2,953,921						2,953,921
Notes receivable, net		1,037,541						1,037,541
Inventory		22,659,357			(1,082,748	)		21,576,609
Prepaids and other current assets		2,549,559						2,549,559
Total current assets		42,171,822						41,097,074

Property and equipment, net		3,340,616						3,340,616
Operating leases right-of-use assets, net		7,628,591						7,628,591
Notes receivable		463,747						463,747
Intangible assets, net		233,280						233,280
Goodwill		17,798,932						17,798,932
Other assets		377,364						377,364
TOTAL ASSETS	$	72,022,352					$	70,939,604

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	6,024,750						6,024,750
Payroll and payroll tax liabilities		1,072,142						1,072,142
Customer deposits		2,503,785						2,503,785
Sales tax payable		533,656						533,656
Current maturities of right-of-use assets		1,836,700						1,836,700
Current portion of long-term debt		110,231						110,231
Total current liabilities		12,081,264						12,081,264

Operating leases right-of-use assets, net of current maturities		5,807,266						5,807,266
Long-term debt, net of current portion		242,079						242,079
Total liabilities		18,130,609						18,130,609

Stockholders' Equity:
Common stock; $.001 par value; 100,000,000 shares 36,876,305 shares issued and outstanding as of December 31, 2019		36,876						36,876
Additional paid-in capital		60,742,055						60,742,055
Accumulated deficit		(6,887,188	)		(1,082,748	)		(7,969,936	)
Total stockholders' equity		53,891,743						52,808,995
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	72,022,352					$	70,939,604

	Year Ended December 31, 2019
	As Previously Reported			Adjustment		Revised
Sales	$	79,733,568				$	79,733,568
Cost of sales		57,171,721			556,962		57,728,683
Gross profit		22,561,847					22,004,885

Operating expenses:
Store operations		10,095,422					10,095,422
General and administrative		3,172,019					3,172,019
Share based compensation		2,490,535					2,490,535
Depreciation and amortization		1,044,553					1,044,553
Salaries and related expenses		3,619,197					3,619,197
Total operating expenses		20,421,726					20,421,726

Net income from operations		2,140,121					1,583,159

Other income (expense):
Miscellaneous income (expense)		(4,545	)				(4,545	)
Interest income		144,725					144,725
Interest expense		(401,497	)				(401,497	)
Total non-operating income (expense), net		(261,317	)				(261,317	)

Net income before taxes		1,878,804					1,321,842

Provision for income taxes		0					0

Net income	$	1,878,804					1,321,842

Net income per share, basic	$	0.06				$	0.04
Net income per share, diluted	$	0.06				$	0.04

Weighted average shares outstanding, basic		32,833,594					32,833,594
Weighted average shares outstanding, diluted		33,910,154					33,910,154

	For The Year Ended December 31, 2019
Cash Flows from Operating Activities:	As Previously Reported			Adjustment			Revised
Net income	$	1,878,804			(556,962	)	$	1,321,842
Adjustments to reconcile net income to net cash used in operating Activities:								-
Depreciation and amortization		1,044,553						1,044,553
Provision for doubtful accounts receivable		172,135						172,135
Inventory valuation reserve		429,126						429,126
Amortization of debt discount		356,306						356,306
Stock based compensation		2,490,535						2,490,535
Other		(66,536	)					(66,536	)
Changes in operating assets and liabilities:								-
(Increase) decrease in:								-
Accounts receivable		(3,764,947	)					(3,764,947	)
Inventory		(10,482,014	)		556,962			(9,925,052	)
Prepaid expenses and other assets		(2,061,701	)					(2,061,701	)
Increase (decrease) in:								-
Accounts payable and accrued liabilities		4,165,188						4,165,188
Operating leases		15,375						15,375
Customer deposits		1,987,747						1,987,747
Income taxes		-						-
Payroll and payroll tax liabilities		154,471						154,471
Sales taxes payable		341,698						341,698
Net Cash and Cash Equivalents (Used In) Operating Activities		(3,339,260	)					(3,339,260	)
Cash Flows from Investing Activities:
Assets acquired in business combinations		(9,458,743	)					(9,458,743	)
Purchase of property and equipment		(2,232,812	)					(2,232,812	)
Purchase of goodwill and other intangibles		(119,125	)					(119,125	)
Net Cash and Cash Equivalents (Used In) Investing Activities		(11,810,680	)					(11,810,680	)
Cash Flows from Financing Activities:
Principal payments on long term debt		(460,129	)					(460,129	)
Stock redemptions		-						-
Proceeds from the sales of common stock and exercise of warrants and options, net of expenses		13,949,532						13,949,532
Net Cash and Cash Equivalents Provided by Financing Activities		13,489,403						13,489,403

Net Increase(decrease) in Cash and Cash Equivalents		(1,660,537	)					(1,660,537	)
Cash and Cash Equivalents at Beginning of year		14,639,981						14,639,981
Cash and Cash Equivalents at End of year	$	12,979,444					$	12,979,444