General Overview

As used in this current report and unless otherwise indicated, the terms "we", "us" and "our" mean Grove, Inc.

Grove, Inc. (the "Company") is a Nevada Corporation and has nine wholly owned subsidiaries, Trunano Labs, Inc., a Nevada corporation, Cresco Management, a California corporation, Steam Distribution, LLC, a California limited liability company; One Hit Wonder, Inc., a California corporation; Havz, LLC, d/b/a Steam Wholesale, a California limited liability company, Grove Acquisition Subsidiary, Inc, d/b/a VitaMedica a Nevada corporation, One Hit Wonder Holdings, LLC a California corporation, Infusionz LLC, a Colorado corporation and SWCH, a Delaware corporation.

We are in the business of developing, producing, marketing, and selling raw materials, white label products and end consumer products containing the hemp plant extract, Cannabidiol ("CBD") and health and wellness products not containing CBD. We sell to numerous consumer markets including the nutraceutical, beauty care, pet care and functional food sectors. We seek to take advantage of an emerging worldwide trend to re-energize the production of industrial hemp and to foster its many uses for consumers. CBD is derived from hemp stalk and seed.

In addition, we are an operator of an annual tradeshow in the United States related to the CBD industry. The trade show scheduled for November 2020 has been postponed and the Company has not rescheduled this trade show as of the date of this report.

In December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world in 2020 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company has transition to a combination of work from home and social distancing operations and there has been minimal impact to our internal operations from the transition. The Company is unable to determine if there will be a material future impact to its customers' operations and ultimately an impact to the Company's overall revenues.





Our Growth Strategy



Results of Operations

The following summary of the Company's operations should be read in conjunction with its unaudited condensed consolidated financial statements for the three months ended September 30, 2021 and 2020, which are included herein.





Three Months Ended September 30, 2021 Compared to Three Months Ended September
30, 2020



                                 September 30,
                             2021            2020           Change
Revenue                   $ 8,449,754     $ 2,937,442     $ 5,512,312
Cost of revenue             3,067,376       1,619,208       1,448,168
Operating expenses          4,946,835       2,078,320       2,868,515
Other expenses (income)      (285,041 )        48,987         334,028
Net income (loss)         $   511,711     $  (809,073 )   $ 1,320,784

Revenues increased by $5,512,312 or 188% compared with the same period last year. $881,573 was from VitaMedica sales of non-CBD health and wellness products, the Company's direct to consumer business of new products increased by approximately $2,465,000 with the remaining increase related to increases in white label and private label CBD sales.

Cost of revenue increased by $1,448,168 or 89% compared with the same period last year. $298,373 was the cost of revenue for the VitaMedica sales of non-CBD health and wellness products and the remaining increase was direction related to the increase in sales. The improved profit margin of 18.8% is from the non-CBD health and wellness products, the significant increase in direct to consumer sales and the Company's investments in additional equipment to automate more of the overall packaging process.

Operating expenses increased by $2,868,515 or 138% compared with the same period last year. The acquisition of VitaMedica increased the costs by $463,894, sales and marketing, exclusive of VitaMedica increased by $773,377, increase of $499,905 of amortization of stock compensation, an increase of $208,740 of stock compensation and increases in compensation expense for additional resources to manage the growth in the business.






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In the three months ended September 30, 2021, there was a gain on the extinguishment of the SBA PPP loan of $300,995 and offset by $15,956 of interest expense.

The Company had net income of $511,711 and a net loss of $809,073 for the three months ended September 30, 2021, and 2020, respectively. The increase in net income is primarily related to the increase in gross profit.

Liquidity and Capital Resources





Working Capital



                           As of             As of
                       September 30,        June 30,
                           2021               2021
Current assets        $    17,789,134     $ 18,293,083
Current liabilities   $     4,249,903     $  5,819,161
Working capital       $    13,539,231     $ 12,473,922




Cash Flows



                                                  Three Months Ended September 30,
                                                     2021                   2020
Cash flows provided by (used in) operating
activities                                    $          817,357       $      (637,185 )
Cash flows (used in) provided by investing
activities                                            (2,166,869 )             270,668
Cash flows (used in) financing activities               (150,000 )             (12,000 )
Net decrease in cash during period            $       (1,499,512 )     $      (378,517 )

At September 30, 2021, the Company had cash of $13,034,699 or a decrease of $1,499,512 from June 30, 2021. Cash increased from the net income during the quarter and non-cash transactions of $1,428,291 and offset by $610,934 in changes in assets and liabilities.

Net cash (used in) provided by investing activities for the three months ended September 30, 2021, and 2020 was ($2,166,869) and $270,668, respectively. For the period ended September 30, 2021, the use of cash was primarily due to the $2,000,000 paid for the acquisition of VitaMedica and $166,869 in equipment purchases. In the prior year the cash provided by investing activities was from the net cash acquired in the purchase of Infusionz and the sale of fixed assets.

Net cash flows used by financing activities for the three months ended September 30, 2021, was $150,000 compared to $12,000 in the three months ended September 30, 2020. The use of cash in both periods was the repayment of notes payable.

Related to the acquisition of VitaMedica, the Company has agreed to $1,000,000 in debt obligations and are payable within the next 12 months.

On October 19, 2021, the Company made a $2,100,000 cash payment for the acquisition of Interactive Offers and committed to an additional $600,000 cash payment in the form of an earnout payment based on certain revenue milestones in accordance with and subject to the terms and conditions of the I/O Agreement within the next 12 months.

We have sufficient working capital to fund our operations over the twelve months following the date of the issuance of these condensed consolidated financial statements and meet all of our debt obligations.

In December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company has transition to a combination of work from home and social distancing operations and there has been minimal impact to our internal operations from the transition. The Company is unable to determine if there will be a material future impact to its customers' operations and ultimately an impact to the Company's overall revenues.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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