Log in
Log in
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
Sign up
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
  1. Homepage
  2. Equities
  3. United States
  4. OTC Markets
  5. GROWLIFE
  6. News
  7. Summary
    PHOT   US39985X2036

GROWLIFE

(PHOT)
Delayed OTC Markets  -  03:59 2022-10-06 pm EDT
0.000600 USD   -33.33%
04:23pGrowlife, Inc. : Amendments to Articles of Inc. or Bylaws; Change in Fiscal Year, Other Events, Financial Statements and Exhibits (form 8-K)
AQ
04:17pGrowlife, Inc. : Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant, Unregistered Sale of Equity Securities, Financial Statements and Exhibits (form 8-K)
AQ
08/22GROWLIFE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)
AQ
SummaryQuotesChartsNewsCalendarCompanyFinancialsFunds 
SummaryMost relevantAll NewsOther languagesPress ReleasesOfficial PublicationsSector news

GROWLIFE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

05/16/2022 | 06:03pm EDT

In 2021 GrowLife experienced a decline in annual revenue of 11% from the year 2020 primarily due to ceasing the hydroponics business by the beginning of 2021 and an increase in EZ-CLONE revenue in 2021. This decline was offset by an improvement in cost of goods sold of 17% and in operating expenses of 10% which resulted in a 21% improvement to operating loss in 2021 compared to 2020. In addition, total other expenses declined 22% in 2021 compared to 2020. A more detailed explanation of these changes are provided below.



RESULTS OF OPERATIONS



The following table presents certain consolidated statement of operations
information and presentation of that data as a percentage of change from
year-to-year.




         10

  Table of Contents




                                                    Years ended December 31,
                                                     (Dollars in thousamds)
                                     2021           2020         $ Variance       % Variance
Net revenue                            6,199          7,001             (802 )            -11 %
Cost of good sold                      3,406          4,021             (615 )            -15 %
Gross profit                           2,793          2,980             (187 )             -6 %
Operating expenses                     4,318          4,870             (552 )            -11 %
Operating (loss)                      (1,525 )       (1,890 )            365              -19 %
Other expense
Change in fair value of                      )                               )
derivative                              (973            199           (1,172             -589 %
Interest expense, net                 (3,252 )       (1,090 )         (2,162 )            198 %
Loss on debt conversions                (931 )         (984 )             53               -5 %
Gain on extinguishment of debt         1,025             39              986             2528 %
Loss on debt settlement                              (2,422 )          2,422             -100 %
Gain on debt forgiveness                 206                             206              100 %
Total othere expenses                 (3,926 )       (4,258 )            332               -8 %
(Loss) before income taxes            (5,451 )       (6,148 )            697              -11 %
Income taxes                             (22 )         (232 )            210              -91 %
Net (loss)                            (5,473 )       (6,380 )            907              -14 %



YEAR ENDED DECEMBER 31, 2021 COMPARED TO THE YEAR ENDED DECEMBER 31, 2020

Net revenue for the year ended December 31, 2021 decreased by $802,000 to $6,199,000 from $7,001,000 for the year ended December 31, 2020. The decrease resulted from lower hydroponic sales from the decision during 2020 to exit the hydroponics business and the elimination of the hydroponics sales personnel and the impact of the pandemic on the hydroponics segment during the year ended December 31, 2021. The hydroponics revenue for the year ended December 31, 2021 was $35,000 as compared to $1,568,000 for the year ended December 31, 2020. The EZ-CLONE revenue from its line of products for the year ended December 31, 2021 was $6,164,000 as compared to $5,433,000 for the year ended December 31, 2020..



Cost of Goods Sold


Cost of sales for the year ended December 31, 2021 decreased by $615,000 to $3,406,000 from $4,021,000 for the year ended December 31, 2020. The decrease resulted from lower sales in the hydroponics segment, offset by increased EZ-CLONE sales as discussed above.

Gross profit was $2,793,000 for the year ended December 31, 2021 as compared to a gross profit of $2,980,000 for the year ended December 31, 2020. The gross profit percentage was 45.1% for the year ended December 31, 2021 as compared to 42.6% for the year ended December 31, 2020. The increase was due to lower sales in the hydroponics segment, offset by increased EZ-CLONE sales, as discussed above.




Operating Expenses



Operating expenses for the year ended December 31, 2021 were $4,318,000 as compared to $4,870,000 for the year ended December 31, 2020. The variances were as follows: (i) an increase in EZ-CLONE expenses of $394,000, consisting of increase in rent of $60,000, promotion and trade show expenses of $80,000 and payroll of $243,000; offset by (ii) a decrease in Hydroponic expenses of $156,000; (iii) a decrease in payroll of $905,000; and offset by an increase in professional services of $165,000.

Non-cash operating expenses for the year ended December 31, 2021 of $748,000 including (i) depreciation of $37,000; (ii) amortization of intangible assets of $672,000; (iii) stock based compensation of $15,000 related to stock option grants and warrants; and (iv) common stock issued for services of $24,000.

Non-cash operating expenses for the year ended December 31, 2020 of $846,000 including (i) depreciation of $37,000; (ii) amortization of intangible assets of $672,000; (iii) stock based compensation of $125,000 related to stock option grants and warrants; and (iv) common stock issued for services of $12,000.




         11

  Table of Contents




Other Expense


Other expense for the year ended December 31, 2021, was $3,926,000 as compared to $4,258,000 for the year ended December 31, 2020. The other expense for the year ended December 31, 2021, included (i) loss from the increase in derivative liability of $973,000; (ii) gain on extinguishment of debt of $1,025,000 related to prior shutdown of retail operations; and offset by (iii) interest expense of $3,252,000; (iv) loss on debt conversions of $931,000; and (v) gain on debt forgiveness of $206,000. The change in derivative liability is the non-cash change in the fair value and relates to our derivative instruments. The increase in non-cash interest related to accrued interest expense, write-off of original issue discount and the derivative liability calculated on our notes payable. The loss on debt conversions related to the conversion of our notes payable at prices below the market price.

On April 5, 2021, we entered into a Warrant Settlement Agreement dated March 31, 2021, with St. George and Iliad to resolve a dispute related to the calculation of shares issuable under warrants issued in prior financings whereby we agreed that upon the exercise of the warrant of up 14,250,000 shares of our common stock that the balance of the warrant related to a 2018 financing agreement would be cancelled. We recorded a loss on debt settlement of $2,422,000 as of December 31, 2020. The 14,250,000 warrants were exercised during 2021. In 2021, the Company recognized a gain on extinguishment of $1,025,000 due to the change in the fair value of the shares.

The other expense for the year ended December 31, 2020 included (i) benefit from the reduction in derivative liability of $199,000; offset by (ii) interest expense of $1,090,000; and (iii) loss on debt conversions of $984,000 and gain on debt extinguishment of $37,000. The change in derivative liability is the non-cash change in the fair value and relates to our derivative instruments. The non-cash interest related to accrued interest expense on our notes payable. The loss on debt conversions related to the conversion of our notes payable at prices below the market price.



Net Loss


Net loss for the year ended December 31, 2021 was $5,473,000 as compared to $6,380,000 for the for the year ended December 31, 2020 for the reasons discussed above.

Net loss for the year ended December 31, 2021 included non-cash expenses of $4,267,000 including (i) depreciation of $37,000; (ii) amortization of intangible assets of $672,000; (iii) amortization of debt discount of $644,000; (iv) stock based compensation of $15,000 related to stock option grants; (v) common stock issued for services of $24,000; (vi) non-cash interest of $772,000; (vii) loss on debt conversions of $931,000; (viii) change in derivative liability of $973,000; (ix) fair value of derivatives expensed at issuance of $1,429,000;and offset by (x) gain on debt settlement of current liabilities of $1,025,000; and (xi) gain on debt forgiveness of $206,000.

Net loss for the year ended December 31, 2020 included non-cash expenses of $5,076,000 including (i) depreciation of $37,000; (ii) amortization of intangible assets of $672,000; (iii) stock based compensation of $125,000 related to stock option grants and warrants; (iv) common stock issued for services of $12,000; (v) non cash interest and amortization of debt discount of $1,061,000; (vi) loss on debt settlement of $2,422,000; (vii) loss on debt conversion of $945,000; and offset by (vii) benefit from the reduction in derivative liability of $199,000.

We expect losses to continue as we implement our business plan.

LIQUIDITY AND CAPITAL RESOURCES

Financial Accounting Standards Board's ("FASB") Accounting Standard Codification ("ASC") Topic 205-40, Presentation of Financial Statements - Going Concern, requires that management evaluate whether there are relevant conditions and events that, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued.

The accompanying financial statements have been prepared assuming that we will continue as a going concern. However, since inception, we have sustained significant operating losses and such losses are expected to continue for the foreseeable future. As of December 31, 2021, we had an accumulated deficit of $160 million, cash and cash equivalents of $364,000 and a working capital deficit of $885,000 excluding derivative liability, convertible debt, acquisition to be paid in stock and right of use liability. Additionally, we used cash in operating activities of $1,463,000 and $1,951,000 for the years ended December 31, 2021 and 2020, respectively. We will require additional cash funding to fund operations beyond May 31, 2022. Accordingly, management has concluded that we do not have sufficient funds to support operations within one year after the date the financial statements are issued and, therefore, we concluded there was substantial doubt about the Company's ability to continue as a going concern.




         12

  Table of Contents




To fund further operations, we will need to raise additional capital. We may obtain additional financing in the future through the issuance of its common stock, or through other equity or debt financings. Our ability to continue as a going concern or meet the minimum liquidity requirements in the future is dependent on its ability to raise significant additional capital, of which there can be no assurance. If the necessary financing is not obtained or achieved, we will likely be required to reduce its planned expenditures, which could have an adverse impact on the results of operations, financial condition and our ability to achieve its strategic objective. Historically, the Company has been successful in its ability to raise the financing necessary to continue operations without interruption. There can be no assurance that financing will be available on acceptable terms, or at all. The financial statements contain no adjustments for the outcome of these uncertainties. These factors raise substantial doubt about our ability to continue as a going concern and have a material adverse effect on our future financial results, financial position and cash flows.




Operating Activities



Net cash used in operating activities for the year ended December 31, 2021 was $1,463,000. This amount was primarily related to a (i) net loss of $5,473,000, and (ii) net working capital decrease of $294,000; offset by (iii) non-cash expenses of $4,267,000 including (iv) depreciation of $37,000; (v) amortization of intangible assets of $672,000; (vi) amortization of debt discount of $644,000; (vii) stock based compensation of $15,000 related to stock option grants; (viii) common stock issued for services of $24,000; (ix) non-cash interest of $772,000; (x) loss on debt conversions of $931,000; (xi) change in derivative liability of $973,000; (xii) fair value of derivatives expensed at issuance of $1,429,000;and offset by (xiii) gain on debt settlement of current liabilities of $1,025,000; and (ix) gain on debt forgiveness of $206,000.



Financing Activities


Net cash provided by financing activities for the year ended December 31, 2021 was $1,463,000. The amount related to proceeds from note payable of $2,066,000, offset by repayment of notes payable of $603,000.

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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The application of GAAP involves the exercise of varying degrees of judgment. On an ongoing basis, we evaluate our estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies (see summary of significant accounting policies more fully described in Note 3 to Form 10-K for the year ended December 31, 2021), the following policies involve a higher degree of judgment and/or complexity:

Accounts Receivable and Revenue - We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which requires the application of the five-step-principles-based-accounting-model for revenue recognition. These steps include (1) a legally enforceable contract, written or unwritten is identified; (2) performance obligations in the contracts are identified; (3) the transaction price reflecting variable consideration, if any, is identified; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when the control of goods is transferred to the customer at a particular time or over time. Our hydroponic sales were cash or credit card. Our EZ-CLONE sales include credit cash, payments in advance, 3% discount upon receipt and, we extend thirty-day terms to select customers. Accounts receivables are reviewed periodically for collectability. As of December 31, 2021 and 2020, the Company has an allowance for doubtful accounts totaling $10,000 and $5,690, respectively.

Inventories - Inventories are recorded on a first in first out basis Inventory consists of raw materials, work in process and finished goods and components sold by EZ-CLONE to it distribution customers. Inventory is valued at the lower of cost or market.

Fair Value Measurements and Financial Instruments - ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value 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. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 - Quoted prices in active markets for identical assets and liabilities;

Level 2 - Inputs other than level one inputs that are either directly or indirectly observable; and.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of December 31, 2021 and 2020 are based upon the short-term nature of the assets and liabilities.




         13

  Table of Contents



Derivative financial instruments -We evaluate all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a Binomial pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.

Stock Based Compensation - We have share-based compensation plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options to purchase shares of our common stock at the fair market value at the time of grant. Stock-based compensation cost is measured by us at the grant date, based on the fair value of the award, over the requisite service period using an estimated forfeiture rate. For options issued to employees, we recognize stock compensation costs utilizing the fair value methodology over the related period of benefit. Grants of stock options and stock to non-employees and other parties are accounted for in accordance with the ASC 718.

Convertible Securities - Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities issued subsequent to December 31, 2015. We will evaluate our contracts based upon the earliest issuance date.

© Edgar Online, source Glimpses

All news about GROWLIFE
04:23pGrowlife, Inc. : Amendments to Articles of Inc. or Bylaws; Change in Fiscal Year, Other Ev..
AQ
04:17pGrowlife, Inc. : Entry into a Material Definitive Agreement, Creation of a Direct Financia..
AQ
08/22GROWLIFE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS..
AQ
08/11Growlife : Amendments to Articles of Incorporation/Bylaws/Change in Fiscal Year - Form 8-K
PU
08/11Growlife, Inc. : Amendments to Articles of Inc. or Bylaws; Change in Fiscal Year, Other Ev..
AQ
07/07Growlife, Inc. : Change in Directors or Principal Officers, Financial Statements and Exhib..
AQ
07/07GrowLife, Inc. Appoints Thom Kozik as Chairman
CI
06/23Growlife, Inc. : Other Events (form 8-K)
AQ
06/07Growlife : Marking its formal entrance into the mushroom business, the company agrees to a..
PU
06/07Growlife, Inc. : Entry into a Material Definitive Agreement, Regulation FD Disclosure, Fin..
AQ
More news
Financials (USD)
Sales 2021 6,20 M - -
Net income 2021 -5,47 M - -
Net Debt 2021 3,80 M - -
P/E ratio 2021 -0,29x
Yield 2021 -
Capitalization 0,45 M 0,45 M -
EV / Sales 2020 1,23x
EV / Sales 2021 0,95x
Nbr of Employees 25
Free-Float -
Chart GROWLIFE
Duration : Period :
GROWLIFE Technical Analysis Chart | MarketScreener
Full-screen chart
Income Statement Evolution
Managers and Directors
David Lisle Dohrmann President, Chief Executive Officer, CFO & Director
Thom Kozik Chairman & Secretary
Will Scott Controller
Brian Knight Director-National Sales
William James Blackburn President-GrowLife Innovations