GROWLIFE, INC. In 2021
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.
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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
Net revenue for the year ended
Cost of Goods Sold
Cost of sales for the year ended
Gross profit was
Operating Expenses
Operating expenses for the year ended
Non-cash operating expenses for the year ended
Non-cash operating expenses for the year ended
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Other Expense
Other expense for the year ended
On
The other expense for the year ended
Net Loss
Net loss for the year ended
Net loss for the year ended
Net loss for the year ended
We expect losses to continue as we implement our business plan.
LIQUIDITY AND CAPITAL RESOURCES
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
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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
Financing Activities
Net cash provided by financing activities for the year ended
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
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
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
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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.
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