Growgeneration Corp. current report, 15 May 2017

Full document

Business Context and Reporting Period

Company: GrowGeneration Corp.
Filing Type: Form 8-K (Current Report)
Date of Report: May 15, 2017 (Signed May 19, 2017)
Context: The filing reports the final closing of a private placement of equity securities and significant changes in corporate governance, specifically the departure of the Chief Financial Officer and the appointment of a successor.

Key Financial Metrics and Capital Structure

Capital Raised: $2,000,000 gross proceeds from the sale of 1,000,000 units to 27 accredited investors.
Unit Composition: Each unit consists of one share of common stock and one 5-year warrant to purchase one share at an exercise price of $2.75.
Placement Agent Compensation:

  • Cash fee: $150,000
  • Non-accountable expense allowance: $60,000
  • Warrants: 75,000 warrants at $2.00/share and 75,000 warrants at $2.75/share
  • Exercise fee: 3% of sums received from the exercise of 750,000 warrants
Executive Compensation (New CFO):
  • Salary: $150,000 (Year 1), $162,500 (Year 2), $175,000 (Year 3)
  • Equity Grant: 25,000 shares of common stock and 50,000 stock options
Other Metrics: The filing text does not provide clear values for revenue, profit, cash flow, margins, debt, or liquidity.

Material Changes Versus Prior Period

Capital Structure: The company increased its equity capital by $2,000,000 through the private placement closed on May 16, 2017.
Management Changes:

  • Departure: Irwin Lampert resigned as Chief Financial Officer and Secretary on May 15, 2017. He remains on the Board of Directors. The resignation was not due to disagreements.
  • Appointment: Monty Lamirato was appointed Chief Financial Officer and Secretary on May 15, 2017, under a 3-year employment agreement.

Guidance, Outlook, and Risks

Management Commentary: The filing confirms the successful completion of the offering and the transition of financial leadership. No specific financial guidance or outlook for future periods is provided in this document.
Risks and Contingencies: The filing notes that the description of the Offering terms is qualified by reference to the full text of the Subscription Agreement and Warrants. It explicitly states the report is not an offer to sell securities.

Investor Verification Checklist

  • Verify the final closing date of the private placement (May 16, 2017) and the total gross proceeds ($2,000,000).
  • Review the specific terms of the warrants issued to investors (exercise price $2.75) and the placement agent (exercise prices $2.00 and $2.75).
  • Confirm the terms of the new CFO's employment agreement, specifically the vesting schedule for the 25,000 shares and 50,000 options.
  • Examine the full text of Exhibits 99.1 through 99.6 for complete legal terms regarding the securities and employment.
  • Check subsequent filings for the impact of the new CFO on financial reporting and internal controls.