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What changed in HYDROFARM HOLDINGS GROUP, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of HYDROFARM HOLDINGS GROUP, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+358 added−315 removedSource: 10-K (2026-03-27) vs 10-K (2025-03-05)

Top changes in HYDROFARM HOLDINGS GROUP, INC.'s 2025 10-K

358 paragraphs added · 315 removed · 254 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

62 edited+9 added−8 removed83 unchanged
Biggest changeCannabis Industry We sell our products through third-party retailers and resellers and not directly to cannabis growers in countries that prohibit the sale and use of cannabis, including the United States. Nonetheless, it is evident to us that the legalization of cannabis in many U.S. states and Canada has ultimately had a significant, positive impact on our industry.
Biggest changeNonetheless, it is evident to us that the legalization of cannabis in many U.S. states and Canada has historically had a significant, positive impact on our industry. Accordingly, laws and regulations governing the cultivation and sale of cannabis and related products have an indirect effect on our business.
House of Representatives passed the Secure and Fair Enforcement ("SAFE") Act (the "SAFE Banking Act") numerous times. This bill was intended to protect banks and credit unions from federal prosecution for providing services to cannabis companies, thus allowing cannabis companies greater access to deposit accounts, insurance, and other financial institutions. However, the U.S.
House of Representatives passed the Secure and Fair Enforcement Act (the "SAFE Banking Act") numerous times. This bill was intended to protect banks and credit unions from federal prosecution for providing services to cannabis companies, thus allowing cannabis companies greater access to deposit accounts, insurance, and other financial institutions. However, the U.S.
We believe this forecasted growth in the U.S. cannabis market may be attributable to (i) state initiatives for new adult use and/or medical use programs in additional U.S. states, (ii) expanded access for patients or consumers in existing state medical or adult use cannabis programs, and (iii) increased consumption driven by greater product diversity and choice, reduced stigma, and real and perceived health benefits including pain management, the treatment of neurological and mental conditions, and sleep management.
We believe this growth in the U.S. cannabis market may be attributable to (i) state initiatives for new adult use and/or medical use programs in additional U.S. states, (ii) expanded access for patients or consumers in existing state medical or adult use cannabis programs, and (iii) increased consumption driven by greater product diversity and choice, reduced stigma, and real and perceived health benefits including pain management, the treatment of neurological and mental conditions, and sleep management.
The majority of products we offer are produced by us or are supplied to us under exclusive or preferred brand relationships. Our proprietary, or house brands, generally provide higher gross profit margins compared to preferred or distributed brands and provide a competitive advantage as we offer our customers a breadth of products that cannot be purchased elsewhere.
The majority of products we offer are produced by us or are supplied to us under exclusive or distributed brand relationships. Our proprietary, or house brands, generally provide higher gross profit margins compared to distributed brands and provide a competitive advantage as we offer our customers a breadth of products that cannot be purchased elsewhere.
Broad Portfolio with Innovative Proprietary Offerings and Recurring Consumables Sales We have a large equipment and consumable product offering, including lighting solutions, grow media, nutrients, equipment and supplies. We offer everything growers need to ensure their operations are maximizing efficiency, output and quality.
Broad Portfolio with Innovative Proprietary Offerings and Recurring Consumables Sales We have a large durable and consumable product offering, including lighting solutions, grow media, nutrients, equipment and supplies. We offer everything growers need to ensure their operations are maximizing efficiency, output and quality.
Canadian based operations and product lines are regulated under the Canadian Food Inspection Agency and some organic certified products are audited and attested to by EcoCert and/or the Organic Materials Review Institute. Our peat harvesting operations are regulated by provincial and municipal bodies, including Alberta Environment and Parks regulations.
Canada-based operations and product lines are regulated under the Canadian Food Inspection Agency and some organic certified products are audited and attested to by EcoCert and/or the Organic Materials Review Institute. Our peat harvesting operations are regulated by provincial and municipal bodies, including Alberta Environment and Parks regulations.
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are filed with the SEC.
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are filed with the Securities Exchange Commission (the "SEC").
Federal authorities may decide to change their current posture and begin to enforce current federal cannabis law and, if they begin to aggressively enforce such laws, it is possible that they could allege that we violated federal laws by selling products used in the cannabis industry.
Federal authorities may decide to change their current posture and begin to enforce current federal cannabis laws and, if they begin to aggressively enforce such laws, it is possible that they could allege that we violated federal laws by selling products used in the cannabis industry.
The benefits of CEA include: • Greater product safety, quality and consistency; • More reliable, climate-agnostic year-round crop supply from multiple, faster harvests per year as opposed to a single, large harvest with outdoor cultivation; • Lower risk of crop loss from pests (and subsequently lower need for pesticides) and plant disease; • Lower required water and pesticide use compared to conventional farming, offering incremental benefits in the form of reduced chemical runoff and lower labor requirements; and • Potentially lower operating expenses from resource-saving technologies such as high-efficiency LED lights, precision nutrient and water systems and automation.
The benefits of CEA include: • Greater product safety, quality and consistency; 5 TABLE OF CONTENTS • More reliable, climate-agnostic year-round crop supply from multiple, faster harvests per year as opposed to a single, large harvest with outdoor cultivation; • Lower risk of crop loss from pests (and subsequently lower need for pesticides) and plant disease; • Lower required water and pesticide use compared to conventional farming, offering incremental benefits in the form of reduced chemical runoff and lower labor requirements; and • Potentially lower operating expenses from resource-saving technologies such as high-efficiency LED lights, precision nutrient and water systems and automation.
Our peat harvesting operation provides useful products for improving grow media and organic farming. Supplier Relationships and Geographic Footprint We have developed distribution relationships with a network of several hundred suppliers, giving us access to a best-in-class diverse product portfolio and allowing us to provide a full range of CEA solutions to our customers.
Our peat harvesting operation provides useful products for improving grow media and organic farming. Supplier Relationships and Geographic Footprint We have developed distribution relationships with a network of suppliers, giving us access to a best-in-class diverse product portfolio and allowing us to provide a full range of CEA solutions to our customers.
The Cole Memorandum provided guidance to all federal prosecutors and indicated that federal enforcement of the CSA against cannabis-related conduct should be focused on specific priorities, including cannabis distribution to minors, violence in connection with cannabis distribution, cannabis cultivation on federal property, and collection of cannabis-derived revenue by criminal enterprises, gangs and cartels. • On January 4, 2018, the DOJ under the Trump administration issued a memorandum (the "Sessions Memorandum"), which effectively rescinded the Cole Memorandum and directed federal prosecutors to enforce the CSA and to follow well-established principles when pursuing prosecutions related to cannabis activities.
The Cole Memorandum provided guidance to all federal prosecutors and indicated that federal enforcement of the CSA against cannabis-related conduct should be focused on specific priorities, including cannabis distribution to minors, violence in connection with cannabis distribution, cannabis cultivation on federal property, and collection of cannabis-derived revenue by criminal enterprises, gangs and cartels. • On January 4, 2018, the DOJ under the Trump administration issued a memorandum (the "Sessions Memorandum"), which effectively rescinded the Cole Memorandum and directed federal prosecutors to enforce the CSA and to follow well-established principles when pursuing prosecutions related to cannabis 9 TABLE OF CONTENTS activities.
Smaller Reporting Company We qualify as a smaller reporting company in accordance with Rule 12b-2 under the Exchange Act, and have elected to follow certain of the scaled back disclosure accommodations within this Annual Report on Form 10-K. 13 TABLE OF CONTENTS
Smaller Reporting Company We qualify as a smaller reporting company in accordance with Rule 12b-2 under the Exchange Act, and have elected to follow certain of the scaled-back disclosure accommodations available to smaller reporting companies within this Annual Report on Form 10-K. 13 TABLE OF CONTENTS
We source individual components, raw materials or products from our supplier base. Raw materials used in our nutrient manufacturing operations primarily include nitrogen, potassium, and phosphate. Raw materials used in our grow media manufacturing include peat moss, compost, perlite, coir fiber, pumice and worm casings.
We source individual components, raw materials or products from our supplier base. Raw materials used in our nutrient manufacturing operations primarily include nitrogen, potassium, and phosphate. Raw materials used in our grow media manufacturing include peat moss, compost, perlite, coir fiber, pumice and worm castings.
The market for medical and adult use of cannabis is uncertain, and any adverse or negative publicity, scientific research, limiting regulations, medical opinion and public opinion (whether or not 8 TABLE OF CONTENTS accurate or with merit) relating to the consumption of cannabis, whether in the United States or internationally, may have a material adverse effect on our operational results, consumer base, and financial results.
The market for medical and adult use of cannabis is uncertain, and any adverse or negative publicity, scientific research, limiting regulations, medical opinion and public opinion (whether or not accurate or with merit) relating to the consumption of cannabis, whether in the United States or internationally, may have a material adverse effect on our operational results, consumer base, and financial results.
A decision by a regulatory agency to significantly restrict the use of these products can limit our ability to sell these products. 7 TABLE OF CONTENTS International, federal, state, provincial and local laws and regulations relating to environmental, health and safety matters affect us in several ways in light of the ingredients that are used in grow media and nutrient products.
A decision by a regulatory agency to significantly restrict the use of these products can limit our ability to sell these products. International, federal, state, provincial and local laws and regulations relating to environmental, health and safety matters affect us in several ways in light of the ingredients that are used in grow media and nutrient products.
An agricultural oversupply has impacted the cannabis industry, driving cannabis wholesale prices down and resulting in a decrease in indoor and outdoor cultivation, which we believe adversely impacts the market for CEA products.
A sustained agricultural oversupply has impacted the cannabis industry, driving cannabis wholesale prices down and resulting in a decrease in indoor and outdoor cultivation, which we believe adversely impacts the market for CEA products.
This could have a material adverse effect on our business, including our reputation and ability to conduct business, the listing of our securities on any stock exchanges, the settlement of trades of our securities, our ability to obtain banking services, our financial position, operating results, profitability or liquidity or the market price of our publicly-traded shares.
This could have a material adverse effect on our business, including our reputation and ability to conduct business, the listing of our securities on any stock exchanges, the settlement of trades of our securities, our ability to obtain banking services, our financial 10 TABLE OF CONTENTS position, operating results, profitability or liquidity or the market price of our publicly-traded shares.
Senate Banking Committee which expands on the financial institutions granted protection than those proposed to be covered by the SAFE Banking Act, provides uniform exam guidelines for cannabis banking institutions, among other changes. However, passage of the SAFER Banking Act in the U.S. Senate or U.S. House of Representatives remains uncertain.
Senate Banking Committee which expands on the financial institutions granted protection beyond those proposed to be covered by the SAFE Banking Act, and provides uniform exam guidelines for cannabis banking institutions, among other changes. However, passage of the SAFER Banking Act in the U.S. Senate or U.S. House of Representatives remains uncertain.
If we or our Cannabis Industry Participants are unable to comply with any applicable regulations and/or registration prescribed by the FDA, we may be unable to continue to conduct business with retailers and resellers that transact with cannabis businesses and/or our financial condition may be adversely impacted. 11 TABLE OF CONTENTS • Controlled substance legislation differs between states, and legislation in certain states may restrict or limit our ability to sell products to Cannabis Industry Participants.
If we or our Cannabis Industry Participants are unable to comply with any applicable regulations and/or registration prescribed by the FDA, we may be unable to continue to conduct business with retailers and resellers that transact with cannabis businesses and/or our financial condition may be adversely impacted. • Controlled substance legislation differs between states, and legislation in certain states may restrict or limit our ability to sell products to Cannabis Industry Participants.
We selectively add distributed products when the brand or technology provides us with a more comprehensive assortment to satisfy our customers' needs. Manufacturing Capabilities We currently operate three manufacturing facilities in North America which include organic certified and synthetic liquid and dry nutrient blending and bottling, organic certified soil blending and bagging, perlite production, and peat harvesting and baling.
We selectively add new products when the brand or technology provides us with a more comprehensive assortment to satisfy our customers' needs. Manufacturing Capabilities We currently operate two manufacturing facilities in North America which include organic certified and synthetic liquid and dry nutrient blending and bottling, organic certified soil blending and bagging, perlite production, and peat harvesting and baling.
Fifty-six percent of our 2024 revenue relates to sales of our proprietary brands, which generally provide for higher gross profit margins compared to preferred and distributed brands and a competitive advantage as we offer products that cannot be purchased elsewhere.
Fifty-six percent of our 2025 revenue relates to sales of our proprietary brands, which generally provide for higher gross profit margins compared to distributed brands and a competitive advantage as we offer products that cannot be purchased elsewhere.
In addition, due to our retailers’ and resellers’ involvement with cannabis businesses, our existing bank accounts could be closed. 9 TABLE OF CONTENTS • Insurance that is otherwise readily available, such as general liability and directors and officer’s insurance, may be more difficult for us to find, and more expensive, to the extent we are deemed to operate in the cannabis industry.
In addition, due to our retailers’ and resellers’ involvement with cannabis businesses, our existing bank accounts could be closed. • Insurance that is otherwise readily available, such as general liability and directors and officer’s insurance, may be more difficult for us to find, and more expensive, to the extent we are deemed to operate in the cannabis industry.
Organic listed products are audited in the US by the California Department of Food and Agriculture and/or the Organic Materials Review Institute. Finished goods and ingredients labeled as pesticides are regulated by federal and state offices of the Environmental Protection Agency (the "EPA").
Organic listed products are audited in the U.S. by the California Department of Food and Agriculture and/or the Organic Materials Review Institute. Finished goods and ingredients labeled as pesticides are regulated by federal and state offices of the Environmental Protection Agency (the "EPA").
We reach commercial farmers and consumers through a broad and diversified network of over 2,000 wholesale customer accounts, who we connect with primarily through our proprietary online ordering platform. Our products are distributed across the United States and Canada through a diversified range of retailers of commercial and home gardening equipment and supplies.
We reach commercial farmers and consumers through a broad and diversified network of over 1,800 wholesale customer accounts, who we connect with primarily through our proprietary online ordering platform. Our products are distributed across the United States and Canada through a diversified range of retailers of commercial and home gardening equipment and supplies.
In Canada, we currently have manufacturing facilities in Edmonton, Alberta. 4 TABLE OF CONTENTS The CEA Industry Our principal industry is the wholesale distribution of CEA equipment and supplies, which generally include nutrients and fertilizers; grow light systems; horticulture benches and racking systems; heating, ventilation, and air conditioning ("HVAC") systems; humidity and carbon dioxide monitors and controllers; water pumps, heaters, chillers, and filters; and various grow media typically made from soil, peat, rock wool or coconut fiber, among others.
In the United States, we currently operate a manufacturing facility in Eugene, Oregon, and in Canada, we currently have manufacturing facilities in Edmonton, Alberta. 4 TABLE OF CONTENTS The CEA Industry Our principal industry is the wholesale distribution of CEA equipment and supplies, which generally include nutrients and fertilizers; grow light systems; horticulture benches and racking systems; heating, ventilation, and air conditioning ("HVAC") systems; humidity and carbon dioxide monitors and controllers; water pumps, heaters, chillers, and filters; and various grow media typically made from soil, peat, rock wool or coconut fiber, among others.
Productivity and Cost Saving Initiatives While maintaining our dedication to customer service and on-time delivery, we are focused on reducing costs and improving productivity within the organization. Our initiatives have included implementing operational changes, consolidating our facility footprint, integrating our business into one operating segment, reducing headcount, and focusing our sales efforts on our proprietary brand offerings.
Productivity and Cost Saving Initiatives While maintaining our dedication to customer service and on-time delivery, we are focused on reducing costs and improving productivity within our organization. Our cost-reduction and restructuring initiatives have included implementing operational changes, consolidating our facility footprint, integrating our business into one operating segment, reducing headcount, and focusing on our proprietary brand offerings.
We believe the oversupply was initiated by the market impacts of the COVID-19 pandemic and is now partially the result of increasing cannabis production in 5 TABLE OF CONTENTS additional global markets.
We believe the oversupply was initiated by the market impacts of the COVID-19 pandemic and is now partially the result of increasing cannabis production in additional global markets.
We maintain health and safety programs, including our Environmental Health and Safety ("EHS") management system. Our associates participate in safety committees, hazard identification, work order resolutions and mandatory compliance training. Additionally, we participate in third party health and safety inspections to meet regulatory requirements.
We maintain health and safety programs, including our Environmental Health and Safety ("EHS") management system. Our associates participate in safety committees, hazard identification, work order resolutions and 12 TABLE OF CONTENTS mandatory compliance training. Additionally, we participate in third party health and safety inspections to meet regulatory requirements.
According to a January 2024 poll by Pew Research Center, approximately 57% of U.S. adults say that cannabis should be legal for recreational and medical use, while an additional 32% say it should be legal for medical use only. Cannabis product availability and breadth includes cannabidiol (CBD) and other cannabis-infused products, including edibles, oils, tinctures, and topical treatments.
According to a January 2025 poll by Pew Research Center, approximately 54% of U.S. adults say that cannabis should be legal for recreational and medical use, while an additional 33% say it should be legal for medical use only. Cannabis product availability and breadth includes cannabidiol (CBD) and other cannabis-infused products, including edibles, oils, tinctures, and topical treatments.
The Credit Facilities prohibit us and the Subsidiary Obligors from selling our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country.
The Term Loan prohibits us and the Subsidiary Obligors from selling our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country.
One supplier accounted for over 10% of purchases in 2024 and 2023. 3 TABLE OF CONTENTS The following graphic illustrates a representative set of our market-leading products across key CEA product categories: Infrastructure and Reach for Fast Delivery, High In-Stock Availability and Exceptional Service Our infrastructure and reach enables us to provide delivery and service capabilities to a diverse group of customers primarily in the United States and Canada.
One supplier accounted for over 10% of purchases in 2025 and 2024. 3 TABLE OF CONTENTS The following graphic illustrates a representative set of our market-leading products across key CEA product categories: Infrastructure and Reach for Delivery Across the U.S. and Canada, and Exceptional Customer Service Our infrastructure and reach enables us to provide delivery and service capabilities to a diverse group of customers primarily in the United States and Canada.
As a result, the Company does not sell our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country. See "Risk Factors— Risks Relating to our Indebtedness" for further detail.
As a result, we do not sell our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country. See Part I, Item 1A, Risk Factors, Risks Relating to our Indebtedness for further detail.
It is also federally illegal to advertise the sale of cannabis or to sell paraphernalia designed or intended primarily for use with cannabis, unless the paraphernalia is authorized by federal, state, or local law. The U.S. Supreme Court ruled in United States v. Oakland Cannabis Buyers’ Cooperative, 532 U.S. 483 (2001) , and Gonzales v.
It is also federally illegal to advertise the sale of cannabis or to sell paraphernalia designed or intended primarily for use with cannabis, unless the paraphernalia is authorized by federal, state, or local law. The U.S. Supreme Court ruled in United States v.
Our products are used to grow, farm, and cultivate cannabis, flowers, fruits, plants, vegetables, grains and herbs in controlled environment settings that allow end users to control key farming variables including temperature, humidity, CO2, light intensity spectrum, nutrient concentration and pH.
Hydroponics is the primary category of CEA and we use the terms CEA and hydroponics interchangeably. Our products are used to grow, farm, and cultivate cannabis, flowers, fruits, plants, vegetables, grains and herbs in controlled environment settings that allow end users to control key farming variables including temperature, humidity, CO2, light intensity spectrum, nutrient concentration and pH.
We estimate that approximately three-quarters of our net sales are generated from consumable products subject to recurring revenue that includes grow media, nutrients and supplies. 6 TABLE OF CONTENTS We sell proprietary and preferred brands across all of our product categories.
We estimate that approximately three-quarters of our net sales are generated from consumable products that may be subject to recurring revenue, including grow media, nutrients and supplies. We sell proprietary and distributed brands across all of our product categories.
Intellectual Property We own 15 issued U.S. design patents, 2 issued U.S. utility patents, 4 issued foreign patents and designs, 103 registered U.S. trademarks, and 128 registered foreign trademarks. Our 21 issued patents cover grow lighting and hydroponic systems and components. These issued patents and our registered trademarks allow us to build out our proprietary brand products.
Intellectual Property We own a number of U.S. design patents, U.S. utility patents, foreign patents and designs, registered U.S. trademarks, and registered foreign trademarks. Our issued patents cover grow lighting and hydroponic systems and components. These issued patents and our registered trademarks allow us to build out our proprietary brand products.
We have executed on our previously announced restructuring plans to improve efficiency and reduce costs. Government Regulation For U.S. based operations, there is no national regulatory body providing oversight of our portfolio of products. A substantial number of our products in our grow media and nutrients product lines are subject to U.S. state specific registration requirements.
Government Regulation For U.S.-based operations, there is no national regulatory body providing oversight of our portfolio of products. A substantial number of our products in our grow media and nutrients product lines are subject to U.S. state specific registration requirements.
However, if we are restricted in our ability to register, or maintain, our trademarks or to file for or enforce patents on any of our inventions, such an inability could materially affect our ability to protect our name, brand and proprietary technologies. See "— Risks Relating to Our Intellectual Property" for more information on the risks associated with intellectual rights.
However, if we are restricted in our ability to register, or maintain, our trademarks or to file for or enforce patents on any of our inventions, such an inability could materially affect our ability to protect our name, brand and proprietary technologies.
We maintain an extensive portfolio of products which includes approximately 35 proprietary brands across thousands of stock keeping units ("SKUs") as well as over 50 preferred brands.
We maintain an extensive portfolio of products which includes approximately 33 proprietary brands across thousands of stock keeping units ("SKUs") as well as approximately 40 distributed brands.
CEA is a component of the global commercial agriculture and consumer gardening sectors. According to industry publications, the global CEA industry was estimated at approximately $99 billion in 2023, and is expected to grow to approximately $423 billion by 2033 representing a CAGR of 16%.
CEA is a component of the global commercial agriculture and consumer gardening sectors. According to industry publications, the global CEA industry was estimated at approximately $96 billion in 2024, and is expected to grow to approximately $507 billion by 2034 representing a CAGR of 18%.
We have cultivated long-term relationships with several of our main suppliers. We maintain a broad geographic footprint of eight distribution centers to efficiently serve our customers in North America. We also operate a distribution center in Zaragoza, Spain, and we are focusing on expanding our international sales.
We maintain a broad geographic footprint to efficiently serve our customers in North America. We also operate a distribution center in Zaragoza, Spain, and we are focusing on expanding our international sales.
The DEA held the preliminary hearing on the proposed rescheduling of cannabis on December 2, 2024. Currently in the United States, 41 states and the District of Columbia, have adopted frameworks that authorize and regulate cannabis cultivation and sale for medical use, while 24 states and the District of Columbia legalized cannabis for medical and recreational use.
Currently in the United States, 40 states and the District of Columbia, have adopted frameworks that authorize and regulate cannabis cultivation and sale for medical use, while 24 states and the District of Columbia legalized cannabis for medical and recreational use.
Even if we are able to comply with all such laws and regulations and obtain all necessary registrations and licenses, the pesticides or other products we apply or use, or the manner in which we apply or use them, could be effected by changing regulations or changing interpretations of the regulations, could be alleged to cause injury to the environment, to people or to animals, or such products could be banned in certain circumstances.
Even if we are able to comply with all such laws and regulations and obtain all necessary registrations and licenses, the pesticides or other products we apply or use, or the manner in which we apply or use them, could be effected by changing regulations or changing interpretations of the regulations, could be alleged to cause injury to the environment, to people or to animals, or such products could be banned in certain circumstances. 7 TABLE OF CONTENTS Cannabis Industry We sell our products through third-party retailers and resellers and not directly to cannabis growers in countries that prohibit the sale and use of cannabis, including the United States.
Other laws that directly impact Cannabis Industry Participants include: • Businesses trafficking in cannabis may not take tax deductions for costs beyond costs of goods sold under Internal Revenue Code Section 280E.
Therefore, strict enforcement of federal law regarding cannabis would likely adversely affect our revenues and results of operations. Other laws that directly impact Cannabis Industry Participants include: • Businesses trafficking in cannabis may not take tax deductions for costs beyond costs of goods sold under Internal Revenue Code Section 280E.
We could be implicated in such enforcement or sanctions because of the sale of our products to such Cannabis Industry Participants. • The failure of our Cannabis Industry Participants to comply with applicable controlled substance laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the demand for our products and, as a result, the financial results of our business operations and our financial condition.
We could be implicated in such enforcement or sanctions because of the sale of our products to such Cannabis Industry Participants. • The failure of our Cannabis Industry Participants to comply with applicable controlled substance laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the demand for our products and, as a result, the financial results of our business operations and our financial condition. 11 TABLE OF CONTENTS On October 25, 2021, we and certain of our subsidiaries (the "Subsidiary Obligors") entered into a $125 million senior secured term loan facility with JPMorgan Chase Bank, N.A.
Accordingly, laws and regulations governing the cultivation and sale of cannabis and related products have an indirect effect on our business. Legislation and regulations pertaining to the use and growth of cannabis are enacted on both the state and federal government level within the United States.
Legislation and regulations pertaining to the use and growth of cannabis are enacted on both the state and federal government level within the United States. The federal and state laws and regulations governing the growth and use of cannabis are subject to change.
We have not sought to register every one of our trademarks either in the United States or in every country in which such mark is used.
Our ability to compete effectively depends in part on our rights to trademarks, patents and other intellectual property rights we own or license. We have not sought to register every one of our trademarks either in the United States or in every country in which such mark is used.
Solution Based Approach to Serve Our Customers We currently maintain long-standing relationships with a diversified range of specialty hydroponic retailers, commercial resellers and greenhouse builders, garden centers, hardware stores, and e-commerce retailers. We serve over 2,000 wholesale customer accounts across multiple channels in North America, providing customers with the capability to purchase their entire product range from us.
Solution Based Approach to Serve Our Customers We currently maintain long-standing relationships with a diversified range of specialty hydroponic retailers, commercial resellers and greenhouse builders, garden centers, hardware stores, and e-commerce retailers.
Raich , 545 U.S. 1 (2005) that the federal government has the right to regulate and criminalize cannabis, even for medical purposes. The illegality of cannabis under federal law preempts state laws that legalize or decriminalize its use. Therefore, strict enforcement of federal law regarding cannabis would likely adversely affect our revenues and results of operations.
Oakland Cannabis Buyers’ Cooperative, 532 U.S. 483 (2001) , and Gonzales v. 8 TABLE OF CONTENTS Raich , 545 U.S. 1 (2005) that the federal government has the right to regulate and criminalize cannabis, even for medical purposes. The illegality of cannabis under federal law preempts state laws that legalize or decriminalize its use.
The legal uncertainty and possible future changes in law could negatively affect our growth, revenues, results of operations and success generally. 10 TABLE OF CONTENTS Unless and until cannabis is de-scheduled entirely or rescheduled or Congress amends the CSA with respect to medical and/or adult use cannabis, there is a risk that federal prosecutors may enforce the existing CSA.
Unless and until cannabis is de-scheduled entirely or rescheduled or Congress amends the CSA with respect to medical and/or adult use cannabis, there is a risk that federal prosecutors may enforce the existing CSA.
Outside of North America, we operate a distribution center in Zaragoza, Spain. We use a third party in China to assist with our international supply chain management and quality assurance in Asia. We partner with a network of third-party transportation companies that facilitate delivery to our customers. The majority of customer orders are received through our business-to-business e-commerce platform.
We partner with a network of third-party transportation companies that facilitate delivery to our customers. The majority of customer orders are received through our business-to-business e-commerce platform.
To evaluate our health and safety performance, we use an EHS scorecard composed of leading and lagging indicators, such as progress measurements for behavioral-based safety and hazard observations, near-miss reporting, and total recordable incident rates. Corporate Structure We have been in the business of supplying indoor gardeners since 1977. We conduct our business through our wholly-owned, direct and indirect subsidiaries.
To evaluate our health and safety performance, we use an EHS scorecard composed of leading and lagging indicators, such as progress measurements for behavioral-based safety and hazard observations, near-miss reporting, and total recordable incident rates. Corporate Information We were incorporated in Delaware in January 2017 under the name Innovation Acquisition One Corp.
Of our total employees, approximately 66% are located in the United States, and the remainder primarily in Canada. During 2024 and 2023, we reduced headcount and we may implement further reductions in the future to create operational efficiencies. Additionally, we use temporary workers as needed to provide flexibility for our business including for seasonal projects.
In conjunction with our restructuring plan initiated in the second quarter of 2025 (the "2025 Restructuring Plan"), we reduced headcount in 2025 and year-to-date 2026. We may implement further reductions in the future to create additional operational efficiencies. We use temporary workers as needed to provide flexibility for our business including for seasonal projects.
Any change in the federal government’s enforcement of current federal laws could cause significant financial damage to us.
Any change in the federal government’s enforcement of current federal laws could cause significant financial damage to us. The legal uncertainty and possible future changes in law could negatively affect our growth, revenues, results of operations and success generally.
Our mission is to empower growers, farmers and cultivators with products that enable greater quality, efficiency, consistency, and speed in their grow projects. For the 2024 fiscal year, our net sales were $190 million. From 2005 through 2024, we generated a net sales compound annual growth rate ("CAGR") of approximately 10%.
Our mission is to empower growers, farmers and cultivators with products that enable greater quality, efficiency, consistency, and speed in their grow projects. For the 2025 fiscal year, our net sales were $134.3 million. Hydroponics is the farming of plants using soilless grow media and often artificial lighting in a controlled indoor or greenhouse environment.
In the United States, we currently distribute our products and employ cross-docking logistics processes from our leased facilities in Fairfield, California; Fontana, California; Gresham, Oregon; Denver, Colorado; Shoemakersville, Pennsylvania; and New Hudson, Michigan. In Canada, we currently distribute our products from locations in Surrey, British Columbia and Cambridge, Ontario.
In the United States, we currently operate two distribution centers in Fairfield, California and Shoemakersville, Pennsylvania. Additionally, we are able to distribute our products through cross-docking logistics arrangements at additional sites. In Canada, we currently distribute our products from locations in Surrey, British Columbia and Cambridge, Ontario.
We have included our website address in this Annual Report on Form 10-K solely as an inactive textual reference. Investors should not rely on any such information in deciding whether to purchase our common stock.
The information contained on, or that can be accessed through, our website is not, and shall not be deemed to be part of, this Annual Report on Form 10-K. We have included our website address in this Annual Report on Form 10-K solely as an inactive textual reference.
Human Capital Our success depends on management implementing effective human resource initiatives in order to recruit, develop and retain key employees. At Hydrofarm we believe that having a strong support base will allow for greater productivity and 12 TABLE OF CONTENTS satisfaction and we are committed to open and healthy communication with our workforce.
At Hydrofarm we believe that having a strong support base will allow for greater productivity and satisfaction and we are committed to open and healthy communication with our workforce. We seek to create an inclusive work environment in order to foster an innovative and team-oriented culture.
On October 25, 2021, we and the Subsidiary Obligors entered into a $125 million senior secured term loan facility with JPMorgan as administrative agent for the lenders, which was subsequently amended (the "Term Loan"). The Revolving Credit Facility and the Term Loan (collectively, the "Credit Facilities") each contain customary covenants, restrictions and defaults.
("JPMorgan") as administrative agent for the lenders, which was subsequently amended (the "Term Loan"). The Term Loan contains customary covenants, restrictions and defaults.
We leverage a seasoned sales team and our internal product category experts to provide industry insights, product capabilities and customer support.
We serve over 1,800 wholesale customer accounts across multiple channels in North America, providing customers with the capability to purchase 6 TABLE OF CONTENTS their entire product range from us. We leverage a seasoned sales team and our internal product category experts to provide industry insights, product capabilities and customer support.
Corporate Information We were incorporated in Delaware in January 2017 under the name Innovation Acquisition One Corp. Our predecessor company, originally called Applied Hydroponics, Inc., was founded in 1977 in Northern California. We changed our name to Hydrofarm Holdings Group, Inc. on August 3, 2018.
Our predecessor company, originally called Applied Hydroponics, Inc., was founded in 1977 in Northern California. We changed our name to Hydrofarm Holdings Group, Inc. on August 3, 2018. Our principal executive offices are located at 1510 Main Street, Shoemakersville, Pennsylvania 19555 and our telephone number is (707) 765-9990. Our website address is www.hydrofarm.com .
We seek to create an inclusive work environment in order to foster an innovative and team-oriented culture. As of December 31, 2024, we had 286 total employees globally, of which 285 are full-time employees, as compared to 369 total employees as of December 31, 2023.
As of December 31, 2025, we had 251 total employees globally, of which 250 are full-time employees, as compared to 286 total employees as of December 31, 2024. Of our total employees, approximately 68% are located in the United States, and the remainder are primarily in Canada.
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Hydroponics is the farming of plants using soilless grow media and often artificial lighting in a controlled indoor or greenhouse environment. Hydroponics is the primary category of CEA and we use the terms CEA and hydroponics interchangeably.
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On February 18, 2026, we entered into definitive agreement with Quality Horticulture, a family-owned Canadian garden center and horticultural distribution company, pursuant to which Quality Horticulture will serve as the exclusive Canadian distributor of our proprietary portfolio of nutrients, plant additives, grow media, horticultural lighting and environmental control products, including House & Garden, Grotek, Gaia Green, PHOTOBIO, SunBlaster, Active Aqua and Aurora Peat Products.
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We believe that our six U.S.-based distribution centers can reach a significant majority of our U.S. customers within 48 hours and that our two Canadian distribution centers can provide timely coverage to the Canadian market.
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The agreement is part of our strategic plan to streamline our operations and improve the focus on our proprietary brands and core product categories. Outside of North America, we operate a distribution center in Zaragoza, Spain. We use a third party in China to assist with our international supply chain management and quality assurance in Asia.
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Through our Distributor Managed Inventory ("DMI") Program, we partner with our network of customers to create customized, supply chain solutions for large commercial end users. In the United States, we currently operate manufacturing facilities in Arcata, California and Eugene, Oregon.
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In addition, we believe demand for our products has been negatively impacted by the extended period to enact reform of U.S. federal regulations, including cannabis rescheduling, which have been slow to develop and possibly leading cannabis operators to reduce investments in our products, particularly durable goods.
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Despite these factors negatively impacting the industry, according to certain industry publications, the U.S. cannabis market is projected to reach approximately $57 billion by 2028, up from an estimated $30 billion in 2024.
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In addition, we believe our financial results have been negatively impacted by hydroponic retail store closings and, in some cases, associated accounts receivable allowances. Despite these factors negatively impacting the cannabis industry, we believe the potential for growth in the industry exists based on industry publications.
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The federal and state laws and regulations governing the growth and use of cannabis are subject to change.
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We have executed on our previously announced restructuring plans to improve efficiency and reduce costs. In addition, to improve our liquidity position we are negotiating with lenders and key vendors, and are pursuing additional financing or strategic alternatives including the sale of assets or businesses, or through an offering of equity securities.
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On March 29, 2021, we and our subsidiaries (the "Subsidiary Obligors") entered into a senior secured revolving loan facility with JPMorgan Chase Bank, N.A. ("JPMorgan"), as administrative agent for the lenders, which was subsequently amended and currently provides for a maximum commitment amount of $35 million and terminates on June 30, 2026 (as amended, the "Revolving Credit Facility").
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The DEA held the preliminary hearing on the proposed rescheduling of cannabis on December 2, 2024. • On December 18, 2025, President Trump issued an executive order instructing the Attorney General to expedite the rulemaking process related to rescheduling cannabis from a Schedule 1 to a Schedule III controlled substance under the CSA.
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Our owned U.S. and foreign issued patents are expected to expire between 2025 and 2035. Our ability to compete effectively depends in part on our rights to trademarks, patents and other intellectual property rights we own or license.
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Despite these advancements in rescheduling, we cannot predict how the current administration or future administrations will enforce the CSA or other laws against cannabis activities.
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Our principal executive offices are located at 1510 Main Street, Shoemakersville, Pennsylvania 19555 and our telephone number is (707) 765-9990. Our website address is www.hydrofarm.com . The information contained on, or that can be accessed through, our website is not, and shall not be deemed to be part of, this Annual Report on Form 10-K.
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See Part I, Item 1A, Risk Factors, Risks Relating to Our Intellectual Property for more information on the risks associated with intellectual rights. Human Capital Our success depends on management implementing effective human resource initiatives in order to recruit, develop and retain key employees.
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Investors should not rely on any such information in deciding whether to purchase our common stock.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Relating to Our Business • competitive industry pressures; • expenses and risks associated with our restructuring activities; • long-lived assets and inventories represent a significant portion of our total assets and we may be required to record impairments or write-downs in future periods; • if we fail to manage our inventory effectively, our results of operations, financial condition and liquidity may be materially and adversely affected; • the risk of damage to, loss of, or theft of our inventory; • manufacturing risks; • the risk that adverse weather may impact our peat harvest; • the risk of product defects; • our proprietary brand offerings expose us to various risks; • our ability to keep pace with technological advances; • the costs of potential tariffs or a global trade war; • increased prices and inflation could negatively impact our margin performance and our financial results; • our commitments to long-term leases and our ability to renew or exit our leases; • the costs and risks of operating internationally; • our ability to comply with environmental regulations; • interruptions in our supply chain; • increasing scrutiny, costs and compliance with environmental, social and governance practices; • the impact of climate change on our facilities and operations; • limitations and possible failures of our internal control systems; • our ability to maintain effective internal control over financial reporting; • damage to our reputation could have an adverse effect on our business; • our marketing activities may not be successful; • a disruption or breach of our information technology systems; • potential inaccuracies in our estimates and assumptions relied upon in preparing consolidated financial statements; • acquisitions, other strategic alliances and investments could result in operating difficulties, dilution and other harmful consequences that may adversely impact our business and results of operations; • possible difficulties in raising sufficient capital to fund our operations; and • the potential for product liability lawsuits.
Biggest changeRisks Relating to Our Business • our ability to meet our current working capital needs and contractual obligations; • possible difficulties in raising sufficient capital to fund our operations; • our ability to continue as a going concern; • our proprietary brand offerings expose us to various risks; • expenses and risks associated with our restructuring activities; • competitive industry pressures; • long-lived assets and inventories represent a significant portion of our total assets and we may be required to record additional impairments or write-downs in future periods; • if we fail to manage our inventory effectively, our results of operations, financial condition and liquidity may be materially and adversely affected; • the risk of damage to, loss of, or theft of our inventory; • manufacturing risks; • the risk that adverse weather may impact our peat harvest; • the risk of product defects; • our ability to keep pace with technological advances; • the costs of potential tariffs or a global trade war; • increased prices and inflation could negatively impact our margin performance and our financial results; • our commitments to long-term leases and our ability to renew or exit our leases; • the costs and risks of operating internationally; • our ability to comply with environmental regulations; • interruptions in our supply chain; • increasing scrutiny, costs and compliance with environmental, social and governance practices; • the impact of climate change on our facilities and operations; • limitations and possible failures of our internal control systems; • our ability to maintain effective internal control over financial reporting; • damage to our reputation could have an adverse effect on our business; • our marketing activities may not be successful; • a disruption or breach of our information technology systems; • potential inaccuracies in our estimates and assumptions relied upon in preparing consolidated financial statements; • acquisitions, other strategic alliances and investments could result in operating difficulties, dilution and other harmful consequences that may adversely impact our business and results of operations; and • the potential for product liability lawsuits.
We may not successfully develop new products or improve existing products or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles. Our future success depends, in part, upon our ability to improve our existing products and to develop, manufacture and market new products to meet evolving consumer needs.
We may not successfully develop new products, improve existing products, or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles. Our future success depends, in part, upon our ability to improve our existing products and to develop, manufacture and market new products to meet evolving consumer needs.
The extent to which these market conditions will continue to impact our business, results of operations, and cash flows are uncertain and difficult to predict at this time, and may result in lower margins, inventory write-downs, accounts receivable allowances, and impairments of our long-lived assets which could have a material adverse effect on our business, financial condition and results of operations.
The extent to which these market conditions will continue to impact our business, results of operations, and cash flows are uncertain and difficult to predict at this time, and may result in lower margins, inventory write-downs, accounts receivable allowances, and additional impairments of our long-lived assets which could have a material adverse effect on our business, financial condition and results of operations.
Factors that could cause fluctuations in the trading price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the trading prices and trading volumes of stocks in our industry; • changes in operating performance and stock market valuations of other companies generally, or those in our industry in particular; • sales of shares of our common stock by us or our stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new offerings or platform features; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, services or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any significant change in our management; • the continued threat of terrorism and the impact of military and other action, including military actions involving Russia and Ukraine and the ongoing conflict in Israel and Gaza; and • general economic conditions and slow or negative growth of our markets.
Factors that could cause fluctuations in the trading price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the trading prices and trading volumes of stocks in our industry; • changes in operating performance and stock market valuations of other companies generally, or those in our industry in particular; • sales of shares of our common stock by us or our stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new offerings or platform features; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry and the cannabis industry, including the legalization of cannabis in the United States; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, services or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any significant change in our management; • the continued threat of terrorism and the impact of military and other action, including military actions involving Russia and Ukraine and the ongoing conflict in Israel and Gaza; and • general economic conditions and slow or negative growth of our markets.
In particular, the carrying value of deferred tax assets is dependent on our ability to generate future taxable income of the appropriate character in the relevant jurisdiction. From time to time, tax proposals are introduced or considered by the U.S.
In particular, the carrying value of deferred tax assets is dependent on our ability to generate future taxable income of the appropriate character in the relevant jurisdiction. From time to time, tax proposals are introduced, considered, or implemented by the U.S.
Additionally, our amended and restated certificate of incorporation (the "Certificate of Incorporation") does not prohibit us from issuing any series of preferred stock that would rank senior or equally to our common stock as to dividend payments and liquidation preference.
Additionally, our restated certificate of incorporation (the "Certificate of Incorporation") does not prohibit us from issuing any series of preferred stock that would rank senior or equally to our common stock as to dividend payments and liquidation preference.
Although we believe that our proprietary brand products offer value to our customers and generally provide us with higher gross margins than comparable third-party branded products we sell, the expansion of our proprietary brand offerings also subjects us to certain specific risks in addition to those discussed elsewhere in this section, such as: • potential mandatory or voluntary product recalls; • supply chain disruptions; • our ability to successfully obtain, maintain, protect and enforce our intellectual property rights (including defending against counterfeit, knock offs, grey-market, infringing or otherwise unauthorized goods); and • our ability to successfully navigate and avoid claims related to the proprietary rights of third parties.
Although we believe that our proprietary brand products offer value to our customers and generally provide us with higher gross margins than comparable 16 TABLE OF CONTENTS third-party branded products we sell, the expansion of our proprietary brand offerings also subjects us to certain specific risks in addition to those discussed elsewhere in this section, such as: • potential mandatory or voluntary product recalls; • supply chain disruptions; • our ability to successfully obtain, maintain, protect and enforce our intellectual property rights (including defending against counterfeit, knock offs, grey-market, infringing or otherwise unauthorized goods); and • our ability to successfully navigate and avoid claims related to the proprietary rights of third parties.
We have experienced delays in relocating certain of our facilities as a result of issues impacting the availability of transportation and the provision of other services necessary to open the new location, and may continue to experience similar delays in the future. 19 TABLE OF CONTENTS A disruption in the operations of our freight carriers, higher shipping costs or shipping delays could disrupt our supply chain and could negatively impact our margin performance and our financial results.
We have experienced delays in relocating certain of our facilities as a result of issues impacting the availability of transportation and the provision of other services necessary to open the new location, and may continue to experience similar delays in the future. 20 TABLE OF CONTENTS A disruption in the operations of our freight carriers, higher shipping costs or shipping delays could disrupt our supply chain and could negatively impact our margin performance and our financial results.
Risks Relating to Our Capital Stock • we may incur indebtedness or issue capital stock that ranks senior or equally to our common stock with certain liquidation preference and other rights, which may dilute our stockholders’ ownership interest; • certain provisions in the Credit Facilities, our corporate charter documents and under Delaware law could make an acquisition of our company more difficult and may prevent attempts by our stockholders to replace or remove current management or to obtain a favorable judicial forum for disputes with directors, officers or employees; • our ability to meet the continued listing standards of The Nasdaq Capital Market; and • the market price of our common stock may be volatile. 15 TABLE OF CONTENTS Our operations and financial results are subject to various risks and uncertainties including those described below.
Risks Relating to Our Capital Stock • we may incur indebtedness or issue capital stock that ranks senior or equally to our common stock with certain liquidation preference and other rights, which may dilute our stockholders’ ownership interest; • certain provisions in the Term Loan, our corporate charter documents and under Delaware law could make an acquisition of our company more difficult and may prevent attempts by our stockholders to replace or remove current management or to obtain a favorable judicial forum for disputes with directors, officers or employees; • our ability to meet the continued listing standards of the Nasdaq; and • the market price of our common stock may be volatile. 15 TABLE OF CONTENTS Our operations and financial results are subject to various risks and uncertainties including those described below.
In the event that such 20 TABLE OF CONTENTS regulations result in increased product or administrative costs, we may not be in a position to increase selling prices, and therefore an increase in costs could have a material adverse effect on our business, financial condition and results of operations.
In the event that such 21 TABLE OF CONTENTS regulations result in increased product or administrative costs, we may not be in a position to increase selling prices, and therefore an increase in costs could have a material adverse effect on our business, financial condition and results of operations.
Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, and may require additional resources to restore our supply chain. 21 TABLE OF CONTENTS Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, and may require additional resources to restore our supply chain. 22 TABLE OF CONTENTS Scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Capital Market and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to compliance with these requirements.
In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to compliance with these requirements.
Regardless of the merits or eventual outcome, liability claims may result in: (i) decreased demand for products that we may offer for sale; (ii) injury to our reputation; (iii) costs to defend the related litigation; (iv) a diversion of management’s time and our resources; (v) substantial monetary awards to trial participants or patients; (vi) product recalls, withdrawals or labeling, marketing or promotional restrictions; or (vii) a decline in our stock price.
Regardless of the merits or eventual outcome, liability claims may result in: (i) decreased demand for products that we may offer for sale; (ii) injury to our reputation; (iii) costs to defend the related litigation; (iv) a diversion of management’s time and our resources; (v) substantial monetary awards to trial participants or patients; (vi) product recalls, 26 TABLE OF CONTENTS withdrawals or labeling, marketing or promotional restrictions; or (vii) a decline in our stock price.
In the same executive order, former President Biden also directed the Secretary of HHS and the Attorney General to initiate an administrative process to review the scheduling of cannabis under the CSA, and on August 29, 2023, the Department of HHS officially recommended that the DEA reschedule cannabis from Schedule I to Schedule III, although the DEA is not obligated to follow this recommendation.
In the same executive order, former President Biden also directed the Secretary of HHS and the Attorney General to initiate an administrative process to review the scheduling of cannabis under the CSA, and on August 29, 2023, the 30 TABLE OF CONTENTS Department of HHS officially recommended that the DEA reschedule cannabis from Schedule I to Schedule III, although the DEA is not obligated to follow this recommendation.
Our manufacturing processes may experience problems including equipment malfunctions, facility contamination, labor problems, raw material shortages or contamination, natural disasters, 17 TABLE OF CONTENTS power outages, terrorist activities, safety and certification issues, or disruptions in the operations of our suppliers which could result in product defects, product recalls, product liability claims and insufficient inventory or supply of product for our customers.
Our manufacturing processes may experience problems including equipment malfunctions, facility contamination, labor problems, raw material shortages or contamination, natural disasters, power outages, terrorist activities, safety and certification issues, or disruptions in the operations of our suppliers which could result in product defects, product recalls, product liability claims and insufficient inventory or supply of product for our customers.
We could be implicated in such enforcement or sanctions because of the purchase of our products by such Cannabis Industry Participants. • The failure of our Cannabis Industry Participants to comply with applicable controlled substance laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the demand for our products and, as a result, the financial results of our business operations and our financial condition.
We could be implicated in such enforcement or sanctions because of the purchase of our products by such Cannabis Industry Participants. 31 TABLE OF CONTENTS • The failure of our Cannabis Industry Participants to comply with applicable controlled substance laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the demand for our products and, as a result, the financial results of our business operations and our financial condition.
The Cole Memorandum provided guidance to all federal prosecutors indicating that federal enforcement of the CSA against cannabis-related conduct should be focused on specific priorities, including cannabis distribution to minors, violence in connection with cannabis distribution, cannabis cultivation on federal property, and collection of cannabis-derived revenue by criminal 29 TABLE OF CONTENTS enterprises, gangs and cartels.
The Cole Memorandum provided guidance to all federal prosecutors indicating that federal enforcement of the CSA against cannabis-related conduct should be focused on specific priorities, including cannabis distribution to minors, violence in connection with cannabis distribution, cannabis cultivation on federal property, and collection of cannabis-derived revenue by criminal enterprises, gangs and cartels.
The steps we take to obtain, maintain, protect and enforce our intellectual property rights may be deemed inadequate and despite our efforts to protect these rights, unauthorized third parties, including our competitors, may duplicate, reverse 34 TABLE OF CONTENTS engineer, access, obtain, use or copy the proprietary aspects of our technology, processes, products or services without our permission.
The steps we take to obtain, maintain, protect and enforce our intellectual property rights may be deemed inadequate and despite our efforts to protect these rights, unauthorized third parties, including our competitors, may duplicate, reverse engineer, access, obtain, use or copy the proprietary aspects of our technology, processes, products or services without our permission.
In February 2014, the FinCEN Memo was issued providing guidance to banks seeking to provide services to cannabis businesses. The FinCEN Memo outlines circumstances under which banks may provide services to cannabis businesses without risking federal prosecution for violation of U.S. federal money laundering laws and 32 TABLE OF CONTENTS outlines extensive due diligence and reporting requirements.
In February 2014, the FinCEN Memo was issued providing guidance to banks seeking to provide services to cannabis businesses. The FinCEN Memo outlines circumstances under which banks may provide services to cannabis businesses without risking federal prosecution for violation of U.S. federal money laundering laws and outlines extensive due diligence and reporting requirements.
The earnings from, or other available assets of, our subsidiaries might not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or other obligations. Any of the foregoing could materially and adversely affect our 37 TABLE OF CONTENTS business, financial condition, results of operations and cash flows.
The earnings from, or other available assets of, our subsidiaries might not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or other obligations. Any of the foregoing could materially and adversely affect our business, financial condition, results of operations and cash flows.
Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences. As a Delaware corporation, we are subject to the U.S. Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.
Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences. As a Delaware corporation, we are subject to the U.S. Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining 42 TABLE OF CONTENTS business.
In particular, legislators, consumers, investors and other stakeholders are increasingly focusing on climate change, petroleum usage, waste, recycled material content, and other sustainability concerns pertaining to companies’ ESG policies.
In particular, certain legislators, consumers, investors and other stakeholders are focusing on climate change, petroleum usage, waste, recycled material content, and other sustainability concerns pertaining to companies’ ESG policies.
In addition, future changes in 24 TABLE OF CONTENTS our stock ownership, some of which may be beyond our control, could result in additional ownership changes under Section 382 of the Code. Acquisitions, other strategic alliances and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business and results of operations.
In addition, future changes in our stock ownership, some of which may be beyond our control, could result in additional ownership changes under Section 382 of the Code. Acquisitions, other strategic alliances and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business and results of operations.
The doctrine of corporate opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources, acquire an interest adverse to that of the corporation or acquire property that is reasonably incident to 39 TABLE OF CONTENTS the present or prospective business of the corporation or in which the corporation has a present or expectancy interest, unless that opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity.
The doctrine of corporate opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources, acquire an interest adverse to that of the corporation or acquire property that is reasonably incident to the present or prospective business of the corporation or in which the corporation has a present or expectancy interest, unless that opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity.
Our Certificate of Incorporation allows for our board of directors to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock. We have the authority to issue up to 50,000,000 shares of our preferred stock without further 36 TABLE OF CONTENTS stockholder approval.
Our Certificate of Incorporation allows for our board of directors to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock. We have the authority to issue up to 50,000,000 shares of our preferred stock without further stockholder approval.
Our restructuring activities may increase our expenses and cash expenditures, and may not have the intended effects. In connection with our restructuring plans, we have implemented a number of restructuring initiatives designed to streamline our operations, reduce costs, and improve efficiencies during the industry recession. See "Item 7.
Our restructuring activities may increase our expenses and cash expenditures, and may not have the intended effects. In connection with our restructuring plans, we have implemented a number of restructuring initiatives designed to streamline our operations, reduce costs, and improve efficiencies during the industry recession.
Acquisitions have been an important element of our overall corporate strategy, and these transactions entailed material investments by us that are material to our financial condition and results of operations. We may evaluate and enter into discussions regarding potential strategic transactions.
Acquisitions have been an important element of our overall corporate strategy, and these transactions entailed investments by us that are material to our financial condition and results of operations. We may evaluate and enter into 25 TABLE OF CONTENTS discussions regarding potential strategic transactions.
Our efforts to enforce or protect our intellectual property rights related to trademarks, trade names and service marks may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our business, financial condition, results of operations and prospects.
Our efforts to enforce or protect our intellectual property rights related to trademarks, trade names and service 37 TABLE OF CONTENTS marks may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our business, financial condition, results of operations and prospects.
From time to time in the normal course of our business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operation are required.
Litigation may adversely affect our business, financial condition and results of operations. From time to time in the normal course of our business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operation are required.
In addition, the development and introduction of new products and product innovations require substantial research, development and marketing expenditures. We may be unable to invest in new products and innovations, and may be unable to recoup any such investments if our new products or innovations do not achieve market acceptance.
In addition, the development and introduction of 17 TABLE OF CONTENTS new products and product innovations require substantial research, development and marketing expenditures. We may be unable to invest in new products and innovations, and may be unable to recoup any such investments if our new products or innovations do not achieve market acceptance.
Such state regulatory requirements may be costly and, the failure of such Cannabis Industry Participants to meet such regulatory requirements could lead to enforcement and sanctions by the states in addition to 30 TABLE OF CONTENTS any from the DEA or otherwise arising under federal law.
Such state regulatory requirements may be costly and, the failure of such Cannabis Industry Participants to meet such regulatory requirements could lead to enforcement and sanctions by the states in addition to any from the DEA or otherwise arising under federal law.
For example, the European Union ("EU") General Data Protection Regulation ("GDPR"), which became effective in May 2018, greatly increased the jurisdictional reach of the 33 TABLE OF CONTENTS European Commission's laws and added a broad array of requirements for handling personal data.
For example, the European Union ("EU") General Data Protection Regulation ("GDPR"), which became effective in May 2018, greatly increased the jurisdictional reach of the European Commission's laws and added a broad array of requirements for handling personal data.
The perception 38 TABLE OF CONTENTS in the public market that these stockholders might sell our common stock could also depress the market price of our common stock and could impair our future ability to obtain capital, especially through an offering of equity securities.
The perception in the public market that these stockholders might sell our common stock could also depress the market price of our common stock and could impair our future ability to obtain capital, especially through an offering of equity securities.
In addition, we may incur significant costs and operational consequences in connection with investigating, mitigating, remediating, eliminating and putting in place additional tools and devices designed to prevent future actual or perceived security incidents, as well as in connection with complying with any notification or other 23 TABLE OF CONTENTS obligations resulting from a security incident.
In addition, we may incur significant costs and operational consequences in connection with investigating, mitigating, remediating, eliminating and putting in place additional tools and devices designed to prevent future actual or perceived security incidents, as well as in connection with complying with any notification or other obligations resulting from a security incident.
See "Risks Relating to Our Indebtedness". Moreover, certain provisions of our Certificate of Incorporation and Bylaws and provisions of DGCL could delay or prevent a change of control or may impede the ability of the holders of our common stock to change our management.
See Risks Relating to Our Indebtedness . Moreover, certain provisions of our Certificate of Incorporation and Bylaws and provisions of DGCL could delay or prevent a 38 TABLE OF CONTENTS change of control or may impede the ability of the holders of our common stock to change our management.
In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may 22 TABLE OF CONTENTS raise concerns for investors.
In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors.
End users may purchase these products for use in new and emerging industries, including the growing of cannabis that may not achieve market 31 TABLE OF CONTENTS acceptance in a manner that we can predict.
End users may purchase these products for use in new and emerging industries, including the growing of cannabis that may not achieve market acceptance in a manner that we can predict.
This could damage our relationships with our customers. A product recall would be particularly harmful to us because it could potentially consume significant financial and administrative resources to effectively manage a product recall and it would detract management’s attention from implementing our core business strategies.
This could damage our relationships with our customers. A product recall would be particularly harmful to us because it could potentially consume significant financial and administrative resources to effectively manage a product recall and it would detract management’s attention from implementing our core business 19 TABLE OF CONTENTS strategies.
We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference or derivation proceedings and various other post-grant 35 TABLE OF CONTENTS proceedings before the USPTO and/or non-U.S. opposition proceedings.
We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference or derivation proceedings and various other post-grant proceedings before the USPTO and/or non-U.S. opposition proceedings.
The demand for these products is dependent on the growth of these industries, which is uncertain, as well as the laws governing the growth, possession, and use of cannabis by adults for both adult and medical use.
The demand for these products is dependent on the growth of these industries, 32 TABLE OF CONTENTS which is uncertain, as well as the laws governing the growth, possession, and use of cannabis by adults for both adult and medical use.
Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their ESG practices and disclosure.
Companies are facing scrutiny from certain customers, regulators, investors, and other stakeholders related to their ESG practices and disclosure.
EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations.
EU member states are tasked 34 TABLE OF CONTENTS under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations.
Risks Relating to Our Indebtedness • significant risks associated with our outstanding and future indebtedness of certain of our subsidiaries; • our ability to make our debt service payments pursuant to the Credit Facilities; and • restrictions imposed by our Credit Facilities, including on our ability to sell products directly to the cannabis industry.
Risks Relating to Our Indebtedness • significant risks associated with our outstanding and future indebtedness of certain of our subsidiaries; • our ability to make our debt service payments pursuant to the Term Loan; and • restrictions imposed by the Term Loan, including on our ability to sell products directly to the cannabis industry.
In addition, our ability to pay dividends is restricted by the terms of the Credit Facilities and, in addition, future debt financing, if any, may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our securities.
In addition, our ability to pay dividends is restricted by the terms of the Term Loan and, in addition, future debt financing, if any, may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our securities.
In addition, our ability to pay dividends is restricted by the terms of the Credit Facilities and, in addition, future debt financing, if any, may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our securities.
In addition, our ability to pay dividends is restricted by the terms of the Term Loan and, in addition, future debt financing, if any, may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our securities.
Furthermore, tariffs on products imported into the United States from Canada, including relating to our peat business, could adversely affect the demand for these products. In addition, political tensions between and among the United States and China and certain other countries have escalated in recent years.
Furthermore, should new tariffs be enacted on products imported into the United States from Canada, including relating to our peat business, they could adversely affect the demand for these products. In addition, political tensions between and among the United States and China and certain other countries have escalated in recent years.
We and our Subsidiary Obligors’ ability to comply with these and other provisions of the existing Credit Facilities is dependent on our future performance, which will be subject to many factors, some of which are beyond our control.
We and our Subsidiary Obligors’ ability to comply with these and other provisions of the existing Term Loan is dependent on our future performance, which will be subject to many factors, some of which are beyond our control.
Various provisions of our lending agreements with JPMorgan, in addition to our Certificate of Incorporation, Bylaws and other corporate documents, could delay or prevent a change of control. The Credit Facilities prohibit us from undergoing a change of control. Any takeover attempt could be delayed, or prevented, if an amendment or waiver is not provided by the respective lenders.
Various provisions of our lending agreements with JPMorgan, in addition to our Certificate of Incorporation, Bylaws and other corporate documents, could delay or prevent a change of control. The Term Loan prohibits us from undergoing a change of control. Any takeover attempt could be delayed, or prevented, if an amendment or waiver is not provided by the respective lenders.
Concern over climate change may result in new or increased legal and regulatory requirements to reduce or mitigate negative impacts to the environment or may result in new reporting and disclosure requirements.
Their concerns over climate change may result in new or increased legal and regulatory requirements to reduce or mitigate negative impacts to the environment or may result in new reporting and disclosure requirements.
As of December 31, 2024, we had U.S. federal net operating loss ("NOL") carryforwards of approximately $183.8 million, the utilization of which may be limited annually due to certain change in ownership provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). Our federal NOL carryforwards will begin to expire in 2037.
As of December 31, 2025, we had U.S. federal net operating loss ("NOL") carryforwards of approximately $238.1 million, the utilization of which may be limited annually due to certain change in ownership provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). Our federal NOL carryforwards will begin to expire in 2037.
Moreover, the breach of any of these compliance requirements may result in the occurrence of an event of default under each of the Revolving Credit Facility and the Term Loan, which would entitle JPMorgan, as administrative agent on behalf of the lenders party to such agreements, to terminate the commitments thereunder and declare all loans then outstanding to be due and payable.
Moreover, the breach of any of these compliance requirements may result in the occurrence of an event of default under the Term Loan, which would entitle the administrative agent on behalf of the lenders party to such agreements, to terminate the commitments thereunder and declare all loans then outstanding to be due and payable.
Legal and contractual restrictions in the Credit Facilities and other agreements which may govern future indebtedness of our subsidiaries, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries.
Legal and contractual restrictions in the Term Loan and other agreements which may govern future indebtedness of our subsidiaries, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries.
Our products compete against national and regional products and private label products produced by various suppliers, many of which are established companies that provide products that perform functions similar to our products. Our competitors may develop or market products that are more effective or commercially attractive than our current or future products.
Our competitors and potential competitors may develop products and technologies that are more effective or commercially attractive than our products. Our products compete against national and regional products and private label products produced by various suppliers, many of which are established companies that provide products that perform functions similar to our products.
On June 29, 2020, FinCEN issued additional guidance for financial institutions conducting due diligence and filing suspicious activity reports in connection with hemp-related business customers.
On June 29, 2020, FinCEN issued additional guidance for financial 33 TABLE OF CONTENTS institutions conducting due diligence and filing suspicious activity reports in connection with hemp-related business customers.
The Credit Facilities prohibit us and the Subsidiary Obligors from selling our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country.
The Term Loan prohibits us and the Subsidiary Obligors from selling our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country.
"Cannabis Industry Participants" means the potential customers and end-users of our products who are engaged in the cannabis industry. We are subject to a number of risks, directly and indirectly through Cannabis Industry Participants, because cannabis is illegal under federal law. Cannabis is illegal under U.S. federal law.
"Cannabis Industry Participants" means the potential customers and end-users of our products who are engaged in the cannabis industry. 29 TABLE OF CONTENTS We are subject to a number of risks, directly and indirectly through Cannabis Industry Participants, because cannabis is illegal under federal law.
We are in compliance with the terms set forth in the Revolving Credit Facility and the Term Loan and maintain policies and procedures that are designed to promote and achieve continued compliance with such requirements.
We are in compliance with the relevant terms set forth in the Term Loan and maintain policies and procedures that are designed to promote and achieve continued compliance with such requirements.
See Note 13 - Income Taxes, in the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a further discussion of the carryforward of our NOLs. As of December 31, 2024, we maintained a valuation allowance of approximately $75.3 million on the majority of our domestic and foreign net deferred tax assets.
See Note 14 - Income Taxes, in the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a further discussion of the carryforward of our NOLs. As of December 31, 2025, we maintained a valuation allowance of approximately $149.1 million on the majority of our domestic and foreign net deferred tax assets.
The existing Credit Facilities also require us, and any documents governing our and our subsidiaries’ future indebtedness may require, to meet certain financial ratios and tests in order to enter into certain transactions, incur additional indebtedness, pay dividends and other actions.
The existing Term Loan also requires us, and any documents governing our and our subsidiaries’ future indebtedness may require us to meet certain financial ratios and tests in order to enter into certain transactions, incur additional indebtedness, pay dividends and take other actions.
Our substantial indebtedness and interest expense could adversely affect our business and results of operations, including: • limiting our ability to use a substantial portion of our cash flow from operations in other areas of our business, including for working capital, expanding our infrastructure, capital expenditures and other general business activities and investment opportunities in our company, because we must dedicate a substantial portion of these funds to pay interest and/or service our debt and because the documents contain restrictions on certain of those actions; • impacting our cash flows, results of operations and financial condition as interest rates fluctuate, as our Credit Facilities incur interest at a floating rate; • requiring us to seek to incur further indebtedness in order to make the capital expenditures and other expenses or investments necessary to operate the business to the extent our future cash flows are insufficient; • requiring us to refinance the Revolving Credit Facility if the lenders do not agree to extend the maturity date beyond June 30, 2026; • limiting our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions and the execution of our strategy, and other expenses or investments planned by us; • limiting our flexibility and our ability to capitalize on business opportunities and to react to competitive pressures and adverse changes in government regulation, our business and our industry; • our inability to satisfy our obligations under our indebtedness (which could result in an event of default and acceleration if we fail to comply with the requirements of our indebtedness); and • increasing our vulnerability to a downturn in our business and to adverse economic and industry conditions generally. 26 TABLE OF CONTENTS The existing Credit Facilities (as discussed in more detail in "Item 7.
Our substantial indebtedness and interest expense could adversely affect our business and results of operations, including: • limiting our ability to use a substantial portion of our cash flow from operations in other areas of our business, including for working capital, expanding our infrastructure, capital expenditures and other general business activities and investment opportunities in our company, because we must dedicate a substantial portion of these funds to pay interest and/or service our debt and because the documents contain restrictions on certain of those actions; • impacting our cash flows, results of operations and financial condition as interest rates fluctuate, as our Term Loan incurs interest at a floating rate; • requiring us to seek to incur further indebtedness in order to make the capital expenditures and other expenses or investments necessary to operate the business to the extent our future cash flows are insufficient; • limiting our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions and the execution of our strategy, and other expenses or investments planned by us; 27 TABLE OF CONTENTS • limiting our flexibility and our ability to capitalize on business opportunities and to react to competitive pressures and adverse changes in government regulation, our business and our industry; • our inability to satisfy our obligations under our indebtedness (which could result in an event of default and acceleration if we fail to comply with the requirements of our indebtedness); and • increasing our vulnerability to a downturn in our business and to adverse economic and industry conditions generally.
Risks Relating to Our Indebtedness The Credit Facilities contain, and future debt facilities may contain, restrictions that limit our flexibility in operating our business; we fund interest and amortization payments from cash flows generated in our operations, and to the extent that cash flows deteriorate, it could be difficult or impossible to timely make our debt service payments or obtain additional debt financing.
Our Term Loan contains, and future debt facilities may contain, restrictions that limit our flexibility in operating our business; we intend to fund interest payments from cash flows generated in our operations, and to the extent that cash flows deteriorate, it could be difficult or impossible to timely make our debt service payments or obtain additional debt financing.
The market price of our common stock could be negatively affected by future sales of our common stock. If our existing stockholders, our directors, their affiliates, or our executive officers, sell a substantial number of shares of our common stock in the public market, the market price of our common stock could decrease significantly.
If our existing stockholders, our directors, their affiliates, or our executive officers, sell a substantial number of shares of our common stock in the public market, the market price of our common stock could decrease significantly.
Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
Any actual or perceived weaknesses and conditions that need to be addressed in our internal 23 TABLE OF CONTENTS control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock. Damage to our reputation could have an adverse effect on our business.
Furthermore, the Credit Facilities restrict our ability and the ability of the Subsidiary Obligors to sell our products directly to U.S. cannabis growers. Our growth is highly dependent on the U.S. cannabis market. In the past, California regulations caused licensing shortages and future regulations may create other limitations that decrease the demand for our products.
Furthermore, the Term Loan restricts our ability and the ability of the Subsidiary Obligors to sell our products directly to U.S. Cannabis Industry Participants. Our growth is highly dependent on the U.S. cannabis market. In the past, California regulations caused licensing shortages and future regulations may create other limitations that decrease the demand for our products.
Inventories are stated at the lower of cost or net realizable value, and we maintain an allowance for excess and obsolete inventory. The estimate for excess and obsolete inventory is based upon assumptions about current and anticipated demand, customer preferences, business strategies, and market conditions.
Inventories consist of manufactured goods, goods acquired for resale, and materials consumed in business operations. Inventories are stated at the lower of cost or net realizable value, and we maintain an allowance for excess and obsolete inventory. The estimate for excess and obsolete inventory is based upon assumptions about current and anticipated demand, customer preferences, business strategies, and market conditions.
Variable rate indebtedness subjects us and the Subsidiary Obligors to the risk of higher interest rates, which could cause our future debt service obligations to increase significantly. The Credit Facilities have restrictions on our ability to sell our products directly to the cannabis industry. Our Credit Facilities each contain customary covenants, restrictions and defaults.
Variable rate indebtedness subjects us and the Subsidiary Obligors to the risk of higher interest rates, which could cause our future debt service obligations to increase significantly. The Term Loan has restrictions on our ability to sell our products directly to the cannabis industry. Our Term Loan contains customary covenants, restrictions and defaults.
Any new laws and regulations limiting the use or cultivation of cannabis and any enforcement actions by state and federal governments could indirectly reduce demand for our products, and may impact our current and planned future operations.
As a result, the laws governing the cultivation and use of cannabis may be subject to change. Any new laws and regulations limiting the use or cultivation of cannabis and any enforcement actions by state and federal governments could indirectly reduce demand for our products, and may impact our current and planned future operations.
Such risks include, but are not limited to, the following: • Cannabis is currently a Schedule I drug under the CSA and regulated by the DEA as an illegal substance. The FDA, in conjunction with the DEA, licenses cannabis research and drugs containing active ingredients derived from cannabis.
Such risks include, but are not limited to, the following: • As of the date of this Annual Report on Form 10-K, cannabis is a Schedule I drug under the CSA and regulated by the DEA as an illegal substance. The FDA, in conjunction with the DEA, licenses cannabis research and drugs containing active ingredients derived from cannabis.
Due to this competition, we may encounter difficulties in generating revenues and capturing market share. In addition, increased competition may lead to reduced prices and/or margins for products we sell. We may not have the financial resources, relationships with key suppliers, technical expertise or marketing, distribution or support capabilities to compete successfully in the future.
In addition, increased competition may lead to reduced prices and/or margins for products we sell. We may not have the financial resources, relationships with key suppliers, technical expertise or marketing, distribution or support capabilities to compete successfully in the future.
There is current uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, government regulations, and tariffs and we cannot predict whether, and to what extent, U.S. trade policies will change in the future, including as a result of changes by the incoming U.S. presidential administration.
There is current uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, government regulations, and tariffs and we cannot predict whether, and to what extent, U.S. trade policies will change in the future.
If we or the Subsidiary Obligors default on any of our obligations under such agreements, JPMorgan will be entitled to exercise remedies available to them resulting from such default, including increasing the applicable interest rate on all amounts outstanding to the stated default rate, declaring all amounts due thereunder immediately due and payable, assuming possession of the secured assets, and exercising all other rights and remedies of a secured party under the Uniform Commercial Code, as applicable then in the United States, or the Personal Property Security Act, as applicable then in Canada.
As we have received a notice of default from JPMorgan, we note that they are entitled to exercise remedies available to them resulting from such default, including increasing the applicable interest rate on all amounts outstanding to the stated default rate, declaring all amounts due thereunder immediately due and payable, assuming possession of the secured assets, and exercising all other rights and remedies of a secured party under the Uniform Commercial Code, as applicable then in the United States, or the Personal Property Security Act, as applicable then in Canada.
We reduced headcount in 2024 and 2023, and may implement further reductions in the future to create operational efficiencies. This workforce reduction may yield unintended consequences, such as attrition beyond our intended reductions and reduced employee morale, which may cause our employees who were not affected by the headcount reductions to seek alternate employment.
This workforce reduction may yield unintended consequences, such as attrition beyond our intended reductions and reduced employee morale, which may cause our employees who were not affected by the headcount reductions to seek alternate employment.
As a result, litigation may adversely affect our business, financial condition and results of operations. 40 TABLE OF CONTENTS Our equity incentive plans may have a dilutive effect on your percentage ownership and may result in a dilution of your voting power and an increase in the number of shares of common stock eligible for future resale in the public market, which may negatively impact the trading price of our shares of common stock.
Our equity incentive plans may have a dilutive effect on your percentage ownership and may result in a dilution of your voting power and an increase in the number of shares of common stock eligible for future resale in the public market, which may negatively impact the trading price of our shares of common stock.
The general availability and price of those components can be affected by numerous forces beyond our control, including political instability, trade restrictions and other government regulations, duties and tariffs, price controls, the availability of shipping and transportation services, changes in currency exchange rates and weather. 27 TABLE OF CONTENTS A significant disruption in the availability of any of our key product components could negatively impact our business.
The general availability and price of those components can be affected by numerous forces beyond our control, including political instability, trade restrictions and other government regulations, duties and tariffs, price controls, the availability of shipping and transportation services, changes in currency exchange rates and weather.
The United States has imposed tariffs on certain imports from China, including on lighting and environmental control equipment manufactured in China, as well as tariffs on steel and aluminum products produced in other countries. In addition, the United States announced tariffs on products from Canada and Mexico before pausing such tariffs prior to going into effect.
The United States has imposed tariffs on certain imports from China, Canada, Mexico, and Europe, including on lighting and environmental control equipment manufactured in China, as well as tariffs on steel and aluminum products produced in other countries.
Risks Relating to the Cannabis Industry • federal and state regulations pertaining to the use and cultivation of cannabis may adversely affect our business; • our products are subject to varying, inconsistent and rapidly changing laws; • we are subject to a number of risks, directly and indirectly, because cannabis is illegal under federal law; • our indirect involvement in the cannabis industry could adversely affect our public reputation; and • businesses involved in the cannabis industry are subject to a variety of laws and regulations related to money laundering, financial recordkeeping and proceeds of crimes. 14 TABLE OF CONTENTS Risks Relating to Other Regulations • we may be restricted by certain state and other regulations pertaining to the use of certain ingredients in grow media and plant nutrients, including the use of pesticides; and • we may be restricted by certain U.S., state and foreign laws regarding how we collect, store and process personal information.
Risks Relating to the Cannabis Industry • federal and state regulations pertaining to the use and cultivation of cannabis may adversely affect our business; • our products are subject to varying, inconsistent and rapidly changing laws; • we are subject to a number of risks, directly and indirectly, because cannabis is illegal under federal law; • our indirect involvement in the cannabis industry could adversely affect our public reputation; and 14 TABLE OF CONTENTS • businesses involved in the cannabis industry are subject to a variety of laws and regulations related to money laundering, financial recordkeeping and proceeds of crimes.
We receive favorable pricing terms in exchange for this arrangement, but such agreements could lead to an oversupply of inventory. If we fail to manage our inventory effectively or negotiate favorable credit terms with third-party suppliers, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs.
If we fail to manage our inventory effectively or negotiate favorable credit terms with third-party suppliers, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs.
The DEA held a preliminary hearing on the proposed rescheduling of cannabis on December 2, 2024. We cannot predict how the current administration or future administrations will enforce the CSA or other laws against cannabis activities. Any change in the federal government’s enforcement of current federal laws could cause significant financial damage to us.
Despite these advancements in rescheduling, we cannot predict how the current administration or future administrations will enforce the CSA or other laws against cannabis activities. Any change in the federal government’s enforcement of current federal laws could cause significant financial damage to us.
Accordingly, the risks referred to below, to the extent they relate to our customers could impact us indirectly. In addition, if our business is deemed to transact with companies in the United States involved in the cannabis business, these risks could apply directly to us.
In addition, if our business is deemed to transact with companies in the United States involved in the cannabis business, these risks could apply directly to us.
Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation and our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect our business, financial condition, and results of operations.
Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation and our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect our business, financial condition, and results of operations. 41 TABLE OF CONTENTS General Risk Factors If we are unable to retain key personnel, we may not be able to implement our business plan and our business may fail; our headcount reductions may cause undesirable consequences.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur acquisition strategy may also result in exposure to certain technology risks during integration of systems of acquired companies to our existing platform. Addressing cybersecurity risks requires ongoing monitoring and vigilance, and the Company is making enhancements to its cybersecurity policies, procedures and practices to safeguard sensitive information as well as information from our partners, customers and employees.
Biggest changeAddressing cybersecurity risks requires ongoing monitoring and vigilance, and the Company continues to make enhancements to its cybersecurity policies, procedures and practices to safeguard sensitive information as well as information from our partners, customers and employees.
Item 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy Cybersecurity risks are critical to our business and our process for identifying and managing material risks from cybersecurity threats have been integrated into our overall risk management system and processes.
Item 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy Cybersecurity risks are critical to our business and our processes for identifying and managing material risks from cybersecurity threats have been integrated into our overall risk management system and processes.
The collective team has extensive experience in information security and cybersecurity risk management and performs detection and monitoring of cybersecurity threats and incidents on an ongoing basis using a combination of security tooling, automated systems and manual processes. 42 TABLE OF CONTENTS
The collective team has extensive experience in information security and cybersecurity risk management and performs detection and monitoring of cybersecurity threats and incidents on an ongoing basis using a combination of security tooling, automated systems and manual processes. 44 TABLE OF CONTENTS
While we employ resources to 41 TABLE OF CONTENTS monitor and protect our technology infrastructure and sensitive information, these security measures or those of our third-party vendors may not prevent all attempted data security breaches or cyber-attacks.
While we employ resources to monitor and protect our technology infrastructure and sensitive information, these security measures or those of our third-party vendors may not prevent all attempted data security breaches or cyber-attacks.
As of December 31, 2024, we are not aware of any cybersecurity incidents or identified risks from cybersecurity threats that have materially affected, or are reasonably likely to affect, our business strategy, results of operations or financial condition. There is no guarantee that cybersecurity incidents or risks from cybersecurity incidents may not be material in the future.
As of December 31, 2025, we are not aware of any cybersecurity incidents or identified risks from cybersecurity threats that have materially affected, or are reasonably likely to affect, our business strategy, results of operations or financial condition.
Added
There is no guarantee that cybersecurity incidents or risks from cybersecurity incidents may not be material in the 43 TABLE OF CONTENTS future.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Square Footage Owned or Leased Distribution Centers: Fairfield, CA, U.S. 175,000 Leased 1 Fontana, CA, U.S. 147,000 Leased 1 Gresham, OR, U.S. 98,000 Leased 1 Denver, CO, U.S. 87,000 Leased Shoemakersville, PA, U.S. 303,000 Leased 1 New Hudson, MI, U.S. 126,000 Leased 1 Surrey, BC, Canada 136,000 Leased 1 Cambridge, ON, Canada 53,000 Leased 2 Zaragoza, Spain 20,000 Owned Manufacturing Facilities: Arcata, CA, U.S. 76,000 Leased Eugene, OR, U.S. 242,000 Leased 3 Edmonton, AB, Canada 26,000 Leased 1 We maintain operations and have one or more operating subleases or third-party logistics agreements at this location. 2 We have subleased this property in its entirety to a tenant that provides us third-party logistics service on-site, allowing us to continue shipping our products from this location. 3 In January 2023, we entered into a sale-leaseback transaction.
Biggest changeLocation Square Footage Owned or Leased Distribution Centers: Fairfield, CA, U.S. 175,000 Leased 1 Shoemakersville, PA, U.S. 303,000 Leased 1 Fontana, CA, U.S. 147,000 Leased 2 New Hudson, MI, U.S. 126,000 Leased 2 Gresham, OR, U.S. 98,000 Leased 3 Denver, CO, U.S. 87,000 Leased 2 Surrey, BC, Canada 136,000 Leased 1 Cambridge, ON, Canada 53,000 Leased 4 Zaragoza, Spain 20,000 Owned Manufacturing Facilities: Arcata, CA, U.S. 76,000 Leased 5 Eugene, OR, U.S. 242,000 Leased Edmonton, AB, Canada 26,000 Leased 1 We maintain operations and inventory at this site.
Refer to Part II, Item 8, Financial Statements, Note 7 – Leases for additional information about the sale and leaseback transaction at the Eugene, OR location. In addition we own approximately 120 acres of land, including a 21,000 square foot building, in Goshen, NY, a majority of which is suitable for future industrial/commercial development located adjacent to our building.
The manufacturing capabilities have been consolidated into our Eugene, OR facility. In addition we own approximately 120 acres of land, including a 21,000 square foot building, in Goshen, NY, a majority of which is suitable for future industrial/commercial development located adjacent to our building. We ceased operations at this facility during the second quarter of 2024.
Removed
We ceased operations at this facility during the second quarter of 2024.
Added
Additionally, we have one or more operating subleases or third-party logistics agreements at this location. 2 We no longer operate this site as a primary distribution center, however we have, or are seeking, operating subleases or third party logistics agreements, and cross-docking arrangements at this site. 3 We have ceased operations at this facility, and plan to fully exit the site upon completion of the lease in the first quarter of 2026. 4 We have subleased this property in its entirety to a tenant that provides us third-party logistics service on-site, allowing us to continue shipping our products from this location. 5 We have ceased operations at this facility, and plan to fully exit the site upon completion of the lease in the first half of 2026.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE SAFETY DISCLOSURES Not applicable. 43 TABLE OF CONTENTS PART II
Biggest changeMINE SAFETY DISCLOSURES Not applicable. 45 TABLE OF CONTENTS PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn lieu of issuing any fractional shares, any stockholder entitled to receive less than one share of common stock received cash for such stockholder’s fractional share. There is no change to the par value of $0.0001.
Biggest changeIn lieu of issuing any fractional shares, any stockholder entitled to receive less than one share of common stock received cash for such stockholder’s fractional share. There was no change to the par value of $0.0001. Holders of our Common Stock As of March 20, 2026, there were approximately 74 stockholders of record of our common stock.
Issuer Purchases of Equity Securities None. Item 6. RESERVED Reserved. 44 TABLE OF CONTENTS
Issuer Purchases of Equity Securities None. Item 6. RESERVED Reserved. 46 TABLE OF CONTENTS
Removed
All share and per share numbers in this Annual Report on Form 10-K have been adjusted to give retroactive effect to the reverse stock split. Holders of our Common Stock As of February 27, 2025, there were approximately 80 stockholders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSG&A expenses decreased in several areas, including as a result of our cost saving and restructuring initiatives: (i) $6.5 million decrease in employee compensation costs, including stock-based compensation and 47 TABLE OF CONTENTS salaries and benefits, (ii) $4.5 million decrease in facility costs, (iii) $1.9 million decrease in insurance expenses, (iv) $1.8 million decrease in professional and outside services, and (v) $1.0 million decrease in amortization and depreciation, partially offset by $1.4 million change in accounts receivable reserves and related charges.
Biggest changeSG&A expenses decreased in several areas, including as a result of our cost saving and restructuring initiatives: (i) a $6.4 million decrease in amortization and depreciation primarily due to intangible asset impairments in 2025, (ii) a $4.1 million decrease in employee compensation costs, including lower salaries and benefits, stock-based compensation, and performance bonus, (iii) a $1.2 million decrease in facility costs, and (iv) a $0.7 million decrease in professional fees. 50 TABLE OF CONTENTS Impairments During the fourth quarter of fiscal 2025, as a result of industry conditions, primarily attributable to an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation, as well as continued declines in operating cash flows and profitability, we assessed our long-lived assets for impairment and recorded an impairment charge of $232.2 million.
In the second quarter of 2024, we entered into an agreement (the "Purchase Agreement") with CM Fabrication, LLC (the "Buyer") to sell the inventories, and property, plant and equipment associated with our IGE branded products for approximately $8.7 million (the "Asset Sale"), while retaining our proprietary brand and customer relationships.
In the second quarter of 2024, we entered into an agreement (the "Purchase Agreement") with CM Fabrication, LLC (the "Buyer") to sell the inventories, and property, plant and equipment associated with our IGE branded products for approximately $8.7 million (the "IGE Asset Sale"), while retaining our proprietary brand and customer relationships.
Term Loan On October 25, 2021, we and certain of our direct and indirect subsidiaries entered into the Term Loan with JPMorgan Chase Bank, N.A., as administrative agent for the lenders, pursuant to which we borrowed a $125 million senior secured term loan (the "Term Loan").
Term Loan On October 25, 2021, we and certain of our direct and indirect subsidiaries entered into the Term Loan with JPMorgan Chase Bank, N.A., as administrative agent for the lenders, pursuant to which we borrowed a $125 million senior secured term loan.
Market Conditions We have experienced adverse financial results which we believe is primarily a result of an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation. The extent these market conditions will continue to negatively impact our business and results of operations is uncertain and difficult to predict at this time.
Market Conditions We have experienced adverse financial results which we believe are primarily a result of an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation. The extent these market conditions will continue to negatively impact our business and results of operations is uncertain and difficult to predict at this time.
See "Special Note Regarding Forward-Looking Statements." Company Overview We are a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture ("CEA"), including grow lights, climate control solutions, grow media and nutrients, as well as a broad portfolio of innovative, proprietary branded products.
See "Special Note Regarding Forward-Looking Statements." Company Overview We are a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture, including grow lights, climate control solutions, grow media and nutrients, as well as a broad portfolio of innovative, proprietary branded products.
While we believe our estimates of charges relating to our Restructuring Plan, long-lived assets, inventory obsolescence, and accounts receivable allowances are reasonable, it is possible that we may incur additional charges in the future and actual results may differ significantly from these estimates and assumptions.
While we believe our estimates of charges relating to our 2025 Restructuring Plan, long-lived assets, inventory obsolescence, and accounts receivable allowances are reasonable, it is possible that we may incur additional charges in the future and actual results may differ significantly from these estimates and assumptions.
In connection with the Asset Sale, we entered into an exclusive supply agreement with the Buyer, pursuant to which the Buyer provides contract manufacturing and we continue to sell our proprietary branded durable products, which include horticulture benches, racking and LED lighting systems.
In connection with the IGE Asset Sale, we entered into an exclusive supply agreement with the Buyer, pursuant to which the Buyer provides contract manufacturing and we continue to sell our proprietary branded durable products, which include horticulture benches, racking and LED lighting systems.
We received cash proceeds from the Asset Sale associated with the sale of property, plant and equipment of $3.7 million, and additional cash proceeds from the sale of property, plant and equipment of $0.9 million. These cash proceeds were partially offset by $2.9 million of capital expenditures of property, plant and equipment.
We received cash proceeds from the IGE Asset Sale associated with the sale of property, plant and equipment of $3.7 million, and additional cash proceeds from the sale of property, plant and equipment of $0.9 million. These cash proceeds were partially offset by $2.9 million of capital expenditures of property, plant and equipment.
As a result, our annual assessment of the effectiveness of our internal control over financial reporting does not require an audit by our external audit firm in compliance with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002 for this Annual Report on Form 10-K for the year ended December 31, 2024.
As a result, our annual assessment of the effectiveness of our internal control over financial reporting does not require an audit by our external audit firm in compliance with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002 for this Annual Report on Form 10-K for the year ended December 31, 2025.
Our effective tax rate for the year ended December 31, 2023, differs from the federal statutory rate of 21% primarily due to maintaining a full valuation allowance against our net deferred tax assets in the United States and most foreign jurisdictions.
Our effective tax rate for the year ended December 31, 2025, differs from the federal statutory rate of 21% primarily due to maintaining a full valuation allowance against our net deferred tax assets in the United States and most foreign jurisdictions.
Financing Activities Net cash used in financing activities was $4.8 million for the year ended December 31, 2024, primarily driven by (i) $3.2 million of Term Loan repayments relating to required quarterly payments of principal and payments made in conjunction with the Sale-Leaseback Transaction and (ii) finance lease principal payments of $1.4 million which included approximately $0.7 million relating to equipment finance lease payments made in connection with the Asset Sale.
Net cash used in financing activities was $4.8 million for the year ended December 31, 2024, primarily driven by (i) $3.2 million of Term Loan repayments relating to required quarterly payments of principal and payments made in conjunction with a 2023 sale-leaseback transaction and (ii) finance lease principal payments of $1.4 million which included approximately $0.7 million relating to equipment finance lease payments made in connection with the IGE Asset Sale.
A discussion of our critical accounting policies that required the application of significant judgments as of December 31, 2024 and 2023 are as follows. Long-lived tangible and finite-lived intangible assets Long-lived tangible assets and finite-lived intangible assets are stated at cost.
A discussion of our critical accounting policies that required the application of significant judgments as of December 31, 2025 and 2024 are as follows. Long-lived tangible and finite-lived intangible assets Long-lived tangible assets and finite-lived intangible assets are stated at cost.
We believe it is prudent to be prepared if required and, accordingly, continue to be engaged in the process of evaluating and preparing to implement one or more of the aforementioned activities. Any potential such event may be subject to provisions referenced in our Term Loan and Revolving Credit Facility, such as subjecting us to make mandatory prepayments.
We believe it is prudent to be prepared if required and, accordingly, continue to be engaged in the process of evaluating and preparing to implement one or more of the aforementioned activities. Any potential such event may be subject to provisions referenced in our Term Loan, such as subjecting us to make mandatory prepayments.
In accordance with our Term Loan, the net proceeds, approximately $6.3 million, from the Asset Sale transaction are required to be reinvested into certain permitted investments, such as capital expenditures or permitted acquisitions/ investments, or offered to prepay Term Loan principal.
In accordance with our Term Loan, the net proceeds, approximately $6.3 million, from the IGE Asset Sale transaction were required to be reinvested into certain permitted investments, such as capital expenditures or permitted acquisitions/ investments, or offered to prepay Term Loan principal.
From time to time in the normal course of business, we will enter into agreements with suppliers which provide favorable pricing in return for a commitment to purchase minimum amounts of inventory over a defined time period.
From time to time in the 54 TABLE OF CONTENTS normal course of business, we will enter into agreements with suppliers which provide favorable pricing in return for a commitment to purchase minimum amounts of inventory over a defined time period.
As further described in Note 3 – Restructuring and Asset Sales to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K , we closed on an Asset Sale and received gross proceeds of $8.7 million during the year ended December 31, 2024.
As further described in Note 4 – Restructuring and Asset Sales to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we closed on the IGE Asset Sale and received gross proceeds of $8.7 million during the year ended December 31, 2024.
We reach commercial farmers and consumers through a broad and diversified network of over 2,000 wholesale customer accounts, who we connect with primarily through our proprietary online ordering platform. Our products are distributed across the United States and Canada through a diversified range of retailers of commercial and home gardening equipment and supplies.
We reach commercial farmers and consumers through a broad and diversified network of over 1,800 wholesale customer accounts, who we connect with primarily through our proprietary online ordering platform. Our products are distributed across the United States and Canada through a diversified range of retailers of commercial and home gardening equipment and supplies.
As described in Note 3 – Restructuring and Asset Sales, in connection with the Asset Sale, we estimated the amount of cash proceeds associated with the sale of inventories as $5.0 million and classified the amount within net cash from operating activities.
As described in Note 4 – Restructuring and Asset Sales , in connection with the IGE Asset Sale, we estimated the amount of cash proceeds associated with the sale of inventories as $5.0 million and classified the amount within net cash from operating activities.
The Company estimates inventory markdowns relating to restructuring charges based upon current and anticipated demand, customer preferences, business strategies, and market conditions including management's planned actions with respect to inventory. 52 TABLE OF CONTENTS Recent accounting pronouncements For information regarding recent accounting pronouncements, refer to Note 2 – Basis of presentation and significant accounting policies — Recently issued accounting pronouncements , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 53 TABLE OF CONTENTS
The Company estimates inventory markdowns relating to restructuring charges based upon current and anticipated demand, customer preferences, business strategies, and market conditions including management's planned actions with respect to inventory. 55 TABLE OF CONTENTS Recent accounting pronouncements For information regarding recent accounting pronouncements, refer to Note 3 – Basis of Presentation and Significant Accounting Policies — Recently issued accounting pronouncements , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 56 TABLE OF CONTENTS
We recorded a loss on asset disposition of $11.5 million for the year ended December 31, 2024 . Refer to Note 3 – Restructuring and Asset Sales for a further description of the Asset Sale.
We recorded a loss on asset disposition of $11.5 million for the year ended December 31, 2024. Refer to Note 4 – Restructuring and Asset Sales for a further description of the IGE Asset Sale.
As of the date of filing this Annual Report on Form 10-K, the ABR Loan and Term Benchmark Loan credit spreads of 4.50% and 5.50%, respectively, within the Amendment No. 1 have not changed from the credit spreads in the original Term Loan. The Term Loan matures on October 25, 2028.
As of the date of filing this Annual Report on Form 10-K, the ABR Loan and Term Benchmark Loan credit spreads of 4.50% and 5.50%, respectively, within the Amendment No. 1 have not changed from the credit spreads in the original Term Loan.
This provision of the Term Loan includes (i) cash investments made within a one-year period from the Sale Leaseback Transaction, and (ii) investments which are contractually committed within one-year of the Sale Leaseback Transaction, and paid within 180 days after entering into such contractual commitment.
This provision of the Term Loan includes (i) cash investments made within a one-year period from the IGE Asset Sale , and (ii) investments which are contractually committed within one-year of the IGE Asset Sale , and paid within 180 days after entering into such contractual commitment.
Refer to Item 8, Financial Statements , Note 10 – Debt , Note 7 – Leases , and Note 14 – Commitments and Contingencies for details relating to our material cash requirements for debt, our leasing arrangements, including future maturities of our operating lease liabilities, and purchase obligations, respectively.
Refer to Item 8, Financial Statements , Note 11 – Debt , Note 8 – Leases , and Note 15 – Commitments and Contingencies for details relating to our material cash requirements for debt, our leasing arrangements, including future maturities of our operating lease liabilities, and purchase obligations, respectively.
Other income, net for the year ended December 31, 2024, was primarily driven by a cash settlement arising from an outstanding litigation matter of a previously acquired entity, foreign currency exchange rate gains and interest income.
Refer to Note 11 – Debt for additional details. Other income, net for the year ended December 31, 2024, was primarily driven by a cash settlement arising from an outstanding litigation matter of a previously acquired entity, foreign currency exchange rate gains and interest income.
Loss on asset disposition As previously described, we entered into a Purchase Agreement with Buyer to sell assets relating to the production of durable equipment products for $8.7 million. The Asset Sale closed during the second quarter of 2024, and we sold or disposed of inventories and other assets.
Loss on asset disposition We entered into a Purchase Agreement with CM Fabrication, LLC to sell assets relating to the production of durable equipment products for $8.7 million. The IGE Asset Sale closed during the second quarter of 2024, and we sold or disposed of inventories and other assets.
However, we expect that, over time, cost of goods sold may decrease as a percentage of net sales if we achieve higher throughput at our manufacturing facilities and achieve the anticipated savings from our Restructuring Plan.
However, we expect that, over time, cost of goods sold may decrease as a percentage of net sales if we achieve higher 49 TABLE OF CONTENTS throughput at our manufacturing facilities and achieve the anticipated savings from our restructuring plans and other productivity and cost-saving initiatives.
Changes to or a failure to achieve our projected business assumptions, including growth and profitability, could result in a valuation that would trigger an impairment in future periods. Inventory valuation Inventories consist of finished goods, work-in-process, and raw materials used in manufacturing products.
However, such assumptions are inherently uncertain and actual results could differ from those estimates. Changes to or a failure to achieve our projected business assumptions, including growth and profitability, could result in a valuation that would trigger an additional impairment in future periods. Inventory valuation Inventories consist of finished goods, work-in-process, and raw materials used in manufacturing products.
Net sales Net sales for the year ended December 31, 2024, were $190.3 million, a decrease of $36.3 million, or 16.0%, compared to the same period in 2023. The 16.0% decline was primarily due to a 12% reduction in volume and mix of products sold and a 4% decrease in price.
Net sales Net sales for the year ended December 31, 2025, were $134.3 million, a decrease of $56.0 million, or 29.4%, compared to the same period in 2024. The 29.4% decline was primarily due to a 26.9% reduction in volume and mix of products sold and a 2.4% decrease in price.
Selling, general and administrative expenses SG&A expenses for the year ended December 31, 2024, were $72.8 million, a decrease of $14.5 million, or 16.6%, compared to the same period in 2023.
Selling, general and administrative expenses SG&A expenses for the year ended December 31, 2025, were $59.9 million, a decrease of $12.8 million, or 17.6%, compared to the same period in 2024.
The income tax expense for the year ended December 31, 2024, was primarily due to current foreign tax expense in certain jurisdictions. We recorded an income tax benefit of $0.2 million for the year ended December 31, 2023, representing an effective tax rate of 0.3%.
The income tax benefit for the year ended December 31, 2025, was primarily due to deferred tax benefits, partially offset by current state and foreign tax expense in certain jurisdictions. We recorded an income tax expense of $0.9 million for the year ended December 31, 2024, representing an effective tax rate of (1.3)%.
The principal amounts of the Term Loan are scheduled to be repaid in consecutive quarterly installments in amounts equal to 0.25% of the original principal amount of the Term Loan on the last day of each fiscal quarter commencing March 31, 2022, with the balance of the Term Loan payable on the Maturity Date of October 25, 2028.
The Term Loan matures on October 25, 2028, and is secured by a first lien on our non-working capital assets and a second lien on our working capital assets. 53 TABLE OF CONTENTS The principal amounts of the Term Loan are scheduled to be repaid in consecutive quarterly installments in amounts equal to 0.25% of the original principal amount of the Term Loan on the last day of each fiscal quarter commencing March 31, 2022, with the balance of the Term Loan payable on the Maturity Date.
This decline was largely driven by the previously mentioned oversupply in the cannabis industry. Gross profit Gross profit for the year ended December 31, 2024, was $32.1 million, a decrease of $5.5 million, or 14.6%, compared to the same period in 2023.
This decline was largely driven by the previously mentioned industry oversupply. Gross profit Gross profit for the year ended December 31, 2025, was $15.2 million, a decrease of $16.9 million, or 52.7%, compared to the same period in 2024.
Interest expense Interest expense for the year ended December 31, 2024, was $15.2 million, a decrease of $0.2 million, or 1.3%, compared to the same period in the prior year. The decrease was primarily due to lower debt outstanding due to principal repayments, partially offset by higher variable interest rates on our Term Loan.
Interest expense Interest expense for the year ended December 31, 2025, was $13.4 million, a decrease of $1.8 million, or 11.9%, compared to the same period in the prior year. The decrease was primarily due to lower debt outstanding due to principal repayments, as well as lower variable interest rates on our Term Loan.
The impairment evaluation includes a comparison of the undiscounted cash flows expected to be generated by that long-lived asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying amount exceeds its fair value.
The impairment evaluation includes a comparison of the undiscounted cash flows expected to be generated by that long-lived asset or asset group to its carrying amount.
Liquidity and Capital Resources Cash Flow from Operating, Investing, and Financing Activities Comparison of Years Ended December 31, 2024, and 2023 The following table summarizes our cash flows for the years ended December 31, 2024, and 2023 (amounts in thousands): Years ended December 31, 2024 2023 Net cash (used in) from operating activities $ (324) $ 7,044 Net cash from (used in) investing activities 1,669 (4,170) Net cash (used in) from financing activities (4,776) 6,065 Effect of exchange rate changes on cash and cash equivalents (770) 82 Net (decrease) increase in cash and cash equivalents (4,201) 9,021 Cash and cash equivalents at beginning of year 30,312 21,291 Cash and cash equivalents at end of year $ 26,111 $ 30,312 48 TABLE OF CONTENTS Operating Activities Net cash used in operating activities was $0.3 million for the year ended December 31, 2024.
The income tax expense for the year ended December 31, 2024, was primarily due to current foreign tax expense in certain jurisdictions. 51 TABLE OF CONTENTS Liquidity and Capital Resources Cash Flow from Operating, Investing, and Financing Activities Comparison of Years Ended December 31, 2025, and 2024 The following table summarizes our cash flows for the years ended December 31, 2025, and 2024 (amounts in thousands): Years ended December 31, 2025 2024 Net cash used in operating activities $ (14,059) $ (324) Net cash (used in) from investing activities (841) 1,669 Net cash used in financing activities (5,438) (4,776) Effect of exchange rate changes on cash and cash equivalents 536 (770) Net decrease in cash and cash equivalents (19,802) (4,201) Cash and cash equivalents cash at beginning of year 26,111 30,312 Cash and cash equivalents at end of year $ 6,309 $ 26,111 Operating Activities Net cash used in operating activities was $14.1 million for the year ended December 31, 2025.
The net cash usage was primarily due to a net loss, partially offset by $9.7 million net cash inflow from a reduction in working capital. The total 2024 cash impact was a net loss of $66.7 million, less net non-cash items of $56.7 million.
The net cash usage was primarily due to a net loss, partially offset by $4.6 million net cash inflow from a reduction in working capital. The total 2025 cash impact was a net loss of $289.8 million, less net non-cash items of $271.2 million, primarily impairments and depreciation, depletion and amortization.
As described in Note 7 – Leases , we received net cash proceeds in January 2023 from the Sale Leaseback Transaction and are subject to a provision whereby such net cash proceeds can be reinvested into certain investments, such as capital expenditures.
As described in Note 4 – Restructuring and Asset Sales , we received net cash proceeds of approximately $6.3 million in May 2024 from the IGE Asset Sale and were subject to a provision whereby such net cash proceeds can be reinvested into certain investments, such as capital expenditures.
Results of Operations - Comparison of Years Ended December 31, 2024, and 2023 The results of operations data in the following table, including amounts and percentages of net sales for each year and the year-to-year change in dollars and percent, for the years ended December 31, 2024, and 2023, have been derived from the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K (amounts in thousands): Years ended December 31, 2024 2023 Year to year change Net sales $ 190,288 100.0 % $ 226,581 100.0 % $ (36,293) -16.0 % Cost of goods sold 158,155 83.1 % 188,969 83.4 % (30,814) -16.3 % Gross profit 32,133 16.9 % 37,612 16.6 % (5,479) -14.6 % Operating expenses: Selling, general and administrative 72,794 38.3 % 87,314 38.5 % (14,520) -16.6 % Loss on asset disposition 11,520 6.1 % — 0.0 % 11,520 N/M % Loss from operations (52,181) -27.4 % (49,702) -21.9 % (2,479) -5.0 % Interest expense (15,237) -8.0 % (15,442) -6.8 % (205) -1.3 % Other income, net 1,570 0.8 % 118 0.1 % 1,452 1,230.5 % Loss before tax (65,848) -34.6 % (65,026) -28.7 % (822) -1.3 % Income tax (expense) benefit (869) -0.5 % 213 0.1 % (1,082) -508.0 % Net loss $ (66,717) -35.1 % $ (64,813) -28.6 % $ (1,904) -2.9 % "N/M" is not meaningful.
Results of Operations - Comparison of Years Ended December 31, 2025, and 2024 The results of operations data in the following table, including amounts and percentages of net sales for each year and the year-to-year change in dollars and percent, for the years ended December 31, 2025, and 2024, have been derived from the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K (amounts in thousands): Years ended December 31, 2025 2024 Year to year change Net sales $ 134,252 100.0 % $ 190,288 100.0 % $ (56,036) -29.4 % Cost of goods sold 119,043 88.7 % 158,155 83.1 % (39,112) -24.7 % Gross profit 15,209 11.3 % 32,133 16.9 % (16,924) -52.7 % Operating expenses: Selling, general and administrative 59,948 44.7 % 72,794 38.3 % (12,846) -17.6 % Impairments 232,179 172.9 % — 0.0 % 232,179 N/M % Loss on asset disposition — 0.0 % 11,520 6.1 % (11,520) N/M % Loss from operations (276,918) -206.3 % (52,181) -27.4 % (224,737) -430.7 % Interest expense (13,427) -10.0 % (15,237) -8.0 % 1,810 11.9 % Other (expense) income, net (185) -0.1 % 1,570 0.8 % (1,755) -111.8 % Loss before tax (290,530) -216.4 % (65,848) -34.6 % (224,682) -341.2 % Income tax benefit (expense) 740 0.6 % (869) -0.5 % 1,609 -185.2 % Net loss $ (289,790) -215.9 % $ (66,717) -35.1 % $ (223,073) -334.4 % "N/M" is not meaningful.
Our customers include specialty hydroponic retailers, commercial resellers and greenhouse builders, garden centers, hardware stores, and e-commerce retailers. Specialty hydroponic retailers can provide growers with specialized merchandise assortments and knowledgeable staff.
Our customers include specialty hydroponic retailers, commercial resellers and greenhouse builders, garden centers, hardware stores, and e-commerce retailers. Specialty hydroponic retailers can provide growers with specialized merchandise assortments and knowledgeable staff. We have incurred recurring operating losses, negative cash flows from operations, and have significant debt obligations due within the next twelve months.
Net cash from operating activities was $7.0 million for the year ended December 31, 2023, primarily due to a $12.4 million net cash inflow from a reduction of working capital, partially offset by a reported net loss of $64.8 million less non-cash items of $59.5 million.
During the year ended December 31, 2025, we paid $12.7 million in cash interest. Net cash used in operating activities was $0.3 million for the year ended December 31, 2024. The net cash usage was primarily due to a net loss, partially offset by $9.7 million net cash inflow from a reduction in working capital.
As a result of the continued adverse market conditions, in the third quarter of 2023 we began a second phase of the Restructuring Plan which included U.S. manufacturing facility consolidations, in particular with respect to our production of certain durable equipment products. In 2023, we recorded $9.2 million of restructuring charges for the second phase.
As a result of the continued adverse market conditions, we began a restructuring plan in 2023 (the "2023 Restructuring Plan"), and undertook significant actions to streamline operations, reduce costs and improve efficiencies. Restructuring actions in the 2023 Restructuring Plan were primarily U.S. manufacturing facility consolidations, in particular with respect to our production of certain durable equipment products.
We anticipate that sales incentives and/or the amount billed to customers for shipping and handling costs could impact our net sales and that changes in such promotional activities or freight recovery charges could impact period-over-period results. 46 TABLE OF CONTENTS Cost of goods sold Cost of goods sold consists primarily of material costs, inbound and outbound freight costs, labor costs primarily for manufacturing and warehouse personnel, facility costs for manufacturing operations, depreciation, depletion and amortization of manufacturing and warehouse improvements and equipment, restructuring costs, and inventory allowances.
We anticipate that sales incentives and/or the amount billed to customers for shipping and handling costs could impact our net sales and that changes in such promotional activities or freight recovery charges could impact period-over-period results.
Revolving Credit Facility On March 29, 2021, we and certain of our subsidiaries entered into the Revolving Credit Facility (the "Revolving Credit Facility") with JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and swingline lender for a revolving line of credit up to $50 million.
Revolving Credit Facility On March 29, 2021, we and certain of our subsidiaries entered into the Revolving Credit Agreement with JPMorgan, as administrative agent, issuing bank and swingline lender for a revolving line of credit up to $50 million (the "Revolving Credit Facility") which was subsequently amended several times to, among other things, modify the maximum aggregate borrowing limit, transition the interest rate benchmark from LIBOR to SOFR, and extend the maturity date.
Net cash used in investing activities for the year ended December 31, 2023, was $4.2 million, due primarily to capital expenditures for property, plant and equipment. In both 2024 and 2023, the capital expenditures of property, plant and equipment primarily relates to investments in our peat moss harvesting operation in Canada.
In both 2025 and 2024, the capital expenditures of property, plant and equipment primarily relates to investments in our peat moss harvesting operation in Canada. 52 TABLE OF CONTENTS Financing Activities Net cash used in financing activities was $5.4 million for the year ended December 31, 2025, primarily driven by (i) $4.9 million of Term Loan repayments primarily made in conjunction with the reinvestment provisions, and (ii) finance lease principal payments of $0.5 million .
Refer to further discussion below, relatin g to Term Loan reinvestment provisions regarding the net cash proceeds of the Sale Leaseback Transaction and Asset Sale. If necessary, we believe that we could supplement our cash position through additional asset sales or divestiture of one or more of our brands or lines of business.
If necessary, we believe that we could supplement our cash position through additional asset sales or divestiture of one or more of our brands or lines of business.
Our gross profit margin percentage increased to 16.9% for the year ended December 31, 2024, from 16.6% in the same period in 2023 . The decrease in gross profit was primarily due to the lower net sales in the current year. The increase in gross profit margin was largely driven by an $8.7 million decrease in restructuring charges.
Our gross profit margin percentage decreased to 11.3% for the year ended December 31, 2025, from 16.9% in the same period in 2024 . The decrease in gross profit and gross profit margin was primarily due to the lower net sales, lower manufacturing production volume, as well as a $3.2 million increase in restructuring charges primarily comprised of inventory markdowns.
Actual results of operations will depend on numerous factors, many of which are beyond our control as further discussed in Part I, Item 1A, Risk Factors included in this Annual Report on Form 10-K.
Although we believe such plans, if executed, should provide us with liquidity to meet our needs, successful completion of such plans is dependent on numerous factors, many of which are beyond our control as further discussed in Part I, Item 1A, Risk Factors included in this Annual Report on Form 10-K.
Total costs incurred relating to this first phase of the Restructuring Plan from its commencement in 2022 to its completion in 2023, were (i) $6.4 million relating primarily to inventory markdowns, and (ii) $3.4 million relating primarily to the relocation and termination of certain facilities in Canada.
Total costs incurred relating to the 2023 Restructuring Plan, from its commencement through completion in the first quarter of 2025 were (i) $9.7 million of non-cash charges relating primarily to inventory markdowns, and (ii) $2.0 million of cash charges relating primarily to the consolidation of U.S. manufacturing facilities.
The foregoing description of the reinvestment provision does not purport to be complete and is qualified in its entirety by reference to the provisions of the Term Loan. As described in Note 3 – Restructuring and Asset Sales , we sold assets for $8.7 million in May 2024.
As of December 31, 2025, we have satisfied this provision as related to the IGE Asset Sale, through a combination of certain investments and prepayments of the Term Loan. The foregoing description of the reinvestment provision does not purport to be complete and is qualified in its entirety by reference to the provisions of the Term Loan.
In addition, the Company paid cash of $1.3 million to terminate the facility operating lease in connection with the Asset Sale.
In addition, the Company paid cash of $1.3 million to terminate the facility operating lease in connection with the IGE Asset Sale. The Company is continuing to consolidate its operations in connection with restructuring and related cost saving initiatives which has contributed to the aforementioned decrease in inventory in both the 2025 and 2024 periods.
The amount of any net cash proceeds which are not reinvested requires us to make an offer to prepay the corresponding amount on the Term Loan.
The amount of any net cash proceeds which are not reinvested required us to make an offer to prepay the corresponding amount on the Term Loan in 2025. In accordance with this provision, we made prepayments of $4.6 million during of 2025. The prepayments reduced our required quarterly installment amounts to zero for the remaining te rm.
Other income, net for the year ended December 31, 2023 was primarily driven by foreign exchange rate gains, partially offset by legal fees associated with the amendment of the Term Loan. Income tax (expense) benefit We recorded an income tax expense of $0.9 million for the year ended December 31, 2024, representing an effective tax rate of (1.3)%.
Income tax benefit (expense) We recorded an income tax benefit of $0.7 million for the year ended December 31, 2025, representing an effective tax rate of 0.3%.
The net reduction in working capital was primarily driven by a $26.1 million decrease of inventories, partially offset by decreases of $9.2 million of lease liabilities and $3.5 million of accrued expenses and other current liabilities. During the year ended December 31, 2023, we paid $13.1 million in cash interest and we received cash income tax refunds of $1.0 million.
The $4.6 million net reduction in working capital was primarily comprised of a $12.1 million decrease of inventories, a $5.7 million decrease in accounts receivable, and a $0.1 million decrease of prepaid expenses and other current assets, partially offset by a $7.8 million decrease of lease liabilities.
Cash and Cash Equivalents The cash and cash equivalents balances of $26.1 million and $30.3 million at December 31, 2024, and December 31, 2023, respectively, included $11.9 million and $8.5 million, respectively, held by foreign subsidiaries. 51 TABLE OF CONTENTS Material Cash Requirements Our estimated 2025 material cash requirements include (i) principal repayments and anticipated interest payments on our long-term debt, (ii) finance lease payments, (iii) operating lease payments, and (iv) balances subject to the Term Loan reinvestment provision, as well as other purchase obligations to support our operations.
Material Cash Requirements Our estimated 2026 material cash requirements include (i) anticipated principal and interest payments on our Term Loan, (ii) finance lease payments, and (iii) operating lease payments, as well as other purchase obligations to support our operations.
Net cash from financing activities was $6.1 million for the year ended December 31, 2023, primarily driven by $8.6 million of proceeds from the Sale-Leaseback Transaction, partially offset by $1.3 million of quarterly principal payments of the Term Loan and $1.0 million of finance lease principal payments.
Investing Activities Net cash used in investing activities was $0.8 million for the year ended December 31, 2025, due to $1.0 million of capital expenditures of property, plant and equipment, partially offset by proceeds from the sale of property, plant and equipment of $0.2 million. Net cash from investing activities was $1.7 million for the year ended December 31, 2024.
Other income, net Other income, net for the year ended December 31, 2024, was $1.6 million, an increase of $1.5 million compared to the same period in the prior year.
Other (expense) income, net Other expense, net for the year ended December 31, 2025, was $0.2 million, compared to other income, net of $1.6 million in the prior year. Other expense, net for the year ended December 31, 2025, was primarily driven by a loss on debt extinguishment recorded in conjunction with the Term Loan prepayments during the year.
We also continue to evaluate opportunities to sell excess owned land to supplement our cash position. We may incur additional charges associated with these potential actions. We anticipate the second phase of our Restructuring Plan and the related actions described above may result in annual cost savings of over $2.0 million.
We anticipate the 2025 Restructuring Plan and related actions may result in additional restructuring charges of up to $3 million, primarily cash related, and annual cost savings of over $6 million plus additional working capital benefits.
As of December 31, 2024, we have satisfied this provision as related to the Sale Leaseback Transaction, through a combination of payments made pursuant to the contractual commitments and additional $2.0 million repayments of the Term Loan.
As of December 31, 2025, we have satisfied this provision as related to the IGE Asset Sale, through a combination of certain investments and prepayments of the Term Loan. Refer to further discussion below, relating to Term Loan reinvestment provisions regarding the net cash proceeds of the IGE Asset Sale.
These charges primarily related to estimated non-cash raw material inventory write-downs as we reduced our capacity and facility 45 TABLE OF CONTENTS space, given the change in customer demand for these products. These restructuring charges were primarily recorded within cost of goods sold on the consolidated statements of operations.
We incurred estimated restructuring costs of $5.2 million during the year ended December 31, 2025, for the 2025 Restructuring Plan. The charges were primarily associated with non-cash inventory write-downs, which were recorded in cost of goods sold on the condensed consolidated statements of operations, and cash charges which primarily comprised of charges incurred to relocate and terminate certain facilities.
We maintain an allowance for excess and obsolete inventory that is based upon assumptions about future demand and market conditions.
For additional information, see Part I, Item 1A, Risk Factors included in this Annual Report on Form 10-K, including the risk entitled “ Our restructuring activities may increase our expenses and cash expenditures, and may not have the intended effects. ” We maintain an allowance for excess and obsolete inventory that is based upon assumptions about future demand and market conditions.
Removed
In 2022, we undertook the following major initiatives in connection with the first phase of our previously disclosed restructuring plan (the "Restructuring Plan"): (i) narrowing our product and brand portfolio, including removing approximately one-third of all products and one-fifth of all brands relating to our primary product portfolio, which excluded our garden center business in Canada, and (ii) relocating and consolidating certain manufacturing and distribution centers, including headcount reductions and reorganization to drive a solution based approach, focusing commercial sales on competencies and product assortment from our 2021 acquisitions.
Added
These conditions and events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern. See Note 2 – Liquidity and Going Concern to our audited consolidated financial statements and our independent registered public accounting firm report included elsewhere in this Annual Report on Form 10-K for additional information.
Removed
As a result of the Asset Sale and new contract manufacturing arrangement, we expect improved profitability on future IGE branded product sales from an anticipated decrease in fixed costs at current sales volumes.
Added
Subsequent Events Term Loan We and certain of our subsidiaries (the “Subsidiary Obligors”) entered into Credit and Guaranty Agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”) as administrative agent for the lenders, pursuant to which we borrowed a $125 million senior secured term loan (the “Term Loan”), which was subsequently amended.
Removed
The Asset Sale closed on May 31, 2024 and we sold or disposed of approximately $11.6 million of inventories, $3.7 million of property, plant and equipment, and technology intangible assets of $2.6 million. In connection with the Asset Sale, we terminated and paid-off the facility operating lease for $1.3 million and certain equipment finance leases for $0.7 million.
Added
On February 4, 2026, we elected to defer making the interest payment of approximately $2.8 million on the Term Loan. As a result of our failure to pay the interest within the grace period, an event of default occurred with respect to the Term Loan.
Removed
We recorded a loss on asset disposition of approximately $11.5 million on the consolidated statements of operations for the year ended December 31, 2024. During the year ended December 31, 2024, we executed further restructuring actions, including consolidation of other U.S. manufacturing facilities, and outsourcing certain distribution center locations to reduce costs and further consolidate our facility footprint.
Added
On February 11, 2026, the lenders, through the administrative agent, notified us of such event of default and informed us that the administrative agent or the collateral agent may exercise any rights and remedies provided under the Credit and Guaranty Agreement and related financing documents, but it did not seek to enforce such remedies as of such time.
Removed
These actions resulted in restructuring charges of $2.2 million during 2024, including termination and disposal costs associated with inventory, facilities and headcount reductions. After completion of the Asset Sale and the aforementioned restructuring actions, we have now consolidated our manufacturing operations into two U.S. locations and our peat moss harvesting and processing operation in Canada.
Added
See —Liquidity and Capital Resources for additional information. In addition, on February 10, 2026, JPMorgan issued a notice to the Company and Lenders of its resignation as Administrative Agent and Collateral Agent under the Credit and Guaranty Agreement.
Removed
In addition, we reorganized and integrated our business activities into one operating segment in the fourth quarter of 2024. The second phase of our Restructuring Plan is substantially complete as of December 31, 2024. Given the current market conditions, we may initiate additional phases to our Restructuring Plan to further consolidate our operations and realize cost savings.
Added
Such resignation became effective on March 12, 2026, when FEAC Agent, LLC was appointed as the successor agent for the Lenders in accordance with Section 9 of the Credit and Guaranty Agreement. 47 TABLE OF CONTENTS Revolving Credit Facility On February 17, 2026, we entered into an agreement (the "Termination Agreement") to terminate that certain Credit Agreement, dated as of March 29, 2021, as amended, by among JPMorgan, as administrative agent, issuing bank and swingline lender, the other loan parties from time to time party thereto and the lenders from time to time party thereto (the "Revolving Credit Agreement").
Removed
The income tax benefit for the year ended December 31, 2023, was primarily due to minor foreign tax benefits in certain jurisdictions.
Added
Pursuant to the terms of the Termination Agreement, the parties agreed to terminate the Revolving Credit Agreement subject to the survival of each of the provisions of the Revolving Credit Agreement and Loan Documents (as defined in the Revolving Credit Agreement) and in the certificates delivered in connection with or pursuant to the Revolving Credit Agreement that survive termination of the Revolving Credit Agreement.
Removed
In both 2024 and 2023, the Company consolidated its operations in connection with restructuring and related cost saving initiatives and decreased its inventory, contributing significantly to operating cash flows. Investing Activities Net cash from investing activities was $1.7 million for the year ended December 31, 2024.
Added
In addition, we believe demand for our products has been negatively impacted by the extended period to enact reform of U.S. federal regulations, including cannabis rescheduling, which have been slow to develop and possibly leading cannabis operators to reduce investments in our products, particularly durable goods.
Removed
Refer to further description of the Sale-Leaseback Transaction and Term Loan reinvestment provision in Part II Item 7. Term Loan.
Added
In addition, we believe our financial results have been negatively impacted by hydroponic retail store closings and, in some cases, associated accounts receivable allowances.
Removed
Availability and Use of Cash Our ability to make investments in our business, service our debt and maintain liquidity will primarily depend upon our ability to generate excess operating cash flows through our operating subsidiaries.
Added
During the fourth quarter of fiscal 2025, as a result of industry conditions, primarily attributable to an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation, as well as continued declines in operating cash flows and profitability, we assessed our long-lived assets for impairment and recorded an impairment charge of $232.2 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign Currency Risk The functional currencies of our foreign subsidiary operations are predominantly in the Canadian dollar ("CAD") and the Euro. For the purposes of presenting these consolidated financial statements, the assets and liabilities of subsidiaries with CAD or Euro functional currencies are translated into USD using exchange rates prevailing at the end of each reporting period.
Biggest changeForeign Currency Risk The functional currencies of our foreign subsidiary operations are predominantly in the Canadian dollar ("CAD") and the Euro. For the purposes of presenting these consolidated financial statements, the assets and liabilities of subsidiaries with CAD or Euro functional currencies are translated into U.S. dollars ("USD") using exchange rates prevailing at the end of each reporting period.
Inflation Risk Our results of operations and financial condition are presented based on historical costs. We cannot provide assurances that our results of operations and financial condition will not be materially impacted by inflation in the future. 54 TABLE OF CONTENTS
Inflation Risk Our results of operations and financial condition are presented based on historical costs. We cannot provide assurances that our results of operations and financial condition will not be materially impacted by inflation in the future. 57 TABLE OF CONTENTS
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of economic losses due to adverse changes in financial market prices and rates. Our primary market risks have been interest rate, foreign currency and inflation risk. Interest Rate Risk We are exposed to interest rate risk through our variable rate debt.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of economic losses due to adverse changes in financial market prices and rates. Our primary market risk has been interest rate, foreign currency and inflation risk. Interest Rate Risk We are exposed to interest rate risk through our variable rate debt.
If the rates were to increase by 100 basis points from the rates in effect as of December 31, 2024, our interest expense on the variable rate debt would increase by an average of $1.1 million annually.
If the rates were to increase by 100 basis points from the rates in effect as of December 31, 2025, our interest expense on the variable rate debt would increase by an average of $1.2 million annually.
As of December 31, 2024, we had $119.3 million of Term Loan debt that is subject to variable interest rates that are based on SOFR or an alternate base rate. Refer to Note 10 – Debt for details relating to the debt.
As of December 31, 2025, we had $114.4 million of Term Loan debt that is subject to variable interest rates that are based on SOFR or an alternate base rate. Refer to Note 11 – Debt for details relating to the debt.

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