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What changed in GrowGeneration Corp.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of GrowGeneration Corp.'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.

+214 added−194 removedSource: 10-K (2026-03-20) vs 10-K (2025-03-13)

Top changes in GrowGeneration Corp.'s 2025 10-K

214 paragraphs added · 194 removed · 161 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeVertical farms producing organic fruits and vegetables also utilize hydroponics due to a rising shortage of farmland and environmental vulnerabilities, including drought, severe weather conditions, and pests. Our target customers include commercial, craft, and home growers, in the plant-based medicine market, and commercial and home gardeners that cultivate organic herbs, fruits, and vegetables.
Biggest changeExisting facilities also need consumable products for operations, as well as equipment updates from time to time. Commercial customers typically purchase large dollar amounts and sizes of products. Vertical farms producing organic fruits and vegetables also utilize hydroponics due to a rising shortage of farmland and environmental vulnerabilities, including drought, severe weather conditions, and pests.
GrowGeneration has also sponsored social impact organizations and programs, such as the Whole Cities Foundation, a non- profit organization established by Whole Foods whose mission is to support community based urban farms and healthy nutrition, Last Prisoner Project, a national, nonpartisan nonprofit dedicated to reforming the U.S. criminal justice system through progressive drug policy, and the NEXTGEN Micro Cultivation competition, an education and training support program for social equity license applicants.
GrowGeneration has also sponsored social impact organizations and programs, such as the Whole Cities Foundation, a non-profit organization established by Whole Foods whose mission is to support community-based urban farms and access to healthy nutrition, Last Prisoner Project, a national, nonpartisan nonprofit dedicated to reforming the U.S. criminal justice system through progressive drug policy, and the NEXTGEN Micro Cultivation competition, an education and training support program for social equity license applicants.
Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, and more, the development and expansion of which are a key component of our growth strategy.
Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, Viagrow, and more, the development and expansion of which are a key component of our growth strategy.
As a result, we have built a business that is driven by a wide selection of products, a strong portfolio of proprietary brands, a solutions-driven staff located in strategic markets around the country, and pick, pack, ship distribution and fulfillment capabilities. Since our founding in 2014, GrowGeneration has acquired or opened numerous specialty hydroponic and organic gardening center locations.
As a result, we have built a business that is driven by a wide selection of products, a strong portfolio of proprietary brands, a solutions-driven staff located in strategic markets around the country, and pick, pack, ship distribution and fulfillment capabilities. Since our founding in 2014, we have acquired or opened numerous specialty hydroponic and organic gardening center locations.
A key part of that selection of products is GrowGeneration's own portfolio of industry-leading proprietary brands, including Ion Lighting, PowerSi monosilicic acid, Charcoir coco pots, cubes, and medium, Drip Hydro liquid and powder nutrients and additives, MMI benching, racking, and storage solutions, The Harvest Company gardening 3 Table of Contents tools and accessories, and other products.
A key part of that selection of products is GrowGeneration's own portfolio of industry-leading proprietary brands, including Ion Lighting, PowerSi monosilicic acid, Charcoir coco pots, cubes, and medium, Drip Hydro liquid and powder nutrients and additives, MMI benching, racking, and storage solutions, The Harvest Company and 3 Table of Contents Viagrow gardening supplies, tools, and accessories, and other products.
The total physical footprint of our Cultivation and Gardening business spans over 724,000 square feet of retail and warehouse space, with garden centers and distribution and fulfillment centers strategically located throughout the U.S. to deliver product and service to customers quickly and efficiently.
The total physical footprint of our Cultivation and Gardening business spans over 563,000 square feet of retail and warehouse space, with garden centers and distribution and fulfillment centers strategically located throughout the U.S. to deliver product and service to customers quickly and efficiently.
No single customer accounted for more than 10% of our net revenues for the years ended December 31, 2024, 2023, and 2022. We source our products from numerous different manufacturers and distributors located both within and outside the U.S.
No single customer accounted for more than 10% of our net revenues for the years ended December 31, 2025, 2024, and 2023. We source our products from numerous different manufacturers and distributors located both within and outside the U.S.
Production takes place within an enclosed growing structure, such as a greenhouse or building, which can produce crops regardless of the season or weather conditions in a controlled environment with increased yield and quality compared to traditional outdoor growers .
Production takes place within an enclosed growing structure, such as a greenhouse or building, which can produce crops regardless of the season or weather conditions in a controlled 2 Table of Contents environment with increased yield and quality compared to traditional outdoor growers .
Currently, our main growth strategies for our Cultivation and Gardening segment include expanding our commercial sales to sell more products to commercial cultivators for large grow operations, expanding our wholesale and distribution capabilities to sell more products to independent retail garden centers and other resellers for resale, and expanding and promoting our portfolio of proprietary brands to increase its market share, product offerings, and profitability.
Currently, our main growth strategies for our Cultivation and Gardening segment include expanding our commercial sales to sell more products to commercial cultivators for large grow operations, expanding our wholesale and distribution capabilities to sell more products to major home improvement mass-market retailers, independent retail garden centers and other resellers for resale, and expanding and promoting our portfolio of proprietary brands to increase its market share, product offerings, and profitability.
The Company has also acquired several other types of businesses within or complimentary to the hydroponic industry, such as online retailers, proprietary products, our wholesale distribution business, and our benching, racking, and storage solutions business, MMI.
We have also acquired several other types of businesses within or complimentary to the hydroponic industry, such as online retailers, proprietary products, our wholesale distribution business, and our benching, racking, and storage solutions business, MMI.
Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 31 retail locations across 12 states as of December 31, 2024.
Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 23 retail locations across 10 states as of December 31, 2025.
GrowGeneration carries and sells thousands of products, including nutrients, additives, growing media, lighting, environmental control systems, and other products for indoor and outdoor cultivation. Our products are capable of growing and maximizing yield and quality of a wide range of plants, from fruits and vegetables in backyards to cannabis and hemp in state-of-the-art commercial cultivation facilities.
We sell a variety of hydroponic and organic gardening related products, including nutrients, additives, growing media, lighting, environmental control systems, and other products for indoor and outdoor cultivation. Our products are capable of growing and maximizing yield and quality of a wide range of plants, from fruits and vegetables in backyards to cannabis and hemp in state-of-the-art commercial cultivation facilities.
Storage Solutions Target customers for our Storage Solutions segment generally include small, mid-size, and large businesses in need of vertical space-saving solutions. The majority of our customers seek a design that is custom tailored to their space and brand in an effort to maximize storage capacity or gain space in their real estate footprint.
Storage Solutions Target customers for our Storage Solutions segment generally include small, mid-size, and large businesses seeking vertical space-saving solutions that are custom tailored to their space and brand in an effort to maximize storage capacity or gain space in their real estate footprint.
Historically, our highest volume of Cultivation and Gardening sales occurs in our second and third fiscal quarters, primarily based on the outdoor growing seasons, and the lower volume occurs during our first or fourth fiscal quarters.
SEASONALITY Our Cultivation and Gardening business is subject to some seasonal influences. Historically, our highest volume of Cultivation and Gardening sales occurs in our second and third fiscal quarters, primarily based on the outdoor growing seasons, and the lower volume occurs during our first or fourth fiscal quarters.
We make our products available to growers through a variety of channels, including hydroponic retail locations, a commercial sales teams serving commercial cultivators, a wholesale distribution business that markets to resellers in both the hydroponic and traditional gardening markets, and an online platform at growgeneration.com, which includes a B2B customer portal for commercial and wholesale customers.
We make our products available to growers through a variety of channels, including our hydroponic retail locations, a commercial sales division that provides white glove service to commercial cultivators, a wholesale division that markets to mass-market retailers and independent resellers in both the hydroponic and traditional gardening markets, and an online platform at growgeneration.com, which includes a B2B customer portal for commercial and wholesale customers.
Today, management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 31 retail locations across 12 states as of December 31, 2024.
Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 23 retail locations across 10 states as of December 31, 2025.
Our customer base also includes the golf industry, specifically country clubs needing to store more club bags and optimize their existing space, as well as commercial cultivators needing benching and racking for indoor grow operations. COMPETITION Cultivation and Gardening The markets in which we sell our Cultivation and Gardening products are highly competitive.
Our customer base also includes the golf industry, specifically country clubs needing to store more club bags and optimize their existing space, as well as CEA operators that cultivate indoors with vertical or rolling benching and racking. COMPETITION Cultivation and Gardening The markets in which we sell our Cultivation and Gardening products are highly competitive.
These new and emerging industries are also subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement, judicial interpretations, and consumer perceptions.
Demand for our products depends on the uncertain acceptance and growth of these industries. These new and emerging industries are also subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement, judicial interpretations, and consumer perceptions.
Plants are often grown 2 Table of Contents using hydroponic methods in order to supply precise amounts of water and nutrients to the root zone. CEA optimizes the use of resources such as water, energy , space, capital, and labor.
Plants are often grown using hydroponic methods in order to supply precise amounts of water and nutrients to the root zone. CEA optimizes the use of resources such as water, energy , space, capital, and labor. Indoor growing techniques and hydroponic products are being utilized in new and emerging industries or segments, including the growing of cannabis and hemp.
While not as pronounced as the seasonality within our Cultivation and Gardening business because our Storage Solutions products are largely used indoors only, our Storage Solutions sales typically align to retail industry capital planning cycles, which generally result in higher sales volumes in our second and third fiscal quarters.
While not as pronounced as the seasonality within our Cultivation and Gardening business because our Storage Solutions products are largely used indoors only, our Storage Solutions sales typically align to retail industry capital planning cycles, which generally result in higher sales volumes in our second and third fiscal quarters. 4 Table of Contents INTELLECTUAL PROPERTY Our intellectual property includes our brands and their related trademarks, domain names and websites, customer lists and affiliations, product knowledge and technology, patents, and marketing intangibles.
MARKET DEVELOPMENT AND GOVERNMENT REGULATION We sell products, including hydroponic gardening products, that end users may purchase for use in new and emerging industries, including the growing of cannabis and hemp, that may not grow or achieve market acceptance in a manner that we can predict. Demand for our products depends on the uncertain acceptance and growth of these industries.
In 2025, 34.6% of employee separations were voluntary, while 52.3% resulted from workforce reductions. MARKET DEVELOPMENT AND GOVERNMENT REGULATION We sell products, including hydroponic gardening products, that end users may purchase for use in new and emerging industries, including the growing of cannabis and hemp, that may not grow or achieve market acceptance in a manner that we can predict.
We own several federally registered trademarks, including for "GrowGeneration®", "Where the Pros Go to Grow®", "MMI®", and our proprietary brands. SOCIAL ENGAGEMENT GrowGeneration seeks to support its customers and their communities in various ways. GrowGeneration regularly supports communities through charitable donations to various causes, both within and outside the hydroponics industry.
We also hold rights to website addresses related to our business, including websites that are actively used in our day-to-day business such as www.GrowGeneration.com and www.MMIstorage.com. We own several federally registered trademarks, including for "GrowGeneration®", "Where the Pros Go to Grow®", "MMI®", and our proprietary brands. SOCIAL ENGAGEMENT GrowGeneration seeks to support its customers and their communities in various ways.
Indoor growing techniques and hydroponic products are being utilized in new and emerging industries or segments, including the growing of cannabis and hemp. The products we sell and the expert knowledge we provide are in demand due to the ever-increasing legalization of plant-based medicines, primarily cannabis and hemp, and the increasing number of licensed cultivation facilities.
The products we sell and the expert knowledge we provide are in demand due to the ever-increasing legalization of plant-based medicines, primarily cannabis and hemp, and the increasing number of licensed cultivation facilities. When commercial customers gain new cultivation licenses, they need lighting, benching, environmental control systems, irrigation, fertigation, and other products to outfit their facilities.
Our workforce is diverse in all categories, from 32.0% ethnicity diversity, to 21.9% female staff with several in senior leadership positions, to 55.6% of our workforce coming from the Millennial generation. We have no employees subject to collective bargaining agreements, nor have we had any labor-related work stoppages.
Approximately 30.7% of employees represent ethnic diversity, 19.9% are female, including several in senior leadership positions, and 56.2% of our employees are part of the Millennial generation. None of our employees are subject to collective bargaining agreements, nor have we experienced any labor-related work stoppages.
In late 2021, we engaged a compensation consultant to ensure our key employee compensation packages are competitive and continue to evaluate to ensure we remain competitive. We believe we offer competitive employment terms, benefits, and incentives to attract and retain employees, including employer contributions to health and welfare benefits, bonus programs, employee discounts and training opportunities.
In late 2021, we engaged an external compensation consultant to assess and enhance the competitiveness of our key employee compensation packages, and we continue to regularly evaluate our practices to remain competitive in the marketplace. We offer comprehensive and competitive employment terms, benefits, and incentives to attract, motivate and retain top talent.
Our proprietary brand, The Harvest Company, is specifically targeted towards customers who grow organic herbs, fruits, and vegetables. Additionally, through our wholesale division, we distribute our proprietary products to wholesalers, resellers, and retailers in the specialty retail hydroponic and organic gardening industry, and we intend to expand such distribution to the traditional gardening industry in the near future.
Additionally, through our wholesale division, we distribute many of our proprietary products to customers that are wholesalers, resellers, major home improvement mass-market retailers, and retailers in the specialty retail hydroponic and organic gardening industry.
Our main growth strategies for our Storage Solutions segment include expanding the types of customers and industries to which we sell our products, including greater penetration in agriculture and golf and country clubs. In addition, we regularly seek and evaluate accretive acquisition opportunities with similar or complimentary businesses to those businesses we already operate.
Our main growth strategies for the Storage Solutions segment include expanding the types of customers and industries to which we sell our Storage Solutions products, including greater penetration in CEA, industrial, and country club verticals. Refer to Note 13, Acquisitions, of the Consolidated Financial Statements for additional information regarding our recent acquisitions.
HUMAN CAPITAL RESOURCES We strive to foster a collaborative and team-oriented culture and view our human capital resources as an ongoing priority. As of December 31, 2024, we employ 306 employees: 289 full-time employees, 17 part-time employees, and no temporary or seasonal workers.
HUMAN CAPITAL RESOURCES We are committed to fostering a collaborative, inclusive, and high-performing workplace culture and view our people as a critical driver of our long-term success. As of December 31, 2025, we employ 253 employees: 248 full-time employees, 5 part-time employees, and no temporary or seasonal workers. Our workforce reflects meaningful diversity across multiple dimensions.
Removed
When commercial customers gain new cultivation licenses, they need lighting, benching, environmental control systems, irrigation, fertigation, and other products to outfit their facilities. Existing facilities also need consumable products for operations, as well as equipment updates from time to time. Commercial customers typically purchase large dollar amounts and sizes of products.
Added
Our target customers include commercial, craft, and home growers in the plant-based medicine market, as well as commercial and home gardeners that cultivate organic herbs, fruits, and vegetables. Our proprietary brand, The Harvest Company, is specifically targeted towards customers who grow organic herbs, fruits, and vegetables.
Removed
Refer to Note 13, Acquisitions, of the Consolidated Financial Statements for additional information regarding the Company's acquisitions. SEASONALITY Our Cultivation and Gardening business is subject to some seasonal influences.
Added
We regularly seek and evaluate accretive acquisition opportunities with similar or complimentary businesses to those businesses we already operate, such as the Viagrow acquisition, which further diversified our home gardening and hydroponic gardening proprietary brand offerings as well as expanded our outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms.
Removed
INTELLECTUAL PROPERTY Our intellectual property includes our brands and their related trademarks, domain names and websites, customer lists and affiliations, product knowledge and technology, patents, and marketing intangibles. We also hold rights to website 4 Table of Contents addresses related to our business, including websites that are actively used in our day-to-day business such as www.GrowGeneration.com and www.MMIstorage.com.
Added
GrowGeneration regularly supports communities through charitable donations to various causes, both within and outside the hydroponics industry.
Removed
Starting in 2022, to boost the mental, physical, financial and overall wellness for our workforce which is our ongoing priority, we launched a wellness initiative program for our employees. In 2024, 45.8% of employee separations were due to voluntary reasons and 40.9% were due to workforce reductions.
Added
These offerings include employer-sponsored health and welfare benefits, performance-based bonus programs, employee discounts, and professional training opportunities. In 2022, we launched a company-wide wellness initiative focused on supporting the mental, physical, financial, and overall well-being of our employees, reflecting our ongoing commitment to workforce health and engagement.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf the U.S. administration imposes tariffs, or if additional tariffs or trade restrictions are implemented by the United States or other countries, the cost of our products manufactured in the United States and imported into other countries could increase, which in turn could adversely affect the demand for these products and have a material adverse effect on our business and results of operations. 7 Table of Contents Our operations may be impaired if our information technology systems, or those of our third-party vendors, fail to perform adequately, or if we or our third-party vendors are the subject of a data breach or cyber-attack.
Biggest changeOur operations may be impaired if our information technology systems, or those of our third-party vendors, fail to perform adequately, or if we or our third-party vendors are the subject of a data breach or cyber-attack.
Our failure to implement and maintain effective internal control over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements and cause us to fail to meet our reporting obligations.
Failure to implement and maintain effective internal control over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements and cause us to fail to meet our reporting obligations.
Our due diligence may fail to identify all liabilities and risks associated with acquisitions, and we may not accurately assess the relative benefits and detriments of acquisition and may pay acquisition consideration exceeding the value of the acquired business.
Our due diligence may fail to identify all liabilities and risks associated with acquisitions, and we may not accurately assess the relative benefits and detriments of acquisitions and may pay acquisition consideration exceeding the value of the acquired business.
A successful claim of intellectual property or proprietary right infringement, misappropriation, or other violation against us, or any other successful challenge to the use of our intellectual property and proprietary rights, could subject us to damages or prevent us from providing certain products or services or using certain of our recognized brand 9 Table of Contents names, which could have a material adverse effect on our business, financial condition, and results of operations.
A successful claim of intellectual property or proprietary right infringement, misappropriation, or other violation against us, or any other successful challenge to the use of our intellectual property and proprietary rights, could subject us to damages or prevent us from providing certain products or services or using certain of our recognized brand names, which could have a material adverse effect on our business, financial condition, and results of operations.
Our failure to achieve and maintain the required high manufacturing standards could result in further delays or failures in product testing or delivery, cost overruns, product recalls or withdrawals, increased warranty costs, or other problems that could harm our business and prospects. Disruptions in availability or prices of materials sourced by suppliers could adversely affect our results of operations.
Our failure to achieve and maintain the required high manufacturing standards could result in further delays or failures in product testing or delivery, cost overruns, product recalls or withdrawals, increased warranty costs, or other problems that could harm our business and prospects. 6 Table of Contents Disruptions in availability or prices of materials sourced by suppliers could adversely affect our results of operations.
Climate change continues to receive increasing global attention. The possible effects of climate change could include severe weather, changes in rainfall patterns, changing temperature levels, and changes in legislation, regulation, and international accords.
Climate change continues to receive increasing global attention. The possible effects of climate change could include severe weather, natural disasters, changes in rainfall patterns, changing temperature levels, and changes in legislation, regulation, and international accords.
We expect to continue to grow our portfolio of proprietary brand offerings and have invested in development and procurement resources and marketing efforts relating to our proprietary brand offerings to meet evolving consumer needs 6 Table of Contents and regulatory requirements.
We expect to continue to grow our portfolio of proprietary brand offerings and have invested in development and procurement resources and marketing efforts relating to our proprietary brand offerings to meet evolving consumer needs and regulatory requirements.
Public perception that the products we distribute or market harm human health or the environment could impair our reputation, involve us in litigation, damage our brand names, and have a material adverse effect on our business, financial condition, and results of operations. 12 Table of Contents Climate change and other environmental, social, and governance issues could adversely affect our brands, business, results of operations, and financial condition.
Public perception that the products we distribute or market harm human health or the environment could impair our reputation, involve us in litigation, damage our brand names, and have a material adverse effect on our business, financial condition, and results of operations. Climate change and other environmental issues could adversely affect our brands, business, results of operations, and financial condition.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We cannot assure, however, that our estimates, or the assumptions underlying them, will not change over time or otherwise prove inaccurate.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We cannot assure, however, that our estimates, or the assumptions underlying them, will not change over 11 Table of Contents time or otherwise prove inaccurate.
We may be required to record impairment charges against the carrying value of our goodwill and other intangible assets in the future. We are required to test for impairment of the carrying value of our goodwill and intangible assets at least annually and whenever evidence of impairment exists. We have recorded impairment charges in the current year.
We may be required to record impairment charges against the carrying value of our goodwill and other intangible assets in the future. We are required to test for impairment of the carrying value of our goodwill and intangible assets at least annually and whenever evidence of impairment exists.
We may be required in the future to record additional impairment charges that could have a material adverse effect on our reported results. The estimates and judgments we make, or the assumptions on which we rely, in preparing our consolidated financial statements could prove inaccurate.
In prior years, we have recorded impairment charges related to our goodwill and intangible assets. We may be required in the future to record additional impairment charges that could have a material adverse effect on our reported results. The estimates and judgments we make, or the assumptions on which we rely, in preparing our consolidated financial statements could prove inaccurate.
We sell products, including hydroponic gardening products, that end users may purchase for use in new and emerging industries, including the growing of cannabis and hemp, that may not grow or achieve market acceptance in a manner that we can predict. Demand for our products depends on the uncertain acceptance and growth of these industries.
We sell products, including hydroponic gardening products, that end users may purchase for use in new and emerging industries, including the growing of cannabis and hemp, that may not grow or achieve market acceptance in a manner that we can predict.
We are subject to collection risk that can impact the results of our operations. We extend credit to customers in the ordinary course of our business in the form of accounts receivable and promissory notes. We seek to ensure our customers are creditworthy before extending credit, but we cannot guarantee that we will receive repayment in full.
We extend credit to customers in the ordinary course of our business in the form of accounts receivable and promissory notes. We seek to ensure our customers are creditworthy before extending credit, but we cannot guarantee that we will receive repayment in full.
Potential tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.
Changes to trade policies, including additional or potential tariffs, or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.
Under the Controlled Substances Act of 1970 (the "CSA"), the federal government lists cannabis as a Schedule I controlled substance (i.e., deemed to have no medical value), and accordingly the manufacturing (cultivation), sale, or possession of cannabis is federally illegal. The U.S.
Under the Controlled Substances Act of 1970 (the "CSA"), the federal government currently lists cannabis as a Schedule I controlled substance (i.e., deemed to have no medical value), rendering its manufacturing (cultivation), distribution, or possession federally illegal. The U.S.
Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts.
Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities.
The base of cannabis growers in the United States has grown over the past 20 years since the legalization of cannabis in various U.S. states such as California, Colorado, Michigan, Nevada, Oregon and Washington, with growers depending on products similar to those we distribute.
Supply and demand and prevailing prices for cannabis may also adversely impact our business. The base of cannabis growers in the United States has grown over the past 20 years since the legalization of cannabis in various U.S. states such as California, Colorado, Michigan, Nevada, Oregon and Washington, with growers depending on products similar to those we distribute.
Present and future armed conflicts such as the ongoing conflict between Russia and Ukraine, as well as fighting in Israel and Palestine, could create or exacerbate certain risks we face to our business, financial condition, and results of operations.
Present and future armed conflicts such as the ongoing conflict between Russia and Ukraine and geopolitical instability in the Middle East, including the current conflict in Iran and its potential escalation as well as the ongoing conflict between Israel and Palestine, could create or exacerbate certain risks we face to our business, financial condition, and results of operations.
If we close or stop fully utilizing a facility, we will most likely remain obligated to perform under the applicable lease, which would include, among other things, paying base rent, insurance, taxes, and other expenses for the remainder of the lease term.
We believe that our future leases will likely also be long-term and non-cancellable and have similar renewal options. If we close or stop fully utilizing a facility, we will most likely remain obligated to perform under the applicable lease, which would include, among other things, paying base rent, insurance, taxes, and other expenses for the remainder of the lease term.
The vesting of the restricted stock units and the exercise of such outstanding options will result in dilution of our security holders.
The vesting of the restricted stock units will result in dilution of our security holders.
These material weaknesses could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected on a timely basis.
As a result, management concluded that the previously reported material weakness was remediated as of December 31, 2025. Material weaknesses could result in a misstatement of account balances or disclosures that could result in a material misstatement to the annual or interim financial statements that would not be prevented or detected on a timely basis.
For example, Russia’s invasion of Ukraine and the global response, including the imposition of financial and economic sanctions by the United States and other countries, has created supply constraints and driven inflation that could impact our operations and could create or exacerbate other risks facing our business. Damage to our reputation could have an adverse effect on our business.
Global responses to ongoing and future armed conflicts, including the imposition of financial and economic sanctions by the United States and other countries, may create supply constraints and drive inflation that could impact our operations and could create or exacerbate other risks facing our business. Damage to our reputation could have an adverse effect on our business.
Many of our facilities are located on leased premises subject to non-cancellable leases. Typically, our leases have initial terms ranging from three to ten years, with options to renew for specified periods of time. We believe that our future leases will likely also be long-term and non-cancellable and have similar renewal options.
We occupy many of our facilities under long-term, non-cancellable leases, and we may be unable to renew our leases at the end of their terms. Many of our facilities are located on leased premises subject to non-cancellable leases. Typically, our leases have initial terms ranging from three to ten years, with options to renew for specified periods of time.
We have hired additional accounting and financial staff, and leveraged outside resources, with appropriate public company experience and technical accounting knowledge to compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.
While we have hired accounting and financial staff as well as leveraged outside resources with appropriate public company experience and technical accounting knowledge to compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404, our internal financial and accounting team is leanly staffed, which can lead to inefficiencies.
We identified a material weakness in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected, along with investor confidence in our company and, as a result, the value of our common stock.
If we do not maintain effective internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected, along with investor confidence in our company and, as a result, the value of our common stock. Effective internal control over financial reporting is necessary for us to provide reliable financial reports.
As a result, we are subject to the risk that cyber-attacks on, or other security incidents affecting, our third-party vendors may adversely affect our business even if an attack or breach does not directly impact our systems.
As a result, we are subject to the risk that cyber-attacks on, or other security incidents affecting, our third-party vendors may adversely affect our business even if an attack or breach does not directly impact our systems. 7 Table of Contents Acquisitions, strategic alliances, and other investments could result in operating difficulties, dilution, and other consequences that may adversely impact our business and results of operations.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to capital. We have taken several actions and remediated previously identified material weaknesses as discussed in Item 9A of this report.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to capital.
Additionally, the impacts of climate change may present physical risks, such as damage to facilities, which could disrupt our operations or those of our customers or suppliers, and therefore our results of operations. There has also been increasing focus by investors, regulators and other constituencies on environmental, social and governance ("ESG") matters.
Additionally, the impacts of climate change and other environmental issues may present physical risks, such as damage to facilities, which could disrupt our operations or those of our customers or suppliers, and therefore our results of operations.
In the past, California regulations caused licensing shortages and future regulations may create other limitations that decrease the demand for our products. State level regulations adopted in the future may adversely impact our business. Supply and demand and prevailing prices for cannabis may also adversely impact our business.
Our growth to a certain extent is 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. State level regulations adopted in the future may adversely impact our business.
In addition, cost-cutting measures may have unanticipated negative consequences, such as customer and employee attrition. Reducing costs also means fewer resources are available for strategic initiatives and operational improvements to support future growth, such as improvements to supply chain operations and information technology systems, which could have a negative impact on our business and results of operations.
Reducing costs also means fewer resources are available for strategic initiatives and operational improvements to support future growth, such as improvements to supply chain operations and information technology systems, which could have a negative impact on our business and results of operations. 10 Table of Contents We are subject to collection risk that can impact the results of our operations.
We expect to evaluate and enter into discussions regarding a variety of potential strategic transactions. The process of integrating an acquired company, business, or product has created, and will continue to create, unforeseen operating difficulties and expenditures.
The process of integrating an acquired company, business, or product has created, and will continue to create, unforeseen operating difficulties and expenditures.
Public health emergencies and efforts to mitigate their impact may have an adverse effect on our business, liquidity, results of operations, and financial condition and the price of our securities.
Public health emergencies and efforts to mitigate their impact may adversely affect our business, liquidity, results of operations, and financial condition and the price of our securities. Public health emergencies, including pandemics, epidemics, or other widespread outbreaks of infectious diseases, and the measures taken to combat them, may have an adverse effect on our business.
Any potential litigation related to the estimates and judgments we make, or the assumptions on which we rely, in preparing our consolidated financial statements could have a material adverse effect on our financial results, harm our business, and cause our share price to decline. 11 Table of Contents We occupy many of our facilities under long-term, non-cancellable leases, and we may be unable to renew our leases at the end of their terms.
Any potential litigation related to the estimates and judgments we make, or the assumptions on which we rely, in preparing our consolidated financial statements could have a material adverse effect on our financial results, harm our business, and cause our share price to decline.
Any efforts to enforce or protect our intellectual property and proprietary rights related to trademarks, trade names, and service marks may be ineffective and could result in substantial costs and diversion of resources and thereby adversely affect our business, financial condition, results of operations, and prospects.
Any efforts to enforce or protect our intellectual property and proprietary rights related to trademarks, trade names, and service marks may be ineffective and could result in substantial costs and diversion of resources and thereby adversely affect our business, financial condition, results of operations, and prospects. 9 Table of Contents Compliance with, or violation of, environmental, health, and safety laws and regulations, including laws pertaining to the use of pesticides, could result in significant costs that adversely impact our reputation, businesses, financial position, results of operations, and cash flows.
These new and emerging industries are also subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement, judicial interpretations, and consumer perceptions.
Demand for our products depends on the uncertain acceptance and growth of these industries. 8 Table of Contents These new and emerging industries are also subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement, judicial interpretations, and consumer perceptions.
Key personnel, including members of management, may leave and compete against us, or may not perform well in their roles with us.
In addition, we do not maintain key man life insurance on any of our executive officers and directors. Key personnel, including members of management, may leave and compete against us, or may not perform well in their roles with us.
We can give no assurance that additional material weaknesses in our internal control over financial reporting will not be identified in the future. We may not successfully develop new products or improve existing products, or successfully manage various risks that we may be exposed to in connection with our proprietary brand offerings.
We may not successfully develop new products or improve existing products, or successfully manage various risks that we may be exposed to in connection with our proprietary brand offerings.
In addition, insurance that is otherwise readily available, such as general liability and directors and officer’s insurance, may be more difficult or impossible to find, and more expensive. 13 Table of Contents Our growth to a certain extent is dependent on the U.S. cannabis market.
Therefore, we may have difficulties collecting outstanding payments if any of our customers in the cannabis industry declare bankruptcy. 13 Table of Contents In addition, insurance that is otherwise readily available, such as general liability and directors and officer’s insurance, may be more difficult or impossible to find, and more expensive.
Maintaining our strong reputation is a key component in our success. Product recalls, disputes and litigation, unauthorized employee statements on social media, our inability to ship, sell, or transport our products, and other matters may harm our reputation and acceptance of our products, which may materially and adversely affect our business operations, decrease sales and increase costs.
Product recalls, disputes and litigation, unauthorized employee statements on social media, our inability to ship, sell, or transport our products, and other matters may harm our reputation and acceptance of our products, which may materially and adversely affect our business operations, decrease sales and increase costs. 12 Table of Contents In addition, perceptions that the products we distribute and market are not safe could adversely affect us and contribute to the risk of legal action against us.
Our failure to address these risks or other problems related to past or future acquisitions, investments, or strategic alliances could cause us to fail to realize the anticipated benefits of such transaction s , incur unanticipated liabilities, and harm our business generally. 8 Table of Contents Our acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, or amortization expenses, impairment of goodwill and purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results of operations and cash flows.
Our acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, or amortization expenses, impairment of goodwill and purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results of operations and cash flows.
Such issuance of additional securities would dilute the ownership stake in us held by our existing stockholders and could adversely affect the value of our securities.
Such issuance of additional securities would dilute the ownership stake in us held by our existing stockholders and could adversely affect the value of our securities. As of the date of this report, we have 1.1 million shares of unvested restricted stock units, no outstanding stock options, and no outstanding stock purchase warrants.
On occasion, allegations or news reports may be made that some of these products have failed to perform up to expectations or have caused damage or injury to individuals or property. In addition, our products or their use by our customers may be alleged to be damaging to the environment.
We distribute and market a variety of products, such as nutrients and growing media. On occasion, allegations or news reports may be made that some of these products have failed to perform up to expectations or have caused damage or injury to individuals or property.
Acquisitions, strategic alliances, and other investments could result in operating difficulties, dilution, and other consequences that may adversely impact our business and results of operations. Acquisitions are an important element of our overall corporate strategy. These transactions could entail material investments by us and be material to our financial condition and results of operations.
Acquisitions are an important element of our overall corporate strategy. These transactions could entail material investments by us and be material to our financial condition and results of operations. We expect to evaluate and enter into discussions regarding a variety of potential strategic transactions.
As part of management's independent assessment as of December 31, 2024 as discussed in Item 9A of this report, we identified a material weakness related to our Storage Solutions business, MMI, and we are therefore unable to certify that our internal controls over financial reporting is effective.
As discussed in Item 9A of this report, management had previously identified a material weakness related to our Storage Solutions business, MMI and thereby concluded that internal control over financial reporting was not effective as of December 31, 2024. During fiscal year 2025, management executed a comprehensive remediation plan to address the underlying causes of the material weakness.
Public health authorities and governments may impose various measures to respond to such emergencies that have an adverse effect on our business, liquidity, results of operations, and financial condition, such as voluntary or mandatory quarantines, restrictions on travel, and distancing, testing, and vaccine mandates.
Public health authorities and governments may implement various measures to respond to such events, including voluntary or mandatory quarantines, restrictions on travel or movement, limitations on business operations, social distancing requirements, testing, and vaccination mandates, or other public health directives.
Because we are unable to conclude that our internal control over financial reporting for our MMI business is effective, and our independent registered public accounting firm also determined that we have a material weakness, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.
The occurrence of, or failure to remediate, any material weakness we have identified or any other material weakness could cause investors to lose confidence in the accuracy and completeness of our financial reports, could cause the market price of our common stock to decline, and could result in sanctions or investigations by the SEC or other regulatory authorities.
Supreme Court has ruled in 2001 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 its use. Therefore, strict enforcement of federal law regarding cannabis would likely adversely affect our revenues and results of operations.
Supreme Court has ruled in 2001 that the federal government has the right to regulate and criminalize cannabis, even for medical purposes. Although the U.S.
If we cannot successfully defend ourselves 10 Table of Contents against product liability claims, we may incur substantial liabilities. Even successful defense could require significant financial and management resources.
Even successful defense could require significant financial and management resources.
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Additionally, our independent registered public accounting firm issued an adverse opinion on internal controls over financial reporting.
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Changes to trade policies, including tariffs or other trade restrictions, have increased, and may continue to increase, the prices of certain imported products used in our business and could continue to adversely affect our costs and supply chain.
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Although we have remediated certain material weaknesses, we are still in the process of completing the remediation process for the MMI business and the steps we are taking may not be sufficient to remediate our material weaknesses or prevent future material weaknesses or significant deficiencies from occurring.
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While we have taken steps to mitigate some of these cost pressures, including adjusting product pricing and product sourcing strategies, there can be no assurance that these actions will fully offset the impact of tariffs or other trade restrictions.
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The COVID-19 pandemic and inflation have exacerbated these risks, and the impact on labor markets may continue to disrupt our ability to attract and retain personnel for an extended period of time. In addition, we do not maintain key man life insurance on any of our executive officers and directors.
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Additional tariffs, retaliatory trade measures, or further changes in international trade policies could adversely affect the demand for our products and have a material adverse effect on our business and results of operations.
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Compliance with, or violation of, environmental, health, and safety laws and regulations, including laws pertaining to the use of pesticides, could result in significant costs that adversely impact our reputation, businesses, financial position, results of operations, and cash flows.
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Our failure to address these risks or other problems related to past or future acquisitions, investments, or strategic alliances could cause us to fail to realize the anticipated benefits of such transaction s , incur unanticipated liabilities, and harm our business generally.
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Public health emergencies, such as the one involving the novel strain of coronavirus, or COVID-19, including mutations and variants thereof, and the measures taken to combat them, may have an adverse effect on our business.
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In addition, cost-cutting measures may have unanticipated negative consequences, such as customer and employee attrition.
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Although many impacts of the COVID-19 pandemic appear to have alleviated, the pandemic has not yet been eliminated, and we cannot predict future impacts of the COVID-19 pandemic, if any, on markets generally or on our operations or the operations of our customers and suppliers.
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If we fail to properly and efficiently maintain an effective internal control over financial reporting, we could fail to report our financial results accurately.
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In addition, perceptions that the products we distribute and market are not safe could adversely affect us and contribute to the risk of legal action against us. We distribute and market a variety of products, such as nutrients and growing media.
Added
Although we have remediated the previously identified material weaknesses as discussed in Item 9A of this report, there is no assurance that the remedial measures we have taken to date, or any remedial measures we may take in the future, will be sufficient to prevent and avoid future material weaknesses or significant deficiencies in our internal control over financial reporting.
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As a result, we may face demands or requirements to make disclosure or commitments or take other action with respect to ESG issues. Our results of operations and financial condition may be adversely impacted if we are unable to effectively manage the risks or costs to us, our brands and our supply chain associated with ESG matters.
Added
Such measures, as well as the broader economic and operational disruptions associated with public health emergencies, could negatively impact our workforce, supply chain, customers, service providers, and overall business operations.
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Therefore, we may have difficulties collecting outstanding payments if any of our customers in the cannabis industry declare bankruptcy.
Added
These conditions may reduce demand for our products or services, disrupt our operations or those of our customers and suppliers, and adversely affect our liquidity, results of operations, financial condition, and the trading price of our securities.
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As of the date of this report, we have 1.4 million shares of unvested restricted stock units, outstanding options to purchase an aggregate of 16 thousand shares of our common stock (all of which are vested as of this date) at a weighted average exercise price of $4.63 per share, and no outstanding stock purchase warrants.
Added
The scope, duration, and ultimate impact of any future public health emergency are uncertain and difficult to predict, and similar events in the future could have material adverse effects on our business and financial performance.
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Maintaining our strong reputation is a key component in our success.
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In addition, our products or their use by our customers may be alleged to be damaging to the environment.
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Department of Justice issued a notice of proposed rulemaking in 2024 to reclassify cannabis as a Schedule III substance, and a Presidential Executive Order in December 2025 directed the Attorney General to expedite this process, such rescheduling has not yet been finalized.
Added
Until a final rule is effective, cannabis remains a Schedule I substance, and illegality of cannabis under federal law continues to preempt state laws legalizing its use.
Added
Furthermore, even if reclassified to Schedule III, cannabis would remain subject to significant federal regulation by the DEA and FDA, and its commercial sale without federal approval would continue to be a violation of the CSA.
Added
Therefore, any change to the enforcement priorities of the federal government, including strict enforcement of federal law regarding cannabis or a failure to finalize the rescheduling process, could materially and adversely affect our business, financial condition, and results of operations.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur CFO, who oversees the information technology department as led by our Director of Information Technology, provides periodic briefings to the Audit Committee regarding our cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, cybersecurity policies and procedures, activities of third parties, and the like.
Biggest changeOur CFO, who oversees the information technology department led by our Director of Information Technology, provides periodic briefings to the Audit Committee regarding our cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, cybersecurity policies and procedures, activities of third parties, and the like.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCultivation and Gardening Storage Solutions Corporate Total Locations Alaska 2 — — 2 California 10 — 1 11 Colorado 2 — 1 3 Florida 1 — — 1 Maine 3 — — 3 Michigan (1) 4 — — 4 Missouri 1 — — 1 New Jersey 1 — — 1 New York — 4 — 4 Ohio 1 — — 1 Oklahoma (1) 3 — — 3 Oregon 2 — — 2 Rhode Island 1 — — 1 Utah — 1 — 1 Washington 2 — — 2 Total Locations 33 5 2 40 (1) The Company owns a retail location in Michigan and in Oklahoma. 17 Table of Contents
Biggest changeCultivation and Gardening Storage Solutions Corporate Total Locations Alaska 1 — — 1 California 6 — — 6 Colorado 2 — 1 3 Maine 3 — — 3 Michigan 3 — — 3 Missouri 1 — — 1 New York — 4 — 4 Ohio 1 — — 1 Oklahoma (1) 3 — — 3 Oregon 2 — — 2 Rhode Island 1 — — 1 Utah — 1 — 1 Washington 2 — — 2 Total Locations 25 5 1 31 (1) The Company owns a retail location in Oklahoma. 17 Table of Contents
In total, the Company utilizes 874,000 square feet of space, which primarily consists of 22,000 square feet of corporate office space, 286,000 square feet of warehouse and distribution center space, and 566,000 square feet of retail and related storage space. The table below summarizes our real estate portfolio by reporting segment and by state.
In total, the Company utilizes 713,000 square feet of space, which primarily consists of 22,000 square feet of corporate office space, 286,000 square feet of warehouse and distribution center space, and 405,000 square feet of retail and related storage space. The table below summarizes our real estate portfolio by reporting segment and by state as of December 31, 2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn our opinion, these claims individually and in the aggregate are not expected to have a material adverse effect on our financial condition, results of operations or cash flows. In December 2021, the Company was sued in the U.S.
Biggest changeIt is our opinion that the legal proceedings disclosed above, in addition to the other legal proceedings and claims in which we have been involved, individually and in the aggregate are not expected to have a material adverse effect on our financial condition, results of operations or cash flows.
There can be no assurance that future developments related to pending claims or claims filed in the future, whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material effect on the Company’s financial condition, results of operations or cash flows.
There can be no assurance that future developments related to pending claims or claims filed in the future, whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material effect on our financial condition, results of operations or cash flows.
In February 2024, the Company received $0.3 million from the bankruptcy proceedings, which it recorded as a recovery on the $1.5 million Note & Option. The remainder of the Note & Option, which were fully reserved, were written off during the year ended December 31, 2024.
In February 2024, the Company received $0.3 million from the bankruptcy proceedings, which was recorded as a recovery on the $1.5 million Note & Option. The remainder of the Note & Option, which were fully reserved, were written off during the year ended December 31, 2024.
ITEM 3. LEGAL PROCEEDINGS We are involved in lawsuits and claims that arise in the normal course of our business, including the initiation and defense of proceedings related to contract and employment disputes.
ITEM 3. LEGAL PROCEEDINGS From time to time, we have been and may again become involved in legal proceedings arising in the ordinary course of our business, including the initiation and defense of proceedings related to contract and employment disputes.
Added
Due to the unpredictable nature of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time is normally difficult to ascertain.
Added
During the year ended December 31, 2025, the Company was engaged in two ongoing legal matters related to a California employment class action dispute and a vendor contract dispute, resulting in a loss contingency accrual of $1.1 million. In December 2021, the Company was sued in the U.S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHOLDERS The approximate number of stockholders of record as of February 28, 2025 was 73. The number of stockholders of record does not include beneficial owners of our common stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers, and other fiduciaries. DIVIDENDS We have never paid any cash dividends on our common stock.
Biggest changeThe number of stockholders of record does not include beneficial owners of our common stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers, and other fiduciaries. DIVIDENDS We have never paid any cash dividends on our common stock.
RECENT SALES OF UNREGISTERED SECURITIES Shares of Common Stock Issued In Connection with Asset Purchases Refer to issuances of shares of common stock in connection with acquisitions during 2022, 2023, and 2024 disclosed in the notes to the Consolidated Financial Statements. These shares were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.
RECENT SALES OF UNREGISTERED SECURITIES Shares of Common Stock Issued In Connection with Asset Purchases Refer to issuances of shares of common stock in connection with acquisitions during 2023, 2024, and 2025 disclosed in the notes to the Consolidated Financial Statements. These shares were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.
Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements, and other factors that our 19 Table of Contents Board of Directors deems relevant. In addition, the terms of any future debt or credit financings may preclude us from paying dividends.
Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements, and other factors that our Board of Directors deems relevant. In addition, the terms of any future debt or credit financings may preclude us from paying dividends.
Prior to that date, our stock traded on the OTCQX Best Market since October 10, 2017, prior to which it was traded on the OTCQB Market since November 11, 2016.
Prior to that date, our stock traded on the OTCQX Best Market since October 10, 2017, prior to which it was traded on the OTCQB Market since November 11, 2016. HOLDERS The approximate number of stockholders of record as of March 16, 2026 was 71.
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COMPARISON OF 5-YEAR CUMULATIVE RETURN The following graph compares the yearly change in the cumulative total stockholder return of our common stock for the past five fiscal years with the cumulative return of the Russell 2000 Index, the S&P 500 Index, and the S&P Retail Select Industry Index.

Item 7. Management's Discussion & Analysis

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

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Biggest changeSet forth below is a reconciliation of EBITDA and Adjusted EBITDA to net loss (in thousands): Year ended December 31, 2024 2023 2022 Net loss $ (49,510) $ (46,496) $ (163,747) Provision (benefit) for income taxes 158 32 (2,885) Interest income (2,703) (2,696) (580) Interest expense 70 97 21 Depreciation and amortization 19,436 16,607 17,132 EBITDA $ (32,549) $ (32,456) $ (150,059) Share-based compensation 2,422 3,171 4,967 Investment income 2,582 2,696 — Impairment loss (1) 6,875 15,659 127,831 Restructuring plan (2) 3,009 — — Consolidation and other charges (3) 3,160 5,376 568 Adjusted EBITDA $ (14,501) $ (5,554) $ (16,693) (1) Impairment loss related to impairments of goodwill and intangible assets and the restructuring plan for operating lease right-of-use assets impairments (2) Includes the $2.1 million incurred in the Consolidated Statements of Operations related to the restructuring plan as well as an estimated additional $0.9 million loss in gross profit due to inventory discounts offered in conjunction with the restructuring plan (3) Consists primarily of expenditures related to the activity of store and distribution consolidation, one-time severances outside of the restructuring plan announced July 2024, and other non-core or non-recurring expenses 27 Table of Contents LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2024, we had working capital of $88.9 million, compared to working capital of $116.5 million as of December 31, 2023, a decrease of $27.6 million.
Biggest changeSet forth below is a reconciliation of EBITDA and Adjusted EBITDA to net loss (in thousands): Year ended December 31, 2025 2024 2023 Net loss $ (24,046) $ (49,510) $ (46,496) Provision for income taxes 191 158 32 Interest income (1,730) (2,703) (2,696) Interest expense — 70 97 Depreciation and amortization 11,295 19,436 16,607 EBITDA $ (14,290) $ (32,549) $ (32,456) Share-based compensation 1,513 2,422 3,171 Investment income 1,741 2,582 2,696 Acquisition transaction costs 69 — — Impairment loss 130 6,875 15,659 Restructuring plan (1) 1,141 3,009 — Consolidation and other charges (2) 3,742 3,160 5,376 Adjusted EBITDA $ (5,954) $ (14,501) $ (5,554) (1) See “Item 7.
Critical accounting policies are defined as those policies that are reflective of significant judgments, estimates and uncertainties, which could potentially result in materially different results under different assumptions and conditions.
Critical accounting estimates are defined as those policies that are reflective of significant judgments, estimates and uncertainties, which could potentially result in materially different results under different assumptions and conditions.
A discussion regarding the major sources and uses of cash for the year ended December 31, 2022 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 13, 2024.
A discussion regarding the major sources and uses of cash for the year ended December 31, 2023 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 13, 2025.
For the year ended December 31, 2024, we also identified a $0.2 million impairment loss related to operating lease right-of-use assets of certain closed retail locations in conjunction with our strategic restructuring plan. Additionally, for the year ended December 31, 2023 we identified a $0.1 million impairment loss related to our operating lease right-of-use assets.
Additionally, for the year ended December 31, 2024, we also identified a $0.2 million impairment loss related to operating lease right-of-use assets of certain closed retail locations in conjunction with our strategic restructuring plan.
MMI also offers a wide variety of services, including site surveys, floor plan designs, capacity analysis, seismic calculations, permitting, and installation, in order to provide a comprehensive, turnkey solution for 21 Table of Contents customers. Based in the Hudson Valley, New York, the MMI team has decades of experience successfully completing projects throughout the U.S., Canada, and Mexico.
MMI also offers a wide variety of services, including site surveys, floor plan designs, capacity analysis, seismic calculations, permitting, and installation, in order to provide a comprehensive, turnkey solution for customers. Based in the Hudson Valley, New York, the MMI team has decades of experience successfully completing projects throughout the U.S., Canada, and Mexico.
Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, and more, the development and expansion of which are a key component of the Company's growth strategy.
Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, Viagrow, and more, the development and expansion of which are a key component of our growth strategy.
If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.
If these cash flows are less than the carrying value of such asset, the estimated fair value must be determined and an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.
A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on the results of the goodwill impairment assessment and the our results of operations. 29 Table of Contents The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill.
A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on the results of the goodwill impairment assessment and the our results of operations. The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill.
We make our products available to growers through a variety of channels, including our hydroponic retail locations, a commercial sales division that provides white glove service to commercial cultivators, a wholesale division that markets to resellers in both the hydroponic and traditional gardening markets, and an online platform at growgeneration.com, which includes a B2B customer portal for commercial and wholesale customers.
We make our products available to growers through a variety of channels, including our hydroponic retail locations, a commercial sales division that provides white glove service to commercial cultivators, a wholesale division that markets to mass-market retailers and independent resellers in both the hydroponic and traditional gardening markets, and an online platform at growgeneration.com, which includes a B2B customer portal for commercial and wholesale customers.
We perform a quantitative impairment assessment for its reporting units using a fair value method based on management's judgements and assumptions or third-party valuations. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date.
We perform a quantitative impairment assessment for our reporting units using a fair value method based on management's judgments and assumptions or third-party valuations. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date.
RESULTS OF OPERATIONS A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is presented below.
RESULTS OF OPERATIONS A discussion regarding our financial condition and results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 is presented below.
These restructuring plans have primarily included product development costs, digital transformation initiatives, reductions in cost structure by closing and consolidating 12 redundant or underperforming retail locations, in addition to the 7 retail locations closed in the first half of 2024, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.
The restructuring plan primarily included product development costs, digital transformation initiatives, reductions in cost structure by closing and consolidating 12 redundant or underperforming retail locations, in addition to the 7 retail locations closed in the first half of 2024, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.
We determined fair value using the income approach, where estimated future cash flows are discounted to present value at an appropriate rate of return. Multiples of earnings based on the average of historical, published multiples of earnings of comparable entities with similar operations and economic characteristics are also used in developing estimated fair values.
We determine fair value using the income approach, where estimated future cash flows are discounted to present value at an appropriate rate of return. Multiples of earnings based on historical averages and published multiples of earnings of comparable entities with similar operations and economic characteristics are also used in developing estimated fair values.
RECENTLY ACCOUNTING PRONOUNCEMENTS Refer to Note 3, Recent Accounting Pronouncements, of the Consolidated Financial Statements for information regarding recently issued accounting standards. 30 Table of Contents
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Refer to Note 3, Recent Accounting Pronouncements, of the Consolidated Financial Statements for information regarding recently issued accounting standards. 29 Table of Contents
Proprietary brand sales as a percentage of Cultivation and Gardening net sales increased to 24.2% for the year ended December 31, 2024 as compared to 18.8% for the year ended December 31, 2023, largely driven by our strategic initiatives to increase sales volume with our expanded portfolio of proprietary brands and various product launches.
Proprietary brand sales as a percentage of Cultivation and Gardening net sales increased to 32.8% for the year ended December 31, 2025 as compared to 24.2% for the year ended December 31, 2024, largely driven by our strategic initiatives to increase sales volume with our expanded portfolio of proprietary brands and various product launches.
Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 31 retail locations across 12 states as of December 31, 2024.
Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 23 retail locations across 10 states as of December 31, 2025.
The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $163.5 million for the year ended December 31, 2024 and $194.5 million for the year ended December 31, 2023.
The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $134.2 million for the year ended December 31, 2025 and $163.5 million for the year ended December 31, 2024.
Operating Activities Net cash and cash equivalents used in operating activities for the year ended December 31, 2024 was $1.8 million, compared to net cash provided by operating activities of $1.4 million for the year ended December 31, 2023.
Operating Activities Net cash and cash equivalents used in operating activities for the year ended December 31, 2025 was $9.4 million, compared to net cash used in operating activities of $1.8 million for the year ended December 31, 2024.
We elected to qualitatively review one reporting unit for events and circumstances which would indicate whether it was more than likely than not reporting unit fair values were below carrying values. The qualitative assessment did not identify any indicators of impairment, and accordingly, no further impairment assessments were necessary.
Of our four reporting units, only three had remaining goodwill balances. We elected to qualitatively review one reporting unit for events and circumstances which would indicate whether it was more than likely than not reporting unit fair values were below carrying values. The qualitative assessment did not identify any indicators of impairment, and accordingly, no further impairment assessments were necessary.
Investing activities for the year ended December 31, 2024 were primarily related to investment of excess cash into marketable securities of $52.6 million, offset by maturity of marketable securities of $60.2 million. We also had purchases of property and equipment of $2.0 million.
Investing activities for the year ended December 31, 2024 were primarily related to investment of excess cash into marketable securities of $52.6 million, and the purchase of property and equipment of $2.0 million, offset by maturities of marketable securities of $60.2 million.
Recoverability of Long-Lived Assets We review the recoverability of our long-lived assets, including property and equipment, operating leases right-of-use assets, and intangible assets, when events or changes in circumstances occur that indicate the carrying value of the asset may not be recoverable.
Refer to Note 6, Goodwill and Intangible Assets, of the Consolidated Financial Statements. Recoverability of Long-Lived Assets We review the recoverability of our long-lived assets, including property and equipment, operating leases right-of-use assets, and intangible assets, when events or changes in circumstances occur that indicate the carrying value of the asset may not be recoverable.
Additionally, in conjunction with our strategic restructuring activities in 2024, we assessed the right-of-use assets of certain closed retail locations for impairment when we anticipated the total remaining lease cost for the term to be greater than the anticipated sublease income, which resulted in an impairment loss of $0.2 million in the year ended December 31, 2024 Other Income Other income for the year ended December 31, 2024 was $2.6 million, a decrease of $0.8 million as compared to other income of $3.4 million for the year ended December 31, 2023.
Additionally, in conjunction with our strategic restructuring activities in 2024, we assessed the right-of-use assets of certain closed retail locations for impairment when we anticipated the total remaining lease cost for the term to be greater than the anticipated sublease income, which resulted in an impairment loss of $0.2 million in the year ended December 31, 2024.
Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $40.2 million for the year ended December 31, 2024 compared to $48.1 million for the year ended December 31, 2023, a decrease of $7.9 million or 16.4%.
Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $30.7 million for the year ended December 31, 2025 compared to $40.2 million for the year ended December 31, 2024, a decrease of $9.5 million or 23.5%.
Gross Profit We calculate gross profit as net sales less cost of sales. Gross profit excludes depreciation and amortization, which are presented separately as a component of operating expenses in the Consolidated Statements of Operations.
Gross profit excludes depreciation and amortization, which are presented separately as a component of operating expenses in the Consolidated Statements of Operations.
Net cash and cash equivalents used in financing activities for the year ended December 31, 2023 was $0.3 million, related primarily to common stock withheld for employee payroll taxes.
Financing Activities Net cash and cash equivalents used in financing activities for the year ended December 31, 2025 was $0.2 million, and was attributable to common stock withheld for employee payroll taxes.
Occupancy expenses of our retail locations and distribution centers, which consist of payroll, rent, and other lease required costs, including common 23 Table of Contents area maintenance and utilities, are included as a component of operating expenses within Store operations and other operational expenses in the Consolidated Statements of Operations.
Occupancy expenses of our retail locations and distribution centers, which consist of payroll, rent, and other lease required costs, including common area maintenance and utilities, are included as a component of operating expenses within Store operations and other operational expenses in the Consolidated Statements of Operations. Gross Profit We calculate gross profit as net sales less cost of sales.
Investing Activities Net cash and cash equivalents provided by investing activities was $5.7 million for the year ended December 31, 2024 compared to net cash used in investing activities of $11.4 million for the year ended December 31, 2023.
Investing Activities Net cash and cash equivalents provided by investing activities was $12.6 million for the year ended December 31, 2025 compared to net cash provided by investing activities of $5.7 million for the year ended December 31, 2024.
This decrease in net sales was primarily due to the closure of 19 retail locations during 2024, which include the 12 redundant or underperforming retail locations consolidated in conjunction with the restructuring plan.
This decrease in net sales was primarily due to the closure of 19 retail locations during 2024, which included the 12 redundant or underperforming retail locations consolidated in the second half of 2024 in conjunction with the restructuring plan, as well as the closure of an additional eight retail locations during 2025.
We have also acquired several other types of businesses within or complimentary to the hydroponic industry, such as online retailers, proprietary products, our wholesale distribution business, and our benching, racking, and storage solutions business, MMI. We regularly seek and evaluates accretive acquisition opportunities with similar or complimentary businesses to those businesses it already operates.
We have also acquired several other types of businesses within or complimentary to the hydroponic industry, such as online retailers, proprietary products, our wholesale distribution business, and our benching, racking, and storage solutions business, MMI.
This increase was further offset by a $1.0 million decrease in estimated credit losses in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to a $0.3 million settlement received in bankruptcy proceedings related to a note receivable in the year ended December 31, 2024 which had been reserved for in the prior year.
These decreases were partially offset by a $0.5 million increase in estimated credit losses in the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a $0.3 million credit recovery settlement received in bankruptcy proceedings related to a note receivable in the year ended December 31, 2024 which had been reserved for in the prior year.
The decrease in store operating costs was primarily due to the 19 retail locations closed during 2024, including the 12 redundant or underperforming retail locations consolidated in conjunction with the restructuring plan.
The decrease in store operating costs was primarily due to the 19 retail locations closed during 2024, including the 12 redundant or underperforming retail locations consolidated in the second half of 2024 in conjunction with the restructuring plan, as well as the closure of an additional eight retail locations during 2025.
We assess goodwill using either a qualitative or quantitative approach to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative assessment evaluates factors including macro-economic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance.
The qualitative assessment evaluates factors including macro-economic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is performed. Otherwise, no further assessment is required.
For each of the years ended December 31, 2024 and December 31, 2023, the impairment losses predominately related to our goodwill and intangible assets. Refer to the discussion within Critical Accounting Policies and Estimates section as well as Note 6, Goodwill and Intangible Assets, of the Consolidated Financial Statements for additional information regarding our impairment losses.
Refer to the discussion within Critical Accounting Policies and Estimates section as well as Note 5, Property and Equipment, and Note 6, Goodwill and Intangible Assets, of the Consolidated Financial Statements for additional information regarding our impairment losses.
The increase in corporate overhead was primarily due to the $2.8 million increase in depreciation and amortization expense, which was largely attributed to the $5.3 million increase related to the accelerated depreciation and amortization for certain capitalized software assets reassessed as part of our restructuring activities and was partially offset by a $2.1 million decrease in amortization expense related to intangible assets as a result of intangible asset impairments in the year ended December 31, 2023.
The decrease in corporate overhead was primarily due to the $8.1 million or 41.9% decrease in depreciation and amortization expense, which was largely attributed to the $5.3 million accelerated depreciation and amortization for certain capitalized software assets reassessed as part of our restructuring activities in the year ended December 31, 2024.
Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 31 retail locations across 12 states as of December 31, 2024.
Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 23 retail locations across 10 states as of December 31, 2025. We closed eight retail locations during the year ended December 31, 2025.
Store operations and other operational expenses consist primarily of payroll, rent and utilities, and allocated corporate overhead costs. Selling, general, and administrative expenses consist of corporate salaries, stock-based compensation, advertising and promotions, travel and entertainment, professional fees, insurance, and other corporate administrative costs.
Store operations and other operational expenses consist primarily of payroll, rent and utilities, and specifically identifiable operating costs related to our retail locations and distribution centers. Selling, general, and administrative expenses consist of corporate salaries, stock-based compensation, advertising and promotions, travel and entertainment, professional fees, insurance, and other corporate administrative costs.
The decrease was partially offset by an increase in the Storage Solutions segment gross profit margin to 45.6% in the year ended December 31, 2024 from 44.1% in the year ended December 31, 2023. Operating Expenses Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, depreciation and amortization, and impairment loss.
The Storage Solutions segment gross profit margin decreased to 40.3% in the year ended December 31, 2025 from 45.6% in the year ended December 31, 2024 due to industry pricing compression. Operating Expenses Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, depreciation and amortization, and impairment loss.
Storage Solutions Segment Our Storage Solutions business, branded as "Mobile Media" or "MMI," provides customized storage solutions designed to enhance profitability, productivity, and efficiency for our customers by allowing them to save space and increase storage capacity.
We continue to evaluate our retail footprint to identify cost redundancies and optimize coverage by leveraging nearby locations and our online sales platforms. Storage Solutions Segment Our Storage Solutions business, branded as "Mobile Media" or "MMI," provides customized storage solutions designed to enhance profitability, productivity, and efficiency for our customers by allowing them to save space and increase storage capacity.
Our main growth strategies for the Storage Solutions segment include expanding the types of customers and industries to which we sell our Storage Solutions products, including greater penetration in controlled environment agriculture, industrial and country club verticals. For further detail on all acquisitions please see Note 13, Acquisitions, of the Consolidated Financial Statements.
Our main growth strategies for the Storage Solutions segment include expanding the types of customers and industries to which we sell our Storage Solutions products, including greater penetration in CEA, industrial, and country club verticals.
Gross profit margin was 23.1% for the year ended December 31, 2024, a decrease of 400 basis points from a gross profit margin of 27.1% for the year ended December 31, 2023.
Gross profit margin was 26.8% for the year ended December 31, 2025, an increase of 370 basis points from a gross profit margin of 23.1% for the year ended December 31, 2024.
Cost of Sales Cost of sales for the year ended December 31, 2024 was $145.1 million, a decrease of $19.5 million or 11.8%, compared to $164.6 million for the year ended December 31, 2023.
Cost of Sales Cost of sales for the year ended December 31, 2025 was $118.5 million, a decrease of $26.7 million or 18.4%, compared to $145.1 million for the year ended December 31, 2024.
This decrease was primarily attributable to the $0.9 million gain recognized in the year ended December 31, 2023 related to a prior acquisition indemnity holdback. 26 Table of Contents Use of Non-GAAP Financial Information The following non-GAAP financial measures of EBITDA and Adjusted EBITDA are not in accordance with, or an alternative for, generally accepted accounting principles ("GAAP") and should be considered in addition to, and not as a substitute for, the most directly comparable GAAP financial measures.
The decrease in other income was primarily attributable to decreased investment income on our marketable securities. 25 Table of Contents Use of Non-GAAP Financial Information The following non-GAAP financial measures of EBITDA and Adjusted EBITDA are not in accordance with, or an alternative for, generally accepted accounting principles ("GAAP") and should be considered in addition to, and not as a substitute for, the most directly comparable GAAP financial measures.
Net sales reflect the amount of consideration that we expect to receive, which is derived from a list price reduced by variable consideration, including applicable sales discounts and estimated expected sales returns.
I n addition to our hydroponic and organic gardening product sales, we sell and install commercial fixtures through our benching, racking, and storage solutions business. Net sales reflect the amount of consideration that we expect to receive, which is derived from a list price reduced by variable consideration, including applicable sales discounts and estimated expected sales returns.
Since the restructuring activities were announced in July 2024, we have incurred aggregate restructuring and restructuring-related costs of $2.4 million, presented on the Consolidated Statements of Operations in the year ended December 31, 2024 as follows (in thousands): Restructuring Cultivation and Gardening segment: Cost of sales (1) $ 1,048 Gross profit (1,048) Store operations and other operational expenses (2) 842 Segment operating loss (1,890) Corporate expenses: Selling, general, and administrative (3) 205 Impairment loss (4) 220 Other expense (5) 50 Total restructuring and restructuring related charges $ (2,365) (1) Includes inventory disposal costs (2) Costs consist of retail location closure costs and employee termination benefits (3) Includes employee termination benefits and other associated costs (4) Consists of asset impairments for operating lease right-of-use assets (5) Includes non-operating losses related to retail location closures In addition to the effect on cost of sales shown above related to inventory disposal costs, we estimate we incurred a $0.9 million loss in gross profit due to inventory discounts offered in conjunction with exiting the 12 retail locations.
Restructuring and restructuring-related costs incurred during the years ended December 31, 2025 and 2024 were presented on the Consolidated Statements of Operations as follows: Year ended December 31, 2025 2024 Cultivation and Gardening segment: Cost of sales (1) $ — $ 1,048 Gross profit — (1,048) Store operations and other operational expenses (2) 765 842 Restructuring costs in segment income from operations (765) (1,890) Corporate expenses: Selling, general, and administrative (3) 376 205 Impairment loss (4) — 220 Other expense (income) (5) — 50 Total restructuring and restructuring related activities $ (1,141) $ (2,365) (1) Includes inventory disposal costs (2) Costs consist primarily of property and equipment disposals, lease contract termination costs and employee termination benefits (3) Costs consist of corporate operational and administrative contract terminations and employee termination benefits (4) Consists of asset impairments for operating lease right-of-use assets (5) Includes non-operating losses related to retail location closures In conjunction with our restructuring activities to support operational and administrative improvements, we reassessed and shortened the estimated useful life of certain capitalized software assets.
Operating expenses were $95.7 million for the year ended December 31, 2024 and $111.1 million for the year ended December 31, 2023, a decrease of $15.4 million or 13.9%.
Operating expenses were $68.9 million for the year ended December 31, 2025 and $95.7 million for the year ended December 31, 2024, a decrease of $26.8 million or 28.0%.
Total corporate overhead, which is comprised of selling, general, and administrative, estimated credit losses, and depreciation and amortization, was $48.6 million for the year ended December 31, 2024 as compared to $47.4 million for 25 Table of Contents the year ended December 31, 2023, an increase of $1.3 million or 2.7%.
Total corporate overhead, which is comprised of selling, general, and administrative, estimated credit losses, and depreciation and amortization, was $38.0 million for the year ended December 31, 2025 as compared to $48.6 million for the year ended December 31, 2024, a decrease of $10.6 million or 21.8%.
Our target customers include commercial and craft growers, as well as home growers, in the plant-based medicine market, and commercial and home gardeners who grow organic herbs, fruits, and vegetables. Additionally, through our wholesale division, we distribute many of our proprietary products to customers that are wholesalers, resellers, and retailers in the specialty retail hydroponic and organic gardening industry.
Additionally, through our wholesale division, we distribute many of our proprietary products to customers that are wholesalers, resellers, major home improvement mass-market retailers, and retailers in the specialty retail hydroponic and organic gardening industry.
The decrease in working capital from December 31, 2023 to December 31, 2024 was due primarily to reductions in inventory and cash and cash equivalents used to repurchase common stock. As of December 31, 2024, we had cash, cash equivalents, and marketable securities of $56.5 million.
The decrease in working capital from December 31, 2024 to December 31, 2025 was due primarily to a net decrease in cash, cash equivalents, and marketable securities as a result of net cash used in operating activities. As of December 31, 2025, we had cash, cash equivalents, and marketable securities of $46.1 million.
Selling, general, and administrative expenses, such as administrative and management expenses, salaries, and benefits, share-based compensation, director fees, legal expenses, accounting and consulting expenses, and technology costs, are not allocated to specific segments and are reflected in the enterprise results.
Selling, general, and administrative expenses, such as administrative and management expenses, salaries, and benefits, share-based compensation, director fees, legal expenses, accounting and consulting expenses, and technology costs, are not allocated to specific segments and are reflected in the enterprise results. 20 Table of Contents Cultivation and Gardening Segment We are a leading developer, marketer, retailer, and distributor of products for both indoor and outdoor hydroponic and organic gardening.
Cultivation and Gardening Segment We are a leading developer, marketer, retailer, and distributor of products for both indoor and outdoor hydroponic and organic gardening. Our main business strategy within the hydroponic and organic gardening sector has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization.
Our main business strategy within the hydroponic and organic gardening sector has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization. We sell a variety of hydroponic and organic gardening related products, including nutrients, additives, growing media, lighting, environmental control systems, and other products for indoor and outdoor cultivation.
Cost of Sales Cost of sales includes cost of goods and shipping costs. Cost of goods consists of cost of merchandise, inbound freight, and other inventory-related costs, such as shrinkage costs and lower of cost or market adjustments.
In more mature markets, the sales patterns tend to favor higher percentages of consumable purchasing in comparison to emerging markets. Cost of Sales Cost of sales includes cost of goods and shipping costs. Cost of goods consists of cost of merchandise, inbound freight, and other inventory-related costs, such as shrinkage costs and lower of cost or market adjustments.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and judgments regarding matters that are uncertain and susceptible to change that affect the reported amounts of assets, liabilities, revenue, and expense.
Net cash and cash equivalents used in financing activities for the year ended December 31, 2024 was $6.2 million, primarily attributable to common stock repurchased under our share repurchase program. 27 Table of Contents Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and judgments regarding matters that are uncertain and susceptible to change that affect the reported amounts of assets, liabilities, revenue, and expense.
To date we have financed our operations through the issuance of common stock, convertible notes, and warrants, as well as cash generated from operations.
However, management believes that the Company is adequately funded to support current and future operations for at least one year from the date of this filing. To date we have financed our operations through the issuance of common stock, convertible notes, and warrants, as well as cash generated from operations.
We retired all 2.5 million shares of common stock repurchased under the program in the year ended December 31, 2024. Cash Flows The following discussion sets forth the major sources and uses of cash for the year ended December 31, 2024 and December 31, 2023.
Cash Flows The following discussion sets forth the major sources and uses of cash for the year ended December 31, 2025 and December 31, 2024.
MARKETS AND BUSINESS SEGMENTS We have two operating segments, each its own reportable segment, based on our major lines of business: the Cultivation and Gardening segment and the Storage Solutions segment. We recognize specifically identifiable operating costs such as cost of sales, distribution expenses, and store operations and other operational expenses within each segment.
We recognize specifically identifiable operating costs such as cost of sales, distribution expenses, and store operations and other operational expenses within each segment.
Additionally, net sales of commercial fixtures within our Storage Solutions segment decreased to $25.4 million for the year ended December 31, 2024 compared to $31.4 million for the year ended December 31, 2023, primarily due to a similar volume of projects with a decrease in average project size.
Net sales of commercial fixtures within our Storage Solutions segment increased to $27.5 million for the year ended December 31, 2025 compared to $25.4 million for the year ended December 31, 2024.
Our restructuring and restructuring related charges consists of inventory disposal costs, retail location closure costs including related contract termination costs and fixed asset disposals, employee termination benefits, asset impairments including the impairment of operating lease right-of-use assets, and other associated costs.
As a result of these restructuring activities, we expect improvement in our gross profit margin and profitability while generating annualized cost savings of approximately $12.0 million. 21 Table of Contents Our restructuring and restructuring-related charges consisted of inventory disposal costs, retail location closure costs including related contract termination costs and fixed asset disposals, employee termination benefits, asset impairments including the impairment of operating lease right-of-use assets, and other associated costs.
Condensed Results of Operations for the Years Ended December 31, 2024 and 2023 The following table presents, for the periods indicated, selected information from our consolidated financial results, including information presented as a percentage of net sales: For the Years Ended December 31, 2024 2023 Year-to-Year Variance Net sales $ 188,866 100.0 % $ 225,882 100.0 % $ (37,016) (16.4) % Cost of sales 145,144 76.9 % 164,624 72.9 % (19,480) (11.8) % Gross profit 43,722 23.1 % 61,258 27.1 % (17,536) (28.6) % Operating expenses 95,694 50.7 % 111,102 49.2 % (15,408) (13.9) % Loss from operations (51,972) (27.5) % (49,844) (22.1) % (2,128) 4.3 % Other income 2,620 1.4 % 3,380 1.5 % (760) (22.5) % Net loss before taxes (49,352) (26.1) % (46,464) (20.6) % (2,888) 6.2 % Provision for income taxes (158) (0.1) % (32) — % (126) 393.8 % Net loss $ (49,510) (26.2) % $ (46,496) (20.6) % $ (3,014) 6.5 % Net Sales Net sales for the year ended December 31, 2024 were $188.9 million, a decrease of $37.0 million, or 16.4% as compared to net sales of $225.9 million for the year ended December 31, 2023.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 13, 2025. 23 Table of Contents Condensed Results of Operations for the Years Ended December 31, 2025 and 2024 The following table presents, for the periods indicated, selected information from our consolidated financial results, including information presented as a percentage of net sales: For the Years Ended December 31, 2025 2024 Year-to-Year Variance Net sales $ 161,741 100.0 % $ 188,866 100.0 % $ (27,125) (14.4) % Cost of sales 118,466 73.2 % 145,144 76.9 % (26,678) (18.4) % Gross profit 43,275 26.8 % 43,722 23.1 % (447) (1.0) % Operating expenses 68,860 42.6 % 95,694 50.7 % (26,834) (28.0) % Loss from operations (25,585) (15.8) % (51,972) (27.5) % 26,387 50.8 % Other income 1,730 1.1 % 2,620 1.4 % (890) (34.0) % Net loss before taxes (23,855) (14.7) % (49,352) (26.1) % 25,497 51.7 % Provision for income taxes (191) (0.1) % (158) (0.1) % (33) (20.9) % Net loss $ (24,046) (14.9) % $ (49,510) (26.2) % $ 25,464 51.4 % Net Sales Net sales for the year ended December 31, 2025 were $161.7 million, a decrease of $27.1 million, or 14.4% as compared to net sales of $188.9 million for the year ended December 31, 2024.
For the years ended December 31, 2024 and 2023, we quantitatively evaluated the recoverability of our long-lived assets for impairment in conjunction with our annual goodwill impairment assessment. As a result, we identified a $0.7 million and $6.2 million impairment loss related to our finite-lived intangible assets in 2024 and 2023, respectively.
For the year ended December 31, 2024, we evaluated the recoverability of our long-lived assets for impairment in conjunction with our annual goodwill impairment assessment.
The decrease in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 19.7% for the year ended December 31, 2024 as compared to 24.4%, due to the effects of the strategic restructuring plan, including the inventory disposal costs, sales discounts, and product offering rationalization, reduced inventory discounts from vendors, and continued industry pricing compression on distributed products.
The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 24.0% for the year ended December 31, 2025 as compared to 19.7% for the year ended December 31, 2024.
The changes in operating cash were primarily driven by the changes in gross profit and operating expenses, excluding non-cash changes such as depreciation and amortization and impairment loss, as previously discussed in the Results of Operations section as well as changes in working capital, primarily inventory.
This was partially offset by the reduction in operating expenses, excluding non-cash changes such as depreciation and amortization and impairment loss, in the year ended December 31, 2025 compared to the year ended December 31, 2024 as previously discussed in the Results of Operations section.
The Company is subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value. For the goodwill impairment test performed on December 1, 2024, we elected different approaches based on the circumstances surrounding each reporting unit. Of our four reporting units, only three had remaining goodwill balances.
The Company is subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value. For the goodwill impairment test performed on December 1, 2025, we elected to qualitatively review our reporting units for events and circumstances which would indicate whether it was more likely than not reporting unit fair values were below carrying values.
Gross Profit Gross profit was $43.7 million for the year ended December 31, 2024 compared to $61.3 million for the year ended December 31, 2023, a decrease of $17.5 million or 28.6%.
The remaining decrease in cost of sales relates to the sales mix of proprietary brands compared to non-proprietary brands described above. Gross Profit Gross profit was $43.3 million for the year ended December 31, 2025 compared to $43.7 million for the year ended December 31, 2024, a decrease of $0.4 million or 1.0%.
Refer to Note 17, Restructuring, of the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K ("Consolidated Financial Statements") for additional information regarding restructuring activities. GROWTH STRATEGIES Our main growth strategy has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization.
GROWTH STRATEGIES Our main growth strategy has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization.
The decrease in gross profit was primarily related to the Cultivation and Gardening segment, which decreased $15.2 million or 32.1% for the year ended December 31, 2024 as compared to the year ended December 31, 2023, largely as a result of the decrease in sales volume due to store consolidations and the effects of the strategic restructuring plan, including the estimated $0.9 million in inventory sales discounts, the additional $1.0 million of inventory disposal costs, and the strategic rationalization of our product offerings in the year ended December 31, 2024.
Additionally, the effects of the strategic restructuring plan in the year ended December 31, 2024 included an estimated $0.9 million in inventory sales discounts, an additional $1.0 million of inventory disposal costs, and the strategic rationalization of our product offerings.
The corresponding reduction in cost of sales as compared to the 16.4% decrease in sales as previously discussed, was largely offset by the additional $1.0 million of inventory disposal costs incurred as part of the restructuring plan as well as costs related to the strategic rationalization of our product offerings, reduced inventory discounts from vendors, and other non-recurring costs associated with store consolidations in the year ended December 31, 2024 compared to the year ended December 31, 2023.
The decrease in cost of sales largely corresponds to the 14.4% decrease in sales as previously discussed, in addition to $1.0 million of inventory disposal costs incurred in connection with the restructuring plan in the year ended December 31, 2024.
The percentage of Cultivation and Gardening net sales related to consumable products for the year ended December 31, 2024 was 72.2%, an increase from 71.7% for the year ended December 31, 2023, which was mainly driven by increased brand adoption of proprietary growing media and nutrient products.
The percentage of Cultivation and Gardening net sales related to consumable products remained relatively consistent for the year ended December 31, 2025, decreasing slightly to 71.9% compared to 72.2% for the year ended December 31, 2024.
Additionally, gross profit from our Storage Solutions segment decreased $2.3 million, or 16.6%, in the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily driven by the decrease in revenue.
The decrease in gross profit was primarily related to the Storage Solutions segment, which decreased $0.5 million, or 4.1%, in the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to industry pricing compression.
We may need additional financing through equity offerings and/or debt financings in the future to continue to expand our business consistent with our growth strategies. However, management believes that the Company is adequately funded to support current and future operations in the next twelve months.
Refer to Note 13, Acquisitions, of our Notes to Consolidated Financial Statements in this report for additional information regarding the Viagrow acquisition. We may need additional financing through equity offerings and/or debt financings in the future to continue to expand our business consistent with our growth strategies.
If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is performed. Otherwise, no further assessment is required.
We perform our goodwill impairment assessment for each of our reporting units that have remaining goodwill on December 1 of each fiscal year. We assess goodwill using either a qualitative or quantitative approach to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
Additionally, selling, general, and administrative expenses decreased $0.6 million as a result of decreased professional fees and corporate expenses and decreased share-based compensation. Impairment loss was $6.9 million in the year ended December 31, 2024, as compared to $15.7 million in the year ended December 31, 2023.
Impairment loss was $0.1 million in the year ended December 31, 2025, as compared to $6.9 million in the year ended December 31, 2024. The $6.9 million impairment loss incurred in the year ended December 31, 2024 was predominately related to impairments of our goodwill and intangible assets.
Investing activities for the year ended December 31, 2023 were primarily related to investment of excess cash into marketable securities of $98.7 million, acquisitions of $3.1 million, and the purchase of property and equipment primarily related to the design of a new enterprise resource planning software system of $6.7 million, partially offset by maturities of marketable securities of $96.8 million. 28 Table of Contents Financing Activities Net cash and cash equivalents used in financing activities for the year ended December 31, 2024 was $6.2 million, primarily attributable to common stock repurchased under our share repurchase program.
Investing activities for the year ended December 31, 2025 were primarily related to investment of excess cash into marketable securities of $35.7 million, acquisitions of $1.0 million, and purchases of property and equipment of $0.5 million, which were offset by maturity of marketable securities of $49.8 million.
COMPONENTS OF RESULTS OF OPERATIONS Net Sales We primarily generate net sales from the selling and distribution of proprietary and non-proprietary brand hydroponic and organic gardening products. I n addition to our hydroponic and organic gardening product sales, we sell and install commercial fixtures through our benching, racking, and storage solutions business.
For further detail on all acquisitions please see Note 13, Acquisitions, of the Consolidated Financial Statements. 22 Table of Contents COMPONENTS OF RESULTS OF OPERATIONS Net Sales We primarily generate net sales from the selling and distribution of proprietary and non-proprietary brand hydroponic and organic gardening products.
Removed
We sell a variety of hydroponic and organic gardening related products, including nutrients, additives, growing media, lighting, environmental control systems, and other products for indoor and outdoor cultivation.
Added
GrowGeneration sources certain proprietary branded products and components used in our Cultivation & Gardening segment, including coir substrates, nutrients, irrigation parts, and lighting components, from suppliers located in India, Mexico, China, and other jurisdictions outside the United States.
Removed
Also in conjunction with our restructuring activities to support operational and administrative improvements, we reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in an $5.3 million increase to depreciation and amortization expense related to property and equipment in the year ended December 31, 2024.
Added
Beginning in the first quarter of 2025, the United States announced changes to U.S. trade policy, including increasing tariffs on imports, in some cases significantly, and potentially negotiating or terminating existing trade agreements. In April 2025, the United States announced changes to its trade policy, including a 10% baseline tariff on imports and additional country-specific tariffs for select trading partners.
Removed
As of December 31, 2024, the outstanding restructuring liability was $0.1 million primarily pertaining to contract terminations costs related to retail location closures, which we expect to pay before the end of the first quarter of 2025.
Added
These new measures, implemented under Executive Order 14257, under presidential authority provided by the International Emergency Economic Powers Act (“IEEPA”) and other statutory authorities, reflected a markedly more dynamic tariff environment. The policies created cost and supply chain impacts for importers and providers of international goods.
Removed
However, certain facilities costs related to closed retail locations for which we are pursuing sublease arrangements will be paid over the remaining terms which extend through 2032 at the latest. 22 Table of Contents Overall, we expect to incur a total of $2.7 million in restructuring and restructuring-related costs, including the $2.4 million previously incurred.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed3 unchanged
Biggest changeWe maintain strategies to mitigate the impact of higher raw material, energy, and commodity costs, which include cost reduction, sourcing, passing along certain cost increases to customers, and other actions, which may offset only a portion of the adverse impact. 31 Table of Contents
Biggest changeWe maintain strategies to mitigate the impact of higher raw material, energy, and commodity costs, which include cost reduction, sourcing, passing along certain cost increases to customers, and other actions, which may offset only a portion of the adverse impact. 30 Table of Contents

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