What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-11 · 111 added, 90 removed, 166 unchanged (55% of the section changed)

21 unchanged sentences

and our Storage Solutions segment, composed of our benching, racking, and storage solutions business.

The United States has recently announced changes to U.S.

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.

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.

For example, on April 2, 2025, the United States announced a new universal baseline tariff of 10%, plus an additional country-specific tariff for select trading partners, on all U.S.

These actions, and retaliatory tariffs imposed by other countries on U.S.

exports, have led to significant volatility and uncertainty in global markets.

Given the uncertainty regarding the scope and duration of current and potential tariffs, trade policies, and other non-tariff trade practices and policies, the specific impact on our business and results of operations is uncertain but could result in increased costs for our products.

We are actively monitoring these developments and exploring strategies to mitigate these risks and potential negative effects on our business and results from operations, including negotiating with suppliers, adjusting our pricing strategies, moving our supply chain away from countries with higher tariffs in favor of other jurisdictions, and seeking tariff exemptions where possible.

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.

These new measures, implemented under Executive Order 14257, reflect a markedly more dynamic tariff environment.

The policies create potential cost and supply chain impacts for importers and providers of international goods.

These actions have resulted in cost increases for certain imported products that collectively represent less than 10% of total company cost of goods sold.

We have partially offset these cost pressures through (i) improved purchasing leverage and volume-based supplier discounts, (ii) targeted price adjustments on affected product categories, and (iii) a continuing shift in sourcing toward lower-tariff regions, including the United States and Southeast Asia.

We are also expanding domestic manufacturing, assembly and packaging for select proprietary brands to reduce reliance on high-tariff import categories.We continue to actively monitor these developments and explore strategies to mitigate these risks and potential negative effects on our business and results from operations.

Management believes these initiatives will enhance long-term supply-chain flexibility and margin stability.

On June 6, 2025, we purchased substantially all of the assets of Hydro Generation Inc.

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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.

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 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.

Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 29 retail locations across 11 states as of June 30, 2025.

We closed two retail locations during the three and six months ending June 30, 2025.

We continue to evaluate our retail geographic footprint for redundancies in our fixed cost structure and for opportunities to serve our customers through other retail locations and our online platforms.

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.

Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 24 retail locations across 11 states as of September 30, 2025.

We closed five and seven retail locations during the three and nine months ending September 30, 2025, respectively.

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

10 unchanged sentences

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.

As of March 31, 2025, we have substantially completed our restructuring activities and do not expect to incur significant additional restructuring and restructuring-related costs in future periods.

Overall, we incurred a total of approximately $3.5 million in restructuring and restructuring-related costs, including $1.1 million during the six months ended June 30, 2025 and $2.4 million previously incurred in fiscal year 2024.

As of March 31, 2025, we had substantially completed our restructuring activities.

As of September 30, 2025, there was no outstanding restructuring liability, and we do not expect to incur significant additional restructuring and restructuring-related costs in future periods.

Overall, we incurred a total of approximately $3.5 million in restructuring and restructuring-related costs, including $1.1 million during the nine months ended September 30, 2025 and $2.4 million previously incurred in fiscal year 2024.

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.

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.

Restructuring and restructuring-related costs incurred during the six months ended June 30, 2025 were presented on the Condensed Consolidated Statements of Operations as follows:

Restructuring

Restructuring and restructuring-related costs incurred during the three and nine months ended September 30, 2025 and 2024 were presented on the Condensed Consolidated Statements of Operations as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Cultivation and Gardening segment:

Cost of sales (1)

$ — $ 1,039 $ — $ 1,039

Gross profit — (1,039) — (1,039)

Store operations and other operational expenses (2)

— 658 765 658

Segment operating loss — (1,697) (765) (1,697)

1 unchanged sentence

Selling, general, and administrative (3)

Impairment loss (4)

Other expense (5)

Total restructuring and restructuring-related charges $ — $ (2,055) $ (1,141) $ (2,055)

(1) Costs consist primarily of property and equipment disposals and lease contract termination costs for previously closed retail locations

(2) Costs consist of corporate operational and administrative contract terminations

(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.

These capitalized software assets became fully amortized and were retired during the six months ended June 30, 2025.

As of June 30, 2025, there was no outstanding restructuring liability.

However, certain facilities costs or contract termination costs related to closed retail locations for which we are pursuing sublease arrangements or lease terminations may be paid over the remaining terms which extend through 2032.

These capitalized software assets became fully amortized and were retired during the nine months ended September 30, 2025.

Refer to Note 16, Restructuring, of our Notes to Unaudited Condensed Consolidated Financial Statements in this report for additional information regarding restructuring activities.

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Since our founding in 2014, we have acquired or opened numerous specialty hydroponic and organic gardening center locations.

Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 29 retail locations across 11 states as of June 30, 2025.

Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 24 retail locations across 11 states as of September 30, 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.

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Our advertising and marketing expenses are largely controllable and variable depending on the particular market.

R ESULTS OF OPERATIONS

Comparison of the Unaudited Results for the Three Months Ended June 30, 2025 and 2024

The following table presents, for the periods indicated, selected information from our unaudited Condensed Consolidated financial results, including information presented as a percentage of net sales:

Three Months Ended June 30,

RESULTS OF OPERATIONS

Comparison of the Unaudited Results for the Three Months Ended September 30, 2025 and 2024

The following table presents, for the periods indicated, selected information from our unaudited Condensed Consolidated Statements of Operations, including information presented as a percentage of net sales:

Three Months Ended September 30,

2025 2024 Year-to-Year Variance

6 unchanged sentences

Net loss before income taxes (2,435) (5.2) % (11,478) (23.0) % 9,043 78.8 %

Provision for income taxes — — % (95) (0.2) % 95 100.0 %

(Provision) benefit for income taxes (2) — % 43 0.1 % (45) (104.7) %

Net loss $ (2,437) (5.2) % $ (11,435) (22.9) % $ 8,998 78.7 %

Net sales for the three months ended June 30, 2025 were $41.0 million, a decrease of $12.6 million or 23.5% as compared to net sales of $53.5 million for the three months ended June 30, 2024.

The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $32.9 million for the three months ended June 30, 2025 compared to $46.1 million for the three months ended June 30, 2024.

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.

Additionally, the decreased net sales for Cultivation and Gardening related to slowness in durable product sales, as well as recent declines in consumer confidence related to uncertainty surrounding the impact of potential tariffs.

Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended June 30, 2025 increased to 32.0% as compared to 21.5% for the three months ended June 30, 2024, largely driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands and various product launches.

The percentage of Cultivation and Gardening net sales related to consumable products for the three months ended June 30, 2025 was 78.0%, an increase from 73.0% for the three months ended June 30, 2024, which was mainly driven by increased brand adoption of proprietary growing media and nutrient products and slowness in durable product sales.

Net sales of commercial fixtures within our Storage Solutions segment increased to $8.1 million for the three months ended June 30, 2025 compared to $7.4 million for the three months ended June 30, 2024.

Net sales for the three months ended September 30, 2025 were $47.3 million, a decrease of $2.8 million or 5.5% as compared to net sales of $50.0 million for the three months ended September 30, 2024.

The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $38.4 million for the three months ended September 30, 2025 compared to $41.4 million for the three months ended September 30, 2024.

This decrease was partially offset by improvements in durable product sales driven by increased demand for capital investments by our customers in the three months ended September 30, 2025.

As a result, the ratio of consumables net sales as a percentage of Cultivation and Gardening net sales was 66.5% in the three months ended September 30, 2025, as compared to consumables net sales representing 73.3% of Cultivation and Gardening net sales in the three months ended September 30, 2024.

Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended September 30, 2025 increased to 31.6% as compared to 23.8% for the three months ended September 30, 2024, largely driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands and various product launches.

Net sales of commercial fixtures within our Storage Solutions segment increased to $8.9 million for the three months ended September 30, 2025 compared to $8.6 million for the three months ended September 30, 2024.

Cost of Sales

Cost of sales for the three months ended June 30, 2025 was $29.4 million, a decrease of $9.7 million or 24.9% compared to $39.1 million for the three months ended June 30, 2024.

The decrease in cost of sales largely corresponds to the 23.5% decrease in net sales, as previously discussed.

Gross profit was $11.6 million for the three months ended June 30, 2025 compared to $14.4 million for the three months ended June 30, 2024, a decrease of $2.8 million or 19.6%.

The decrease in gross profit was primarily related to the Cultivation and Gardening segment, which decreased $2.8 million, or 25.3%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, largely as a result of the decrease in sales volume due to store consolidations and the effects of the strategic restructuring plan.

Additionally, gross profit from our Storage Solutions segment remained relatively flat at $3.4 million and $3.5 million in the three months ended June 30, 2025 and 2024, respectively.

Gross profit margin was 28.3% for the three months ended June 30, 2025, an increase of 140 basis points from a gross profit margin of 26.9% for the three months ended June 30, 2024.

The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 24.8% for the three months ended June 30, 2025 as compared to 23.7% for the three months ended June 30, 2024, primarily driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands.

The Storage Solutions gross profit margin decreased to 42.3% in the three months ended June 30, 2025 from 46.9% in three months ended June 30, 2024 due to industry pricing compression for the Storage Solutions segment.

Cost of sales for the three months ended September 30, 2025 was $34.4 million, a decrease of $4.8 million or 12.2% compared to $39.2 million for the three months ended September 30, 2024.

The decrease in cost of sales largely corresponds to the 5.5% decrease in net sales, as previously discussed, in addition to $1.0 million of inventory disposal costs incurred in connection with our restructuring plan in the three months ended September 30, 2024.

The remaining decrease in cost of sales relates to the sales mix of proprietary brands compared to non-proprietary brands and consumables compared to durables, as discussed below.

Gross profit was $12.9 million for the three months ended September 30, 2025 compared to $10.8 million for the three months ended September 30, 2024, an increase of $2.0 million or 18.9%.

The increase in gross profit was primarily related to the Cultivation and Gardening segment, which increased $1.8 million, or 25.5%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, as a result of margin improvement due to a greater proportionate mix of proprietary brand sales in the three months ended September 30, 2025 as well as the comparison to the effects of the strategic

restructuring plan in the three months ended September 30, 2024, which included an estimated $0.9 million in inventory sales discounts and $1.0 million of inventory disposal costs.

Additionally, gross profit from our Storage Solutions segment increased $0.2 million or 5.9% in the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Gross profit margin was 27.2% for the three months ended September 30, 2025, an increase of 560 basis points from a gross profit margin of 21.6% for the three months ended September 30, 2024.

The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 23.5% for the three months ended September 30, 2025 as compared to 17.3% for the three months ended September 30, 2024.

This increase was primarily driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands in the three months ended September 30, 2025, as well as additional cost of sales and inventory sales discounts incurred in the three months ended September 30, 2024 as a result of the restructuring plan discussed above.

The Storage Solutions gross profit margin also slightly increased to 43.4% in the three months ended September 30, 2025 from 42.2% in three months ended September 30, 2024.

Operating Expenses

Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, and depreciation and amortization.

Operating expenses were $16.9 million for the three months ended June 30, 2025 and $20.9 million in the three months ended June 30, 2024, a decrease of $4.1 million or 19.4%.

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $7.9 million for the three months ended June 30, 2025 compared to $10.2 million for the three months ended June 30, 2024, a decrease of $2.3 million or 22.9%.

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.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $9.0 million for the three months ended June 30, 2025 compared to $10.7 million for the three months ended June 30, 2024.

Selling, general, and administrative costs decreased by $1.0 million or 13.4% for the three months ended June 30, 2025 primarily as a result of decreased employee costs, share-based compensation, corporate expenses, and professional fees.

Additionally, depreciation and amortization costs decreased by $0.9 million or 25.7% for the three months ended June 30, 2025, primarily as a result of asset retirements in conjunction with the restructuring plan.

Other income was $0.5 million for the three months ended June 30, 2025 compared to $0.7 million for the three months ended June 30, 2024, a decrease of $0.3 million or 35.1%.

Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, depreciation and amortization expense, and impairment loss.

Operating expenses were $15.7 million for the three months ended September 30, 2025 and $22.9 million in the three months ended September 30, 2024, a decrease of $7.2 million or 31.5%.

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $7.2 million for the three months ended September 30, 2025 compared to $10.0 million for the three months ended September 30, 2024, a decrease of $2.8 million or 27.8%.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $8.5 million for the three months ended September 30, 2025 compared to $12.6 million for the three months ended September 30, 2024.

Selling, general, and administrative costs decreased by $1.7 million or 22.9% for the three months ended September 30, 2025 primarily due to cost rationalization initiatives, which resulted in decreased professional fees and corporate expenses, and lower share-based compensation.

Depreciation and amortization costs decreased by $2.3 million or 46.7% for the three months ended September 30, 2025, primarily as a result of asset retirements in conjunction with the restructuring plan.

In conjunction with our strategic restructuring activities, 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 three months ended September 30, 2024.

Other income was $0.4 million for the three months ended September 30, 2025 compared to $0.6 million for the three months ended September 30, 2024, a decrease of $0.2 million or 33.6%.

The decrease in other income was primarily attributable to decreased investment income on our marketable securities.

Comparison of the Unaudited Results for the Six Months Ended June 30, 2025 and 2024

Six Months Ended June 30,

Comparison of the Unaudited Results for the Nine Months Ended September 30, 2025 and 2024

Nine Months Ended September 30,

2025 2024 Year-to-Year Variance

8 unchanged sentences

Net loss $ (16,625) (13.4) % $ (26,168) (17.3) % $ 9,543 36.5 %

Net sales for the six months ended June 30, 2025 were $76.7 million, a decrease of $24.8 million or 24.4% as compared to net sales of $101.4 million for the six months ended June 30, 2024.

The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $63.8 million for the six months ended June 30, 2025 compared to $89.2 million for the six months ended June 30, 2024.

Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the six months ended June 30, 2025 increased to 32.0% as compared to 22.0% for the six months ended June 30, 2024, largely driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands and various product launches.

The percentage of Cultivation and Gardening net sales related to consumable products for the six months ended June 30, 2025 was 76.3%, an increase from 71.6% for the six months ended June 30, 2024, which was mainly driven by increased brand adoption of proprietary growing media and nutrient products and slowness in durable product sales.

Net sales of commercial fixtures within our Storage Solutions segment increased to $12.9 million for the six months ended June 30, 2025 compared to $12.2 million for the six months ended June 30, 2024.

Net sales for the nine months ended September 30, 2025 were $123.9 million, a decrease of $27.5 million or 18.2% as compared to net sales of $151.4 million for the nine months ended September 30, 2024.

The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $102.1 million for the nine months ended September 30, 2025 compared to $130.6 million for the nine months ended September 30, 2024.

Additionally, the Cultivation and Gardening segment experienced slowness in its net sales in the first half of 2025 related to declines in consumer confidence and uncertainty surrounding the potential macroeconomic and market impacts of tariffs.

Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the nine months ended September 30, 2025 increased to 31.8% as compared to 22.6% for the nine months ended September 30, 2024, largely driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands and various product launches.

The percentage of Cultivation and Gardening net sales related to consumable products for the nine months ended September 30, 2025 was 72.6%, an increase from 72.1% for the nine months ended September 30, 2024.

Net sales of commercial fixtures within our Storage Solutions segment increased to $21.8 million for the nine months ended September 30, 2025 compared to $20.8 million for the nine months ended September 30, 2024.

Cost of Sales

Cost of sales for the six months ended June 30, 2025 was $55.4 million, a decrease of $19.3 million or 25.8% compared to $74.6 million for the six months ended June 30, 2024.

The decrease in cost of sales largely corresponds to the 24.4% decrease in net sales, as previously discussed.

Gross profit was $21.3 million for the six months ended June 30, 2025 compared to $26.8 million for the six months ended June 30, 2024, a decrease of $5.5 million or 20.5%.

The decrease in gross profit was primarily related to the Cultivation and Gardening segment, which decreased $5.2 million, or 24.4%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, largely as a result of the decrease in sales volume due to store consolidations and the effects of the strategic restructuring plan.

Additionally, gross profit from our Storage Solutions segment decreased $0.3 million, or 5.3%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily due to industry pricing compression for the Storage Solutions segment.

Gross profit margin was 27.8% for the six months ended June 30, 2025, an increase of 140 basis points from a gross profit margin of 26.4% for the six months ended June 30, 2024.

The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 25.2% for the six months ended June 30, 2025 as compared to 23.8% for the six months ended June 30, 2024, primarily driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands.

The Storage Solutions gross profit margin decreased to 40.6% in the six months ended June 30, 2025 from 45.3% in six months ended June 30, 2024 due to industry pricing compression for the Storage Solutions segment.

Cost of sales for the nine months ended September 30, 2025 was $89.8 million, a decrease of $24.1 million or 21.1% compared to $113.8 million for the nine months ended September 30, 2024.

The decrease in cost of sales largely corresponds to the 18.2% decrease in net sales, as previously discussed, in addition to $1.0 million of inventory disposal costs incurred in connection with our restructuring plan in the nine months ended September 30, 2024.

Gross profit was $34.2 million for the nine months ended September 30, 2025 compared to $37.6 million for the nine months ended September 30, 2024, a decrease of $3.4 million or 9.1%.

The decrease in gross profit was primarily related to the Cultivation and Gardening segment, which decreased $3.4 million, or 11.8%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, driven largely by reduced sales volume due to store consolidations.

This period-over-period decrease was partially offset by the comparable effects of the strategic restructuring plan incurred in the nine months ended September 30, 2024, which included an estimated $0.9 million in inventory sales discounts as well as $1.0 million of inventory disposal costs incurred in the nine months ended September 30, 2024.

Gross profit from our Storage Solutions segment decreased $0.1 million, or 0.8%, in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

Gross profit margin was 27.6% for the nine months ended September 30, 2025, an increase of 280 basis points from a gross profit margin of 24.8% for the nine months ended September 30, 2024.

The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 24.5% for the nine months ended September 30, 2025 as compared to 21.8% for the nine months ended September 30, 2024.

The improvement in the Cultivation and Gardening segment gross profit margin was primarily driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands in the nine months ended September 30, 2025 as well as the comparison to the effects of the additional cost of sales and inventory sales discounts incurred with the strategic restructuring plan in the nine months ended September 30, 2024.

The Storage Solutions gross profit margin decreased to 41.7% in the nine months ended September 30, 2025 from 44.0% in nine months ended September 30, 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, and depreciation and amortization.

Operating expenses were $36.4 million for the six months ended June 30, 2025 and $42.7 million in the six months ended June 30, 2024, a decrease of $6.3 million or 14.7%.

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $16.7 million for the six months ended June 30, 2025, compared to $20.8 million for the six months ended June 30, 2024, a decrease of $4.2 million or 20.1%.

This decrease was partially offset by the additional $0.8 million of restructuring costs incurred in the six months ended June 30, 2025 related to fixed asset disposals and lease contract terminations costs for previously closed retail locations.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $19.8 million for the six months ended June 30, 2025, compared to $21.9 million for the six months ended June 30, 2024.

Selling, general, and administrative costs decreased by $1.7 million or 11.7% for the six months ended June 30, 2025 primarily as a result of decreased employee costs, share-based compensation and professional fees.

This decrease in selling, general, and administrative expense was partially offset by a net $0.7 million increase in estimated credit losses in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to a $0.3 million credit recovery settlement received in bankruptcy proceedings related to a note receivable in the six months ended June 30, 2024.

Additionally, depreciation and amortization costs decreased by $1.1 million or 14.7% for the six months ended June 30, 2025, primarily as a result of asset retirements in conjunction with the restructuring plan.

Operating expenses were $52.1 million for the nine months ended September 30, 2025 and $65.6 million in the nine months ended September 30, 2024, a decrease of $13.5 million or 20.5%.

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $23.9 million for the nine months ended September 30, 2025, compared to $30.9 million for the nine months ended September 30, 2024, a decrease of $7.0 million or 22.6%.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $28.2 million for the nine months ended September 30, 2025, compared to $34.5 million for the nine months ended September 30, 2024.

Selling, general, and administrative costs decreased by $3.4 million or 15.4% for the nine months ended September 30, 2025 primarily due to cost rationalization initiatives, which resulted in decreased professional fees, corporate expenses, and employee costs, and lower share-based compensation.

This decrease in selling, general, and administrative expense was partially offset by a net $0.6 million increase in estimated credit losses in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, primarily due to a $0.3 million credit recovery settlement received in bankruptcy proceedings related to a note receivable in the nine months ended September 30, 2024.

Additionally, depreciation and amortization costs decreased by $3.4 million or 27.6% for the nine months ended September 30, 2025, primarily as a result of asset retirements in conjunction with the restructuring plan.

Other Income (Expense)

Other income was $1.0 million for the six months ended June 30, 2025 compared to $1.3 million for the six months ended June 30, 2024, a decrease of $0.3 million or 26.5%.

Other income was $1.4 million for the nine months ended September 30, 2025 compared to $1.9 million for the nine months ended September 30, 2024, a decrease of $0.6 million or 28.8%.

The decrease in other income was primarily attributable to decreased investment income on our marketable securities.

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Set forth below is a reconciliation of EBITDA and Adjusted EBITDA to net loss (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

8 unchanged sentences

Acquisition transaction costs 9 — 59 —

Impairment loss (1)

Restructuring plan

— 2,699 1,141 2,699

Consolidation and other charges (2)

1 unchanged sentence

Adjusted EBITDA $ 1,338 $ (2,388) $ (3,994) $ (6,402)

(1) Impairment loss related to the restructuring plan for operating lease right-of-use assets impairments

(2) 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

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2025, we had working capital of $81.7 million compared to working capital of $88.9 million as of December 31, 2024, a decrease of $7.2 million.

The decrease in working capital from December 31, 2024 to June 30, 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 June 30, 2025, we had cash, cash equivalents, and marketable securities of $48.7 million.

As of September 30, 2025, we had working capital of $82.5 million compared to working capital of $88.9 million as of December 31, 2024, a decrease of $6.5 million.

The decrease in working capital from December 31, 2024 to September 30, 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 September 30, 2025, we had cash, cash equivalents, and marketable securities of $48.3 million.

Currently, we are not aware of any extraordinary demands, commitments, or uncertainties that would materially reduce our current working capital.

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To date we have financed our operations through the issuance of common stock, convertible notes, and warrants, as well as cash generated from operations.

The following discussion sets forth the major sources and uses of cash for the six months ended June 30, 2025 and 2024.

The following discussion sets forth the major sources and uses of cash for the nine months ended September 30, 2025 and 2024.

Operating Activities

Net cash and cash equivalents used in operating activities for the six months ended June 30, 2025 was $6.8 million compared to net cash used in operating activities of $4.0 million for the six months ended June 30, 2024.

The changes in operating cash were primarily driven by changes in gross profit and operating expenses, excluding non-cash changes such as share-based compensation and depreciation and amortization, as previously discussed in the Results of Operations section as well as changes in working capital due to timing as well as store consolidations and the effects of the strategic restructuring plan.

Net cash and cash equivalents used in operating activities for the nine months ended September 30, 2025 was $7.2 million compared to net cash used in operating activities of $2.9 million for the nine months ended September 30, 2024.

The changes in operating cash were primarily driven by changes in gross profit and operating expenses, excluding non-cash changes such as share-based compensation and depreciation and amortization, as previously discussed in the Results of Operations section, changes in working capital due to timing, as well as store consolidations and the effects of the strategic restructuring plan.

Investing Activities

Net cash and cash equivalents provided by investing activities for the six months ended June 30, 2025 was $2.7 million compared to net cash provided by investing activities of $6.2 million for the six months ended June 30, 2024.

Investing activities for the six months ended June 30, 2025 were primarily attributable to investment of excess cash into marketable securities of $19.0 million and $1.0 million of cash paid for the Viagrow acquisition, offset by maturity of marketable securities of $23.0 million.

Investing activities for the six months ended June 30, 2024 were primarily attributable to investment of excess cash into marketable securities of $28.0 million and purchases of property and equipment of $1.4 million, offset by maturity of marketable securities of $35.6 million.

Net cash and cash equivalents provided by investing activities for the nine months ended September 30, 2025 was $7.2 million compared to net cash provided by investing activities of $6.7 million for the nine months ended September 30, 2024.

Investing activities for the nine months ended September 30, 2025 were primarily attributable to investment of excess cash into marketable securities of $25.0 million, $1.0 million of cash paid for the Viagrow acquisition, and purchases of property and equipment of $0.4 million, offset by maturity of marketable securities of $33.7 million.

Investing activities for the nine months ended September 30, 2024 were primarily attributable to investment of excess cash into marketable securities of $41.9 million and purchases of property and equipment of $1.9 million, offset by maturity of marketable securities of $50.3 million.

Financing Activities

Net cash and cash equivalents used in financing activities was $0.1 million for the six months ended June 30, 2025 and was attributable to common stock withheld for employee payroll taxes.

Net cash and cash equivalents used in financing activities for the for the six months ended June 30, 2024 was $4.3 million and was primarily attributable to common stock repurchased under our share repurchase program..

Critical Accounting Policies, Judgements, and Estimates

For a summary of the Company's critical accounting policies, judgements, and estimates, please refer to Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

Net cash and cash equivalents used in financing activities was $0.1 million for the nine months ended September 30, 2025 and was attributable to common stock withheld for employee payroll taxes.

Net cash and cash equivalents used in financing activities for the for the nine months ended September 30, 2024 was $6.2 million and was primarily attributable to common stock repurchased under our share repurchase program.

Critical Accounting Policies, Judgments, and Estimates

For a summary of the Company's critical accounting policies, judgments, and estimates, please refer to Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

Off Balance-Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis