What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-12 compared with 2025-11-06 · 70 added, 147 removed, 130 unchanged (63% of the section changed)

25 unchanged sentences

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 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.

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.

(referred to as "Viagrow"), a domestic supplier of gardening and hydroponic equipment.

The acquisition further diversifies our home gardening and hydroponic gardening proprietary brand product offerings as well as expands our outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms.

Refer to Note 12, Acquisitions, of our Notes to Unaudited Condensed Consolidated Financial Statements in this report for additional information regarding the Viagrow acquisition.

We are also expanding domestic manufacturing, assembly and packaging for select proprietary brands to reduce reliance on high-tariff import categories.

On February 20, 2026, the U.S.

Supreme Court struck down certain tariffs imposed under the IEEPA.

The President immediately imposed replacement tariffs under Section 122 of the Trade Act of 1974, which are temporary (150-day maximum duration, expiring in mid-July 2026, unless such period is extended by Congress), and has indicated intent to impose tariffs under other statutory authorities going forward.

It is unclear at this time what impact this decision will have on our future financial results, including whether we will be able to obtain refunds of amounts previously paid for the IEEPA tariffs or any fluctuations of the level of replacement tariffs imposed or the addition of any new tariffs through other means.

We continue to actively monitor these developments and the evolving tariff environment and its potential effects on our cost structure and supply chain.

We will continue to explore and adjust our mitigation strategies as circumstances develop.

MARKETS AND BUSINESS SEGMENTS

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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 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 the Company's growth strategy.

Our target customers include commercial, craft, and home growers in the plant-based medicine market, as well as commercial and home gardeners who grow organic herbs, fruits, and vegetables.

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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.

Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 19 retail locations across 9 states as of March 31, 2026.

We closed four retail locations during the three months ended March 31, 2026.

We continue to evaluate our retail footprint to identify cost redundancies and optimize coverage by leveraging nearby locations and our online sales platforms

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In July 2024, we announced a strategic restructuring plan focused on long-term profitability and advancing growth initiatives in key areas of our Cultivation and Gardening segment such as our proprietary brands, commercial sales, and e-commerce business.

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 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 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)

Corporate expenses:

Selling, general, and administrative (3)

Impairment loss (4)

Other expense (5)

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

(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 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.

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, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.

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

During the three months ended March 31, 2025, we incurred approximately $1.1 million of restructuring and restructuring related charges as described in Note 14, Restructuring of our Notes to Condensed Consolidated Financial Statements in this report.

GROWTH STRATEGIES

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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 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.

We regularly seek and evaluate accretive acquisition opportunities with similar or complimentary businesses to those businesses it already operates, such as the Viagrow acquisition, which further diversifies our home gardening and hydroponic gardening proprietary brand product offerings as well as expands our outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms.

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.

Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 19 retail locations across 9 states as of March 31, 2026.

We have also acquired several other types of businesses within or complementary 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 evaluate accretive acquisition opportunities with similar or complementary businesses to those businesses we already operate, such as the acquisition of Hydro Generation Inc.

(referred to as "Viagrow") on June 6, 2025, which further diversified our home gardening and hydroponic gardening proprietary brand product offerings as well as expanded our outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms.

COMPONENTS OF RESULTS OF OPERATIONS

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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.

Cost of goods consists of cost of merchandise, inbound freight, and other inventory-related costs, such as shrinkage costs and lower of cost or net realizable value adjustments.

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 Condensed Consolidated Statements of Operations.

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depreciation and amortization;

and impairment losses.

Store operations and other operational expenses consist primarily of payroll, rent and utilities, and allocated corporate overhead costs.

and impairment losses when applicable.

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.

Selling, general, and administrative expenses as a percentage of net sales typically does not increase commensurate with an increase in net sales.

Selling, general, and administrative expenses as a percentage of net sales typically do not increase commensurately with an increase in net sales.

Our largest expenses are generally related to employee compensation and leases, which are primarily fixed and not variable.

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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

Net sales $ 47,254 100.0 % $ 50,006 100.0 % $ (2,752) (5.5) %

Cost of sales 34,398 72.8 % 39,196 78.4 % (4,798) (12.2) %

Gross profit 12,856 27.2 % 10,810 21.6 % 2,046 18.9 %

Operating expenses 15,698 33.2 % 22,901 45.8 % (7,203) (31.5) %

Loss from operations (2,842) (6.0) % (12,091) (24.2) % 9,249 76.5 %

Other income 407 0.9 % 613 1.2 % (206) (33.6) %

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

(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 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 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 seven retail locations to date in fiscal 2025.

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 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, 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%.

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 seven retail locations to date in fiscal 2025.

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 Nine Months Ended September 30, 2025 and 2024

Comparison of the Unaudited Results for the Three Months Ended March 31, 2026 and 2025

Nine Months Ended September 30,

Three Months Ended March 31,

2026 2025 Year-to-Year Variance

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Net loss before income taxes (4,941) (12.9) % (9,377) (26.3) % 4,436 47.3 %

Provision for income taxes (2) — % (50) — % 48 96.0 %

Benefit for income taxes

19 — % — — % 19 *

Net loss $ (4,922) (12.8) % $ (9,377) (26.3) % $ 4,455 47.5 %

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.

Net sales for the three months ended March 31, 2026 were $38.4 million, an increase of $2.7 million or 7.5% as compared to net sales of $35.7 million for the three months ended March 31, 2025.

The increase in net sales was driven in part by our Cultivation and Gardening segment, which had net sales of $31.9 million for the three months ended March 31, 2026 compared to $30.9 million for the three months ended March 31, 2025.

This increase in net sales was primarily due to improvements in durable product sales driven by increased demand for capital investments by our customers in the three months ended March 31, 2026.

As a result, the ratio of consumables net sales as a percentage of Cultivation and Gardening net sales was 72.1% in the three months ended March 31, 2026, as compared to consumables net sales representing 75.8% of Cultivation and Gardening net sales in the three months ended March 31, 2025.

This increase in net sales was partially offset by retail store closures, including four retail locations during three months ended March 31, 2026 and eight retail locations closed in 2025 subsequent to March 31, 2025.

Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended March 31, 2026 increased to 37.0% as compared to 32.0% for the three months ended March 31, 2025, largely driven by our continued strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands.

Net sales of commercial fixtures within our Storage Solutions segment increased to $6.5 million for the three months ended March 31, 2026 compared to $4.8 million for the three months ended March 31, 2025 as a result of increased demand for capital investments by our customers primarily in the retail industry.

Cost of Sales

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.

Cost of sales for the three months ended March 31, 2026 was $28.7 million, an increase of $2.7 million or 10.2% compared to $26.0 million for the three months ended March 31, 2025.

The increase in cost of sales largely corresponds to the 7.5% increase in net sales, with cost of sales increasing at a higher rate in part due to the increased sales mix of durable products previously discussed.

The remaining increase in cost of sales relates to inventory disposal costs incurred in connection with the closure of four retail locations during three months ended March 31, 2026 whereas no such costs were incurred during the three months ended March 31, 2025.

Gross profit was $9.7 million for each of the three months ended March 31, 2026 and 2025.

Gross profit related to the Cultivation and Gardening segment decreased $0.7 million, or 9.3%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily as a result of the increased sales mix of durable products, which generally have lower margins than consumable products, as well as inventory disposal costs and inventory sales discounts incurred in connection with retail location closures during the three months ended March 31, 2026.

Gross profit from our Storage Solutions

segment increased $0.8 million or 42.7% in the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily as a result of increased sales volume and sales mix of large-scale projects.

Gross profit margin was 25.4% for the three months ended March 31, 2026, a decrease of 180 basis points from a gross profit margin of 27.2% for the three months ended March 31, 2025.

The decrease in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 22.5% for the three months ended March 31, 2026 as compared to 25.6% for the three months ended March 31, 2025.

This decrease was primarily driven by the increased sales mix of durable products, which generally have lower margins than consumable products, as well as additional cost of sales and inventory sales discounts incurred in the three months ended March 31, 2026.

The Storage Solutions gross profit margin increased to 39.6% in the three months ended March 31, 2026 from 37.6% in the three months ended March 31, 2025, primarily as a result of the increased sales mix of large-scale projects.

Operating Expenses

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 $1.4 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%.

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

Operating expenses were $15.0 million for the three months ended March 31, 2026 and $19.6 million in the three months ended March 31, 2025, a decrease of $4.6 million or 23.4%.

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and specifically identifiable operating costs related to our retail locations and distribution centers, were $6.4 million for the three months ended March 31, 2026 compared to $8.8 million for the three months ended March 31, 2025, a decrease of $2.4 million or 27.2%.

The decrease in store operating costs was primarily due to the eight retail locations closed during 2025 as well as the closure of four retail locations during three months ended March 31, 2026.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $8.6 million for the three months ended March 31, 2026 compared to $10.8 million for the three months ended March 31, 2025.

Selling, general, and administrative costs decreased by $0.2 million or 2.6% for the three months ended March 31, 2026 primarily due to cost rationalization initiatives, which resulted in decreased corporate expenses and lower share-based compensation.

Depreciation and amortization costs decreased by $2.0 million or 55.1% for the three months ended March 31, 2026, primarily as a result of asset retirements in conjunction with the restructuring plan and certain intangible assets reaching the end of their estimated useful lives.

Other income was $0.3 million for the three months ended March 31, 2026 compared to $0.5 million for the three months ended March 31, 2025, a decrease of $0.2 million or 34.8%.

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 September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

Net loss $ (4,922) $ (9,377)

Provision for income taxes 2 (43) 2 50

Benefit for income taxes (19) —

Interest income (324) (497)

Interest expense — — — 70

Depreciation and amortization 1,611 3,585

2 unchanged sentences

Investment income 300 519

Acquisition transaction costs 9 — 59 —

Impairment loss (1)

Restructuring plan

— 2,699 1,141 2,699

Consolidation and other charges (1)

694 567 1,257 2,375

Adjusted EBITDA $ (1,584) $ (4,030)

(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

(1) Consists primarily of expenditures related to legal settlements and contingencies, 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 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.

As of March 31, 2026, we had working capital of $75.1 million compared to working capital of $77.8 million as of December 31, 2025, a decrease of $2.7 million.

The decrease in working capital from December 31, 2025 to March 31, 2026 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 March 31, 2026, we had cash, cash equivalents, and marketable securities of $41.1 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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Refer to Note 8, Leases, of the Condensed Consolidated Financial Statements for additional information regarding leases.

On June 6, 2025, we purchased substantially all of the assets of Viagrow, a domestic supplier of gardening and hydroponic equipment.

The total consideration for the purchase of Viagrow was $1.2 million, including $1.0 million cash paid and $0.1 million common stock issued on the date of acquisition, with certain additional amounts to be paid in future periods.

Refer to Note 12, Acquisitions, of our Notes to Unaudited Condensed 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.

However, management believes that the Company is adequately funded to support current and future operations in the next twelve months.

However, management believes that the Company has sufficient liquidity to fund operations and meet its obligations as they become due for at least the next twelve months 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.

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

The following discussion sets forth the major sources and uses of cash for the three months ended March 31, 2026 and 2025.

Operating Activities

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.

Net cash and cash equivalents used in operating activities for the three months ended March 31, 2026 was $5.0 million compared to net cash used in operating activities of $3.8 million for the three months ended March 31, 2025.

The increase in cash used in operating activities was primarily related to changes in our operating assets and liabilities including the timing of cash receipts related to our accounts and notes receivables and customer deposits offset by the difference in sell through of inventory for the three months ended March 31, 2026 as compared to the build-up of inventory in three months ended March 31, 2025.

Investing Activities

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.

Net cash and cash equivalents used in investing activities for the three months ended March 31, 2026 was $3.7 million compared to net cash provided by investing activities of $9.2 million for the three months ended March 31, 2025.

Investing activities for the three months ended March 31, 2026 were primarily attributable to investment of excess cash into marketable securities of $4.7 million, and purchases of property and equipment of $0.1 million, offset by maturity of marketable securities of $1.1 million.

Investing activities for the three months ended March 31, 2025 were primarily attributable to investment of excess cash into marketable securities of $7.2 million and purchases of property and equipment of $0.2 million, offset by maturity of marketable securities of $16.6 million.

Financing Activities

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.

There were no cash financing activities for the three months ended March 31, 2026.

Net cash and cash equivalents used in financing activities for the three months ended March 31, 2025 was $0.1 million and was attributable to common stock withheld for employee payroll taxes.

Critical Accounting Policies, Judgments, and Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis