What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-11 compared with 2026-05-12 · 111 added, 58 removed, 142 unchanged (54% of the section changed)

27 unchanged sentences

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.

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

We 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 also expanded 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.

Subsequently, the United States Customs and Border Protection agency was ordered to begin accepting refund requests for these IEEPA tariffs.

During the three and six months ended June 30, 2026, we received an immaterial amount of refunds of tariffs imposed under IEEPA.

Subsequent to June 30, 2026, we received approximately $2.6 million of refunds related to previously submitted claims.

Because realization of these refunds remained uncertain as of occurred June 30, 2026, no amounts were recognized in the accompanying Condensed Consolidated Financial Statements.

The President has continued to indicate his intent to impose tariffs under other statutory authorities going forward.

It is unclear at this time what impact tariffs will have on our future financial results, including whether we will be able to obtain more 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.

8 unchanged sentences

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 our growth strategy.

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 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.

1 unchanged sentence

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 19 retail locations across 9 states as of March 31, 2026.

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

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 June 30, 2026.

We closed four retail locations during the six months ended June 30, 2026.

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

13 unchanged sentences

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.

During the six months ended June 30, 2025, we incurred approximately $1.1 million of restructuring and restructuring related charges as described in Note 15, Restructuring of our Notes to Condensed Consolidated Financial Statements in this report.

GROWTH STRATEGIES

Our main growth strategy has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization.

Our growth strategy is focused on expanding our portfolio and sales of proprietary brands, growing our commercial, wholesale, and e-commerce channels, increasing penetration of our Storage Solutions business across diversified end markets, and pursuing selective, accretive acquisitions that complement our existing businesses.

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.

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.

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.

Since our founding in 2014, we have built our Cultivation and Gardening business through a combination of organic investment and targeted acquisitions, such as specialty hydroponic and organic gardening center locations, online retailers, proprietary products, and our wholesale distribution business.

We continue to evaluate accretive acquisition opportunities involving businesses or proprietary brands that are similar or complementary to those 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 wholesale channel 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, which includes our benching, racking, and storage solutions business, MMI, are centered on driving recurring commercial sales opportunities and 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.

COMPONENTS OF RESULTS OF OPERATIONS

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RESULTS OF OPERATIONS

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

Comparison of the Unaudited Results for the Three Months Ended June 30, 2026 and 2025

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 March 31,

Three Months Ended June 30,

2026 2025 Year-to-Year Variance

9 unchanged sentences

Net loss $ (2,013) (4.7) % $ (4,811) (11.7) % $ 2,798 58.2 %

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.

*Percentage is not meaningful.

Net sales for the three months ended June 30, 2026 were $43.2 million, an increase of $2.3 million or 5.5% as compared to net sales of $41.0 million for the three months ended June 30, 2025.

The increase in net sales was driven in part by our Cultivation and Gardening segment, which had net sales of $34.9 million for the three months ended June 30, 2026 compared to $32.9 million for the three months ended June 30, 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 June 30, 2026.

As a result, the ratio of consumables net sales as a percentage of Cultivation and Gardening net sales was 72.0% in the three months ended June 30, 2026, as compared to consumables net sales representing 79.7% of Cultivation and Gardening net sales in the three months ended June 30, 2025.

The increase in net sales was partially offset by retail store closures, including four retail locations closed during 2026 and six retail locations closed in 2025 subsequent to June 30, 2025.

Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended June 30, 2026 increased to 39.7% as compared to 32.0% for the three months ended June 30, 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 $8.3 million for the three months ended June 30, 2026 compared to $8.1 million for the three months ended June 30, 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 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.

Cost of sales for the three months ended June 30, 2026 was $30.9 million, an increase of $1.5 million or 5.2% compared to $29.4 million for the three months ended June 30, 2025.

The increase in cost of sales largely corresponds to the 5.5% increase in net sales, as previously discussed.

Gross profit was $12.3 million for the three months ended June 30, 2026 compared to $11.6 million for the three months ended June 30, 2025, an increase of $0.7 million or 6.3%.

Gross profit related to the Cultivation and Gardening segment increased $0.8 million, or 10.3%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily as a result of the increased sales volume and mix of proprietary brand products and durable products during the three months ended June 30, 2026.

The increase in gross profit was partially offset by our Storage Solutions segment decreased $0.1 million or 3.5% in the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Gross profit margin was 28.5% for the three months ended June 30, 2026, an increase of 20 basis points from a gross profit margin of 28.3% for the three months ended June 30, 2025.

The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 25.8% for the three months ended June 30, 2026 as compared to 24.8% for the three months ended June 30, 2025.

This increase was primarily driven by the increased mix of proprietary brand products, which generally have higher margins than non-proprietary brand products, partially offset by the increased sales mix of durable products, which generally have lower margins than consumable products during the three months ended June 30, 2026.

The Storage Solutions gross profit margin decreased to 39.8% in the three months ended June 30, 2026 from 42.3% in the three months ended June 30, 2025, primarily as a result of industry pricing compression and higher cost of services for the Storage Solutions segment.

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.

Operating expenses were $14.7 million for the three months ended June 30, 2026 and $16.9 million in the three months ended June 30, 2025, a decrease of $2.2 million or 13.1%.

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 $6.1 million for the three months ended June 30, 2026 compared to $7.9 million for the three months ended June 30, 2025, a decrease of $1.7 million or 21.9%.

The decrease in store operating costs was primarily due to the six retail locations closed in 2025 subsequent to June 30, 2025 as well as the closure of four retail locations during 2026.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $8.3 million for the three months ended June 30, 2026 compared to $9.0 million for the three months ended June 30, 2025.

The decrease was largely driven by reduced depreciation and amortization costs, which decreased $1.2 million or 44.0% for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, 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.

This was partially offset by increased selling, general, and administrative costs of $0.3 million, or 5.0%, largely due to increased professional services costs.

Impairment loss was $0.2 million in the three months ended June 30, 2026 and was related to a closed, wholly-owned retail location classified as held for sale.

Refer to Note 5, Property and Equipment for additional information regarding our impairment loss.

Other income was $0.3 million for the three months ended June 30, 2026 compared to $0.5 million for the three months ended June 30, 2025, a decrease of $0.1 million or 25.1%.

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, 2026 and 2025

Six Months Ended June 30,

2026 2025 Year-to-Year Variance

Net sales $ 81,606 100.0 % $ 76,666 100.0 % $ 4,940 6.4 %

Cost of sales 59,546 73.0 % 55,365 72.2 % 4,181 7.6 %

Gross profit 22,060 27.0 % 21,301 27.8 % 759 3.6 %

Operating expenses 29,666 36.4 % 36,449 47.5 % (6,783) (18.6) %

Loss from operations (7,606) (9.3) % (15,148) (19.8) % 7,542 49.8 %

Other income 671 0.8 % 960 1.3 % (289) (30.1) %

Net loss before income taxes (6,935) (8.5) % (14,188) (18.5) % 7,253 51.1 %

Benefit for income taxes — — % — — % — *

Net loss $ (6,935) (8.5) % $ (14,188) (18.5) % $ 7,253 51.1 %

*Percentage is not meaningful.

Net sales for the six months ended June 30, 2026 were $81.6 million, an increase of $4.9 million or 6.4% as compared to net sales of $76.7 million for the six months ended June 30, 2025.

The increase in net sales was driven in part by our Cultivation and Gardening segment, which had net sales of $66.8 million for the six months ended June 30, 2026 compared to $63.8 million for the six months ended June 30, 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 six months ended June 30, 2026.

As a result, the ratio of consumables net sales as a percentage of Cultivation and Gardening net sales was 72.0% in the six months ended June 30, 2026, as compared to consumables net sales representing 77.8% of Cultivation and Gardening net sales in the six months ended June 30, 2025.

This increase in net sales was partially offset by retail store closures, including four retail locations during six months ended June 30, 2026 and six retail locations closed in 2025 subsequent to June 30, 2025.

Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the six months ended June 30, 2026 increased to 38.4% as compared to 32.0% for the six months ended June 30, 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 $14.8 million for the six months ended June 30, 2026 compared to $12.9 million for the six months ended June 30, 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 six months ended June 30, 2026 was $59.5 million, an increase of $4.2 million or 7.6% compared to $55.4 million for the six months ended June 30, 2025.

The increase in cost of sales largely corresponds to the 6.4% 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.

The remaining increase in cost of sales relates to inventory disposal costs incurred in connection with the closure of four retail locations during six months ended June 30, 2026 compared to two retail location closures during the six months ended June 30, 2025.

Gross profit was $22.1 million for the six months ended June 30, 2026 compared to $21.3 million for the six months ended June 30, 2025, an increase of $0.8 million or 3.6%.

Gross profit related to the Cultivation and Gardening segment increased $0.1 million, or 0.7%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily as a result of the increased sales volume and mix of proprietary brand products and durable products during, which were partially offset by inventory disposal costs and inventory sales discounts incurred in connection with retail location closures during the six months ended June 30, 2026.

Gross profit from our Storage Solutions segment increased $0.7 million or 12.4% in the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily as a result of increased sales volume.

Gross profit margin was 27.0% for the six months ended June 30, 2026, a decrease of 80 basis points from a gross profit margin of 27.8% for the six months ended June 30, 2025.

The decrease in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 24.2% for the six months ended June 30, 2026 as compared to 25.2% for the six months ended June 30, 2025.

These decreases were partially offset by the increased sales mix of proprietary brand products, which generally have higher margins than non-proprietary brand products.

The Storage Solutions gross profit margin decreased to 39.7% in the six months ended June 30, 2026 from 40.6% in the six months ended June 30, 2025, primarily as a result of industry pricing compression for the Storage Solutions segment.

Operating Expenses

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%.

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

Operating expenses were $29.7 million for the six months ended June 30, 2026 and $36.4 million in the six months ended June 30, 2025, a decrease of $6.8 million or 18.6%.

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 $12.5 million for the six months ended June 30, 2026 compared to $16.7 million for the six months ended June 30, 2025, a decrease of $4.1 million or 24.7%.

The decrease in store operating costs was primarily due to the six retail locations closed in 2025 subsequent to June 30, 2025 as well as the closure of four retail locations during six months ended June 30, 2026.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $16.9 million for the six months ended June 30, 2026 compared to $19.8 million for the six months ended June 30, 2025.

The decrease was largely driven by reduced depreciation and amortization costs, which decreased by $3.2 million or 50.3% for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, 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.

This was partially offset by a $0.1 million increase to selling, general, and administrative costs and a $0.1 million increase to estimated credit losses for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.

Impairment loss was $0.2 million in the six months ended June 30, 2026 and was related to a closed, wholly-owned retail location classified as held for sale.

Refer to Note 5, Property and Equipment for additional information regarding our impairment loss.

Other income was $0.7 million for the six months ended June 30, 2026 compared to $1.0 million for the six months ended June 30, 2025, a decrease of $0.3 million or 30.1%.

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 March 31,

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

2026 2025 2026 2025

Net loss $ (2,013) $ (4,811) $ (6,935) $ (14,188)

Benefit for income taxes (19) —

Provision for income taxes 19 — — —

Interest income (347) (463) (671) (960)

3 unchanged sentences

Investment income 293 453 593 972

Acquisition transaction costs — 50 — 50

Impairment loss 220 — 220 —

Restructuring plan

Consolidation and other charges (1)

309 467 1,824 563

Adjusted EBITDA $ 255 $ (1,302) $ (1,329) $ (5,332)

1 unchanged sentence

LIQUIDITY AND CAPITAL RESOURCES

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.

As of June 30, 2026, we had working capital of $74.0 million compared to working capital of $77.8 million as of December 31, 2025, a decrease of $3.8 million.

The decrease in working capital from December 31, 2025 to June 30, 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 June 30, 2026, we had cash, cash equivalents, and marketable securities of $41.0 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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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 three months ended March 31, 2026 and 2025.

To date we have primarily financed our operations through the issuance of common stock 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, 2026 and 2025.

Operating Activities

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.

Net cash and cash equivalents used in operating activities for the six months ended June 30, 2026 was $4.1 million compared to $6.8 million for the six months ended June 30, 2025.

The decrease 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 six months ended June 30, 2026 as compared to the build-up of inventory in six months ended June 30, 2025.

Investing Activities

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.

Net cash and cash equivalents used in investing activities for the six months ended June 30, 2026 was $1.8 million compared to net cash provided by investing activities of $2.7 million for the six months ended June 30, 2025.

Investing activities for the six months ended June 30, 2026 were primarily attributable to investment of excess cash into marketable securities of $8.9 million and purchases of property and equipment of $0.3 million, offset by maturity of marketable securities of $7.4 million.

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, $1.0 million of cash paid for the Viagrow acquisition and purchases of property and equipment of $0.3 million, offset by maturity of marketable securities of $23.0 million.

Financing Activities

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.

Net cash and cash equivalents used in financing activities for the six months ended June 30, 2026 was $1.1 million and was primarily attributable to common stock repurchased under our share repurchase program.

Net cash and cash equivalents used in financing activities for the six months ended June 30, 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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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