What changed in this filing

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Item 1A. Risk Factors

2025-03-05 compared with 2024-02-29 · 227 added, 225 removed, 609 unchanged (43% of the section changed)

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Risks Relating to Our Business

• our proprietary brand offerings expose us to various risks;

• competitive industry pressures;

• expenses and risks associated with our restructuring activities;

• long-lived assets and inventories represent a significant portion of our total assets and we may be required to record impairments or write-downs in future periods;

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• the risk of damage to, loss of, or theft of our inventory;

• manufacturing risks as a result of recent acquisitions;

• expenses and risks associated with our restructuring activities;

• manufacturing risks;

• the risk that adverse weather may impact our peat harvest;

• the risk of product defects;

• our proprietary brand offerings expose us to various risks;

• our ability to keep pace with technological advances;

• the costs of potential tariffs or a global trade war;

• increased prices and inflation could negatively impact our margin performance and our financial results;

• acquisitions, other strategic alliances and investments could result in operating difficulties, dilution and other harmful consequences that may adversely impact our business and results of operations;

• our commitments to long-term leases and our ability to renew or exit our leases;

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• interruptions in our supply chain;

• general economic and/or industry and financial conditions, specifically in the United States and Canada;

• increasing scrutiny, costs and compliance with environmental, social and governance practices;

• the impact of climate change on our facilities and operations;

• the costs of being a public company;

• limitations and possible failures of our internal control systems;

• our ability to maintain effective internal control over financial reporting;

• the adverse effects of public health epidemics, including the COVID-19 pandemic, on our business, results of operations and financial operations;

• damage to our reputation could have an adverse effect on our business;

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• potential inaccuracies in our estimates and assumptions relied upon in preparing consolidated financial statements;

• the costs of potential tariffs or a global trade war;

• possible difficulties in raising sufficient capital to fund our operations;

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Risks Relating to Third Parties

• we rely on a limited base of suppliers for certain products, which may result in disruptions to our business;

• if our suppliers sell directly into the retail market that we conduct our current or future business in, or our customers manufacture and sell competitive products, we may face increased competition;

• disruption in our global supply chain or vendor relationships may make sourcing more difficult;

• a significant interruption in the operation of our or our suppliers’ facilities could impact our capacity to produce products and service our customers, which could adversely affect revenues and earnings;

• if our suppliers are unable to source raw materials or the prices of raw materials increase, this may adversely affect our results of operations.

• as our suppliers sell directly into the retail market that we conduct our current or future business in, we may face increased competition.

Risks Relating to the Cannabis Industry

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Risks Relating to Other Regulations

• we may be restricted by certain state and other regulations pertaining to the use of certain ingredients in growing media and plant nutrients, including the use of pesticides;

• we may be restricted by certain state and other regulations pertaining to the use of certain ingredients in grow media and plant nutrients, including the use of pesticides;

• we may be restricted by certain U.S., state and foreign laws regarding how we collect, store and process personal information.

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• certain provisions in the Credit Facilities, our corporate charter documents and under Delaware law could make an acquisition of our company more difficult and may prevent attempts by our stockholders to replace or remove current management or to obtain a favorable judicial forum for disputes with directors, officers or employees;

• risks related to us being a holding company;

• our ability to meet the continued listing standards of The Nasdaq Global Select Market;

• our ability to meet the continued listing standards of The Nasdaq Capital Market;

• the market price of our common stock may be volatile.

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Risks Relating to Our Business

Our proprietary brand offerings expose us to various risks.

We have invested in acquisition and development of our proprietary brand offerings.

Although we believe that our proprietary brand products offer value to our customers and generally provide us with higher gross margins than comparable third-party branded products we sell, the expansion of our proprietary brand offerings also subjects us to certain specific risks in addition to those discussed elsewhere in this section, such as:

• potential mandatory or voluntary product recalls;

• supply chain disruptions;

• our ability to successfully obtain, maintain, protect and enforce our intellectual property and proprietary rights (including defending against counterfeit, knock offs, grey-market, infringing or otherwise unauthorized goods);

• our ability to successfully navigate and avoid claims related to the proprietary rights of third parties.

An increase in sales of our proprietary brands may also adversely affect our sales of our vendors’ products, which may, in turn, adversely affect our relationship with our vendors.

Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition.

Our competitors and potential competitors may develop products and technologies that are more effective or commercially attractive than our products.

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We may not have the financial resources, relationships with key suppliers, technical expertise or marketing, distribution or support capabilities to compete successfully in the future.

Our restructuring activities may increase our expenses and cash expenditures, and may not have the intended effects.

In connection with our restructuring plans, we have implemented a number of restructuring initiatives designed to streamline our operations, reduce costs, and improve efficiencies during the industry recession.

Management’s Discussion and Analysis of Financial Condition And Results of Operations – Market Conditions" below for more information regarding our restructuring plans.

Restructuring actions typically result in charges and cash expenditures that may adversely affect financial results for one or more periods, and efforts to minimize or eliminate such expenditures may not be successful.

Moreover, restructuring actions can create unanticipated consequences, such as instability or distraction among our workforce or among management.

We cannot assure you that any restructuring plans or any other cost-saving initiatives we may undertake will be successful.

A variety of factors, many of which are beyond our control, could cause us not to realize expected cost savings, including, but not limited to, unexpected costs incurred in connection with consolidating and/or closing certain operations or asset write-downs, delays or difficulty terminating leases, unexpected integration challenges, unintended attrition and temporary instability.

Any of these factors could hamper our ability to grow and meet customer demand in future periods.

If we are unable to structure our operations in light of evolving market conditions, this could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We may not successfully develop new products or improve existing products or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles.

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Many of the products we distribute and market, such as our fertilizers and nutrients, contain ingredients that are subject to regulatory approval or registration with certain U.S., Canadian and/or international regulators.

The need to obtain such approval or registration could delay the launch of new products or product innovations that contain such ingredients or

otherwise prevent us from developing and manufacturing certain products and product innovations.

Failure to properly register and maintain these registrations for these products could result in significant penalties, additional costs, product stop-sales or recalls.

The need to obtain such approval or registration could delay the launch of new products or product innovations that contain such ingredients or otherwise prevent us from developing and manufacturing certain products and product innovations.

Failure to properly register

and maintain these registrations for these products could result in significant penalties, additional costs, product stop-sales or recalls.

Long-lived assets and inventories represent a significant portion of our total assets and we may be required to record impairments or write-downs in future periods.

Our consolidated balance sheet as of December 31, 2024 includes $249.0 million of intangible assets, net, $50.6 million of inventories, $37.5 million of property, plant, and equipment, net, and $42.9 million of operating lease right-of-use assets.

In the three month period ending June 30, 2022, we recorded a $189.6 million goodwill impairment charge due to a decline in the estimated fair value of our reporting units, which reduced the carrying value of our goodwill to zero.

During the years ended December 31, 2024 and 2023, we recorded significant allowances for obsolete inventory and restructuring charges associated with inventory write-downs.

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Nevertheless, if our security measures fail, losses exceed our insurance coverage or are not otherwise covered by insurance, or we are not able to maintain insurance at a reasonable cost, we could incur significant losses from damage, loss or theft, any of which could substantially harm our business and results of operations.

As a result of acquisitions, we are exposed to manufacturing risks that could adversely affect our business and results of operations.

In connection with our 2021 acquisitions, we have acquired several manufacturing facilities.

Expansion into manufacturing exposes us to all of the risks entailed in manufacturing activities generally and there is no assurance that our manufacturing activities will not cause us to incur material unexpected costs or liabilities.

Our manufacturing processes may experience problems including equipment malfunctions, facility contamination, labor problems, raw material shortages or contamination, natural disasters, power outages, terrorist activities, safety and certification issues, or disruptions in the operations of our suppliers which could result in product defects, product recalls, product liability claims and insufficient inventory or supply of product for our customers.

We are exposed to manufacturing risks that could adversely affect our business and results of operations.

We are exposed to manufacturing risks generally and there is no assurance that our manufacturing activities will not cause us to incur material unexpected costs or liabilities.

Our manufacturing processes may experience problems including equipment malfunctions, facility contamination, labor problems, raw material shortages or contamination, natural disasters,

power outages, terrorist activities, safety and certification issues, or disruptions in the operations of our suppliers which could result in product defects, product recalls, product liability claims and insufficient inventory or supply of product for our customers.

For example, the nutrient and fertilizer manufacturing operations may expose us to handling potentially hazardous or explosive chemicals.

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The storage, handling, production and disposal of materials in our manufacturing facilities may expose us to liability under environmental laws and regulations.

Potentially significant expenditures could also be required to comply with evolving interpretations of existing environmental, health and safety laws and regulations or any new such laws and regulations (including concerns about global climate change and its impact) that may be adopted in the future.

Potentially significant expenditures could also be required to comply with evolving interpretations of existing environmental, health and safety laws and regulations or any new such laws and regulations (including laws and regulation related to global climate change and its impact) that may be adopted in the future.

Costs associated with failure to comply with such laws and regulations could have an adverse effect on our business.

Our restructuring activities may increase our expenses and cash expenditures, and may not have the intended effects.

In connection with our restructuring plans, we have implemented and may continue to implement a number of restructuring initiatives designed to streamline our operations, reduce costs, and improve efficiencies during the industry recession.

Management’s Discussion and Analysis of Financial Condition And Results of Operations – Market Conditions" below for more information regarding our restructuring plans.

Moreover, restructuring actions can create unanticipated consequences, such as instability or distraction among our workforce or among management.

We cannot assure you that any restructuring plans or any other cost-saving initiatives we may undertake will be successful.

Any of these factors could hamper our ability to grow and meet customer demand in future periods.

Our peat bogs are susceptible to sudden changes in weather and the impacts of climate change.

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sun and wind are required to dry the top surface, and too much rain can cause compaction and impede the ability of vacuum harvesters to collect the peat.

Peat must be harvested during a narrow window of three to five months during the summer/ fall, and if summer is late or especially wet, this can have an adverse impact on the year’s harvest.

Peat must be harvested during a narrow window of three to six months during the summer/ fall, and if summer is late or especially wet, this can have an adverse impact on the year’s harvest.

Conversely, if temperatures are too high, this can cause an increase in peat decomposition rates, and extended droughts can aggravate such decomposition.

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As a result, a significant product defect or product recall could cause a decline in our sales and profitability and could reduce or deplete our financial resources.

Our proprietary brand offerings expose us to various risks.

We have invested in acquisition and development of our proprietary brand offerings.

• potential mandatory or voluntary product recalls;

• supply chain disruptions;

• our ability to successfully obtain, maintain, protect and enforce our intellectual property rights (including defending against counterfeit, knock offs, grey-market, infringing or otherwise unauthorized goods);

• our ability to successfully navigate and avoid claims related to the proprietary rights of third parties.

An increase in sales of our proprietary brands may also adversely affect our sales of our vendors’ products, which may, in turn, adversely affect our relationship with our vendors.

Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition.

Potential tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.

The United States has imposed tariffs on certain imports from China, including on lighting and environmental control equipment manufactured in China, as well as tariffs on steel and aluminum products produced in other countries.

In addition, the United States announced tariffs on products from Canada and Mexico before pausing such tariffs prior to going into effect.

administration imposes additional tariffs, or if additional tariffs or trade restrictions are implemented by the United States or other countries the cost of our products manufactured in China and imported into the United States or other countries could increase, which in turn could adversely affect the demand for these products and have a material adverse effect on our business and results of operations.

Furthermore, tariffs on products imported into the United States from Canada, including relating to our peat business, could adversely affect the demand for these products.

In addition, political tensions between and among the United States and China and certain other countries have escalated in recent years.

Rising political tensions could reduce trade, investment and other economic activities between the two major economies.

We cannot predict whether the countries in which our components and materials are sourced, or may be sourced in the future, will be subject to new or additional tariffs and trade restrictions imposed by the United States or other foreign governments, including the likelihood, type, effect, or magnitude of any such restrictions and their overall impact on our business and our operating results.

We also may be unable to quickly and effectively react to such actions to mitigate the impact to our business.

The tariffs described above, the adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs, trade agreements or related policies have the potential to adversely impact our supply chain and access to equipment, and our costs and ability to economically serve certain markets.

Any such cost increases or decreases in availability could slow our growth and cause our financial results and operational metrics to suffer.

There is current uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, government regulations, and tariffs and we cannot predict whether, and to what extent, U.S.

trade policies will change in the future, including as a result of changes by the incoming U.S.

presidential administration.

Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations.

Increased prices and inflation could negatively impact our margin performance and our financial results.

Increased inflation, including rising prices for raw materials, parts and components, freight, packaging, labor and energy increases, the costs to manufacture and distribute our products, and we may be unable to pass these costs on to our customers.

Additionally, we are exposed to fluctuations in other costs such as packaging, freight, labor and energy prices.

We are exposed to increased inflation, including rising and fluctuating prices for raw materials, parts and components, freight, packaging, labor, and energy, which impact the costs to manufacture and distribute our products, and we may be unable to pass these costs on to our customers.

If inflation in these costs increases beyond our ability to control for them through measures such as implementing operating efficiencies, we may not be able to increase prices to sufficiently offset the effect of various cost increases without negatively impacting customer demand, thereby negatively impacting our margin performance and results of operations.

Acquisitions, other strategic alliances and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business and results of operations.

Acquisitions have been an important element of our overall corporate strategy, and these transactions entailed material investments by us that are material to our financial condition and results of operations.

We may evaluate and enter into discussions regarding potential strategic transactions.

The process of integrating an acquired company, business, or product has created, and will continue to create, unforeseen operating difficulties and expenditures.

The areas where we face risks may include, but are not limited to:

• diversion of management’s time and focus from operating our business to acquisition integration challenges;

• failure to successfully further develop the acquired business or products;

• implementation or remediation of controls, procedures and policies at the acquired company;

• integration of the acquired company’s accounting, information technology (IT) systems, human resources and other administrative systems, and coordination of product, engineering and sales and marketing functions;

• transition of operations, users and customers onto our existing platforms;

• reliance on the expertise of our strategic partners with respect to market development, sales, local regulatory compliance and other operational matters;

• failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval, under competition and antitrust laws which could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition;

• in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;

• cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire;

• liability for or reputational harm from activities of the acquired company before the acquisition or from our strategic partners, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;

• litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties.

Our due diligence may fail to identify all liabilities associated with acquisitions and we may not assess the relative benefits and detriments of making an acquisition and may pay acquisition consideration exceeding the value of the acquired business.

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments or strategic alliances could cause us to fail to realize the anticipated benefits of such acquisitions, investments or alliances, incur unanticipated liabilities, and harm our business generally.

Our acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or impairment of goodwill, intangible assets and purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results of operations and cash flows.

There can be no assurance that we will be able to identify appropriate acquisition targets or potential strategic transactions, successfully execute such potential transactions, or successfully integrate the business of acquired companies to realize the full, anticipated benefits of such acquisitions.

We occupy many of our facilities under long-term non-cancellable leases, and we may be unable to renew, sublease or terminate and exit our leases.

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We may choose to sublease additional space, close certain operations and/or terminate lease agreements.

We may remain liable for sublease obligations if the sublessee does not perform.

We may remain liable for sublease obligations if the sublessee does not perform, or incur additional liabilities as a result of our third party logistics agreements.

Our inability to sublease excess space, terminate a lease when we stop fully utilizing a facility or exit a market can have a significant adverse impact on our financial condition, operating results and cash flows.

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We operate distribution centers in Canada and Spain and we source and sell products globally.

We also us e a supply chain management team i n China.

We are subject to risks associated with operating in foreign countries, including:

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• additional costs associated with fuel prices and freight/import expenses;

• additional costs of tariffs;

• in certain countries, historically higher rates of inflation than in the United States;

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and foreign laws regarding trade and investment;

• less robust protection of our intellectual property and proprietary rights under foreign laws;

• less robust protection of our intellectual property rights under foreign laws;

• difficulty in obtaining distribution and support for our products;

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Concern over climate change may result in new or increased legal and regulatory requirements to reduce or mitigate negative impacts to the environment or may result in new reporting and disclosure requirements.

In the event that such regulations result in increased product or administrative costs, we may not be in a position to increase selling prices, and therefore an increase in costs could have a material adverse effect on our business, financial condition and results of operations.

In the event that such

regulations result in increased product or administrative costs, we may not be in a position to increase selling prices, and therefore an increase in costs could have a material adverse effect on our business, financial condition and results of operations.

Some of our products have compositions that are controlled by various state, federal and international laws and regulations that are subject to change.

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These laws and regulations also impose strict, retroactive and joint and several liability for the costs of, and damages resulting from, cleaning up current sites, past spills, disposals and other releases of hazardous substances.

We believe that our expenditures related to environmental matters have not had, and are not currently expected to have, a material adverse effect on our financial condition, results of operations or cash flows.

However, the environmental laws under which we operate are complicated, often become increasingly more stringent.

The environmental laws under which we operate are complicated, often become increasingly more stringent.

Accordingly, there can be no assurance that we will not be required to incur additional expenditures to remain in or to achieve compliance with environmental laws in the future or that any such additional expenditures will not have a material adverse effect on our business, financial condition or results of operations.

Our products and operations may be subject to increased regulatory and environmental scrutiny in jurisdictions in which we do business.

For example, we are subject to regulations relating to our harvesting of peat moss in Canada, which has come under increasing regulatory and environmental scrutiny at the federal, provincial and territorial levels.

The remediation of the Company's peat bog sites is under provincial oversight.

Failure by the Company to comply with such oversight could result in fines, current or future loss of peat bog leases, or other penalties.

Additionally, approximately 14%, based on acreage, of our peat bog sites are currently deemed non-compliant by environmental and legal authorities, and at this time we are unable to operate or harvest at these sites.

We have contracted with a third-party engineering company in order to regain compliance, but there is no guarantee that these efforts will be successful.

Failure by the Company to regain compliance could have a material adverse effect on our business, financial conditions and results of operations.

Additional laws and regulations require that we carefully manage our supply chain for the production, distribution and sale of goods.

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Our inability to maintain sufficient internal production capacity or our inability to enter into co-packing arrangements on terms that are beneficial to us could have an adverse effect on our business.

Failure to adequately handle increasing production costs and

complexity, turnover of personnel, or production capability and efficiency issues could materially impact our ability to cost effectively produce our products and meet customer demand.

Failure to adequately handle increasing production costs and complexity, turnover of personnel, or production capability and efficiency issues could materially impact our ability to cost effectively produce our products and meet customer demand.

Additionally, damage or disruption to our production or distribution capabilities resulting from weather, any potential effects of climate change, natural disaster, disease, crop spoilage, fire or explosion, flooding, terrorism, pandemics, strikes, repairs or enhancements at our facilities, or other reasons, could impair our ability to produce or sell our products.

Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, and may require additional resources to restore our supply chain.

Negative economic and/or industry conditions, specifically in the United States and Canada, could adversely affect our business.

Uncertain global economic and/or industry conditions could adversely affect our business.

Negative global economic trends, particularly in the United States and Canada, such as decreased consumer and business spending, high unemployment levels, reduced rates of home ownership and housing starts, high foreclosure rates and declining consumer and business confidence, pose challenges to our business and could result in declining revenues, profitability and cash flow.

Although we continue to devote significant resources to support our brands, unfavorable economic and/or industry conditions may negatively affect demand for our products.

Our most price-sensitive customers may trade down to lower priced products during challenging economic times or if current economic conditions worsen, while other customers may reduce discretionary spending during periods of economic uncertainty, each of which could reduce sales volumes of our products in favor of our competitors’ products or result in a shift in our product mix from higher margin to lower margin products.

Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

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Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, climate change, health and safety, supply chain management, diversity, labor conditions and human rights, both in our own operations and in our supply chain.

Further, there is an increasing number of federal and state-level anti-ESG initiatives in the United States that may conflict with other regulatory requirements or our various stakeholders' expectations.

Increased ESG-related compliance costs for us as well as among our suppliers, vendors and various other parties within our supply chain could result in material increases to our overall operational costs.

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In addition, climate change concerns, and changes in the regulation of such concerns, including greenhouse gas emissions, could also subject us to additional costs and restrictions, including increased energy and raw materials costs which could negatively impact our financial condition and results of operations.

The effects of climate change can have an adverse effect not only to our operations, but also that of our suppliers and customers, and can lead to increased regulations and changes in consumer preferences, which could adversely affect our business, results of operations, and financial condition.

The effects of climate change can have an adverse effect not only to our operations, but also that of our suppliers and customers, and can lead to increased regulations and changes in consumer preferences, which could also adversely affect our business, results of operations, and financial condition.

Our garden center customers and certain of our manufacturing facilities can be heavily impacted by weather conditions.

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Additionally, our outdoor harvesting and other manufacturing operations may be impacted by adverse weather conditions or changing weather patterns which may adversely impact our ability to produce and sell our products.

We have incurred and will continue to incur increased costs as a result of being a public company.

We became a public company on December 9, 2020.

As a public company, we have incurred and will continue to incur significant legal, accounting, Sarbanes-Oxley compliance, insurance and other expenses that we did not incur as a private company.

For example, we have incurred and will continue to incur increased legal and accounting costs as a result of being subject to the information and reporting requirements of the Exchange Act, and other federal securities laws.

The costs of preparing and filing periodic and other reports, proxy statements and other information with the SEC and furnishing audited

reports to stockholders, will cause significant increases in our expenses than if we had remained privately-held.

The cost of being a public company diverts resources that might otherwise have been used to develop our business, which could have a material adverse effect on our company.

If we fail to maintain effective internal controls over financial reporting or fail to comply with other regulations, investors may lose confidence in the accuracy and completeness of our financial reporting, and the price of our common stock may be adversely affected.

As a public company, we incur significant legal, accounting, Sarbanes-Oxley compliance, insurance and other expenses that we would not incur as a private company.

As a public company, we are required to file with the SEC annual and quarterly information and other reports pursuant to the Exchange Act.

We are also required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis.

In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Global Select Market and other applicable securities rules and regulations impose various requirements on public companies.

In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Capital Market and other applicable securities rules and regulations impose various requirements on public companies.

Our management and other personnel devote a substantial amount of time to compliance with these requirements.

Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly.

These matters require a significant commitment of additional resources and many of our competitors already comply with these obligations.

We may not be successful in complying with these obligations and the significant commitment of resources required for complying with them could have a material adverse effect on our business, financial condition and results of operations.

These laws and regulations also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our committees of our board of directors or as our executive officers.

In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our results of operations on a timely and accurate basis could be impaired and we could suffer adverse regulatory consequences or violate applicable listing standards.

There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements, which could have a material adverse effect on our business, financial condition and results of operations.

If we fail to maintain an effective internal control environment or to comply with the numerous legal and regulatory requirements imposed on public companies, we could make material errors in, and be required to restate, our financial statements.

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If we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, as applicable, fines, sanctions and other regulatory action and potentially civil litigation.

We are required to establish and maintain appropriate internal controls over financial reporting.

In the past, our management has identified weaknesses in our internal controls.

Although our management believes such weaknesses have been remediated, our internal control over financial reporting may still or could in the future have weaknesses and conditions that could require correction or remediation and result in additional costs, the disclosure of which may have an adverse impact on the confidence of investors and the price of our common stock.

Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations.

In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may

raise concerns for investors.

Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

We are a "smaller reporting company" and, because we have opted to use the reduced reporting requirements available to us, certain investors may find investing in our securities less attractive.

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If investors consider our common stock less attractive as a result of our election to use the scaled-back disclosure permitted for smaller reporting companies, there may be a less active trading market for our common stock and our share price may be more volatile.

If we fail to maintain effective internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reporting and the price of our common stock may be adversely affected.

We are required to establish and maintain appropriate internal controls over financial reporting.

In the past, our management identified weaknesses in our internal controls.

Although our management believes such weaknesses have been remediated, our internal control over financial reporting may still or could in the future have weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact the confidence of investors and the price of our common stock.

The impact of the COVID-19 pandemic, the shift to a COVID-19 endemic approach and related risks could materially affect our results of operations, financial position and/or liquidity.

The COVID-19 pandemic resulted in a global slowdown of economic activity and disruption of normal business travel and working habits.

While we are shifting to a COVID-19 endemic approach, there is still uncertainty about the impact of COVID-19 variants in the long-term.

The COVID-19 pandemic may have impacted our results of operations, and a reversion to the COVID-19 restrictions could have a significant effect on our future business, results of operations and financial performance.

The pandemic initially resulted in a sharp contraction in the global economy, tightening liquidity and increasing volatility and uncertainty in the capital markets.

Coincident global mitigation responses stabilized markets and stimulated economic recovery.

Continued macroeconomic volatility may persist affecting our businesses and related market opportunities.

The impact of an ongoing pandemic on the financial markets may also adversely affect our ability to fund through public or private equity offerings, debt financings, and through other means at acceptable terms.

Damage to our reputation could have an adverse effect on our business.

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In addition, perceptions that the products we distribute and market are not safe could adversely affect us and contribute to the risk that we will be subjected to legal action.

We distribute and market a variety of products, such as nutrients, and growing media.

We distribute and market a variety of products, such as nutrients, and grow media.

On occasion, allegations or news reports may be made that some of these products have failed to perform up to expectations or have caused damage or injury to individuals or property.

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While we have taken steps to ensure the security of our information technology systems, our security measures or those of our third-party vendors may not be effective and our or our third-party vendors’ systems may nevertheless be vulnerable to computer viruses, security breaches and other disruptions from unauthorized users.

If our or our third-party vendors’ information technology systems are damaged or cease to be available or function properly for an extended period of time, whether as a result of a significant cyber incident or otherwise, our ability to communicate internally as well as with our customers could be significantly impaired, which may adversely impact our business.

We may also have increased exposure to certain technology risks during integration of systems of acquired companies to our existing platform.

Additionally, the techniques used to obtain unauthorized, improper or illegal access to information technology systems are constantly evolving, may be difficult to detect quickly and often are not recognized until after they have been launched against a target.

If our or our third-party vendors’ information technology systems are damaged or cease to be available or function properly for an extended period of time, whether as a result of a significant cyber incident or otherwise, our ability to communicate internally as well as with our customers and vendors could be significantly impaired, which may adversely impact our business.

We may also have increased exposure to certain technology risks during integration of systems of acquired companies into our existing platform.

Additionally, the techniques used to obtain unauthorized, improper or illegal access to information technology resources are constantly evolving, may be difficult to detect quickly and often are not recognized until after they have been launched against a target.

We may be unable to anticipate these techniques, react in a timely manner or implement adequate preventative or remedial measures.

Any operational failure or breach of security from these increasingly sophisticated cyber threats could lead to the loss or disclosure of both our and our customers’ financial, product, and other confidential information, as well as personally identifiable information about our employees or customers, result in negative publicity and expensive and time-consuming regulatory or other legal proceedings, damage our relationships with our customers and have a material adverse effect on our business and reputation.

In addition, we may incur significant costs and operational consequences in connection with investigating, mitigating, remediating, eliminating and putting in place additional tools and devices designed to prevent future actual or perceived security incidents, as well as in connection with complying with any notification or other obligations resulting from any security incidents.

obligations resulting from a security incident.

Because we do not control our third-party vendors, or the processing of data by our third-party vendors, our ability to monitor our third-party vendors’ data security is limited and we cannot ensure the integrity or security of the measures they take to protect and prevent the loss of our or our consumers’ data.

As a result, we are subject to

the risk that cyber-attacks on, or other security incidents affecting, our third-party vendors may adversely affect our business even if an attack or breach does not directly impact our systems.

As a result, we are subject to the risk that cyber-attacks on, or other security incidents affecting, our third-party vendors may adversely affect our business even if an attack or breach does not directly impact our systems.

While we maintain cyber risk insurance, this insurance may not be sufficient to cover all losses from any breaches of our systems and does not extend to reputational damage or costs incurred to improve or strengthen systems against future threats or activity.

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Any potential litigation related to the estimates and judgments we make, or the assumptions on which we rely, in preparing our consolidated financial statements could have a material adverse effect on our financial results, harm our business, and cause our share price to decline.

Potential tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.

Since 2018, the United States has imposed tariffs on certain imports from China, including on lighting and environmental control equipment manufactured in China.

Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our profitability and cash flows.

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In connection with these audits (or future audits), tax authorities may disagree with our determinations and assess additional taxes.

We regularly assess the likely outcomes of our audits in order to determine the appropriateness of our tax provision.

We regularly assess the likely outcomes of our audits in order to determine the appropriateness of our tax provision and financial statements.

As a result, the ultimate resolution of our tax audits, changes in tax laws or tax rates, and the ability to utilize our deferred tax assets could materially affect our tax provision, net income and cash flows in future periods.

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Similar provisions of state tax law may also apply to our state NOL carryforwards.

In addition, future changes in our stock ownership, some of which may be beyond our control, could result in additional ownership changes under Section 382 of the Code.

In addition, future changes in

our stock ownership, some of which may be beyond our control, could result in additional ownership changes under Section 382 of the Code.