What changed in this filing

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Item 1. Business

2026-03-27 compared with 2025-03-05 · 64 added, 70 removed, 267 unchanged (33% of the section changed)

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For the 2025 fiscal year, our net sales were $134.3 million.

From 2005 through 2024, we generated a net sales compound annual growth rate ("CAGR") of approximately 10%.

Hydroponics is the farming of plants using soilless grow media and often artificial lighting in a controlled indoor or greenhouse environment.

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The remaining portion of our net sales relate to durable products such as hydroponic lighting and equipment.

The majority of products we offer are produced by us or are supplied to us under exclusive or preferred brand relationships.

Our proprietary, or house brands, generally provide higher gross profit margins compared to preferred or distributed brands and provide a competitive advantage as we offer our customers a breadth of products that cannot be purchased elsewhere.

The majority of products we offer are produced by us or are supplied to us under exclusive or distributed brand relationships.

Our proprietary, or house brands, generally provide higher gross profit margins compared to distributed brands and provide a competitive advantage as we offer our customers a breadth of products that cannot be purchased elsewhere.

We source individual components, raw materials or products from our supplier base.

Raw materials used in our nutrient manufacturing operations primarily include nitrogen, potassium, and phosphate.

Raw materials used in our grow media manufacturing include peat moss, compost, perlite, coir fiber, pumice and worm casings.

Raw materials used in our grow media manufacturing include peat moss, compost, perlite, coir fiber, pumice and worm castings.

We source these components, raw materials and products from suppliers located primarily in the United States, Canada, China, and Europe.

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The following graphic illustrates a representative set of our market-leading products across key CEA product categories:

Infrastructure and Reach for Fast Delivery, High In-Stock Availability and Exceptional Service

Infrastructure and Reach for Delivery Across the U.S.

and Canada, and Exceptional Customer Service

Our infrastructure and reach enables us to provide delivery and service capabilities to a diverse group of customers primarily in the United States and Canada.

We believe that our six U.S.-based distribution centers can reach a significant majority of our U.S.

customers within 48 hours and that our two Canadian distribution centers can provide timely coverage to the Canadian market.

In the United States, we currently distribute our products and employ cross-docking logistics processes from our leased facilities in Fairfield, California;

Fontana, California;

Gresham, Oregon;

Denver, Colorado;

Shoemakersville, Pennsylvania;

and New Hudson, Michigan.

In the United States, we currently operate two distribution centers in Fairfield, California and Shoemakersville, Pennsylvania.

Additionally, we are able to distribute our products through cross-docking logistics arrangements at additional sites.

In Canada, we currently distribute our products from locations in Surrey, British Columbia and Cambridge, Ontario.

On February 18, 2026, we entered into definitive agreement with Quality Horticulture, a family-owned Canadian garden center and horticultural distribution company, pursuant to which Quality Horticulture will serve as the exclusive Canadian distributor of our proprietary portfolio of nutrients, plant additives, grow media, horticultural lighting and environmental control products, including House & Garden, Grotek, Gaia Green, PHOTOBIO, SunBlaster, Active Aqua and Aurora Peat Products.

The agreement is part of our strategic plan to streamline our operations and improve the focus on our proprietary brands and core product categories.

Outside of North America, we operate a distribution center in Zaragoza, Spain.

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The majority of customer orders are received through our business-to-business e-commerce platform.

Through our Distributor Managed Inventory ("DMI") Program, we partner with our network of customers to create customized, supply chain solutions for large commercial end users.

In the United States, we currently operate manufacturing facilities in Arcata, California and Eugene, Oregon.

In Canada, we currently have manufacturing facilities in Edmonton, Alberta.

In the United States, we currently operate a manufacturing facility in Eugene, Oregon, and in Canada, we currently have manufacturing facilities in Edmonton, Alberta.

The CEA Industry

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Today, we believe that a majority of the CEA equipment and supplies we sell to our customers is ultimately purchased by participants in the cannabis industry, though we do not sell directly to cannabis growers in the United States.

An agricultural oversupply has impacted the cannabis industry, driving cannabis wholesale prices down and resulting in a decrease in indoor and outdoor cultivation, which we believe adversely impacts the market for CEA products.

We believe the oversupply was initiated by the market impacts of the COVID-19 pandemic and is now partially the result of increasing cannabis production in

additional global markets.

Despite these factors negatively impacting the industry, according to certain industry publications, the U.S.

cannabis market is projected to reach approximately $57 billion by 2028, up from an estimated $30 billion in 2024.

We believe this forecasted growth in the U.S.

A sustained agricultural oversupply has impacted the cannabis industry, driving cannabis wholesale prices down and resulting in a decrease in indoor and outdoor cultivation, which we believe adversely impacts the market for CEA products.

We believe the oversupply was initiated by the market impacts of the COVID-19 pandemic and is now partially the result of increasing cannabis production in additional global markets.

In addition, we believe demand for our products has been negatively impacted by the extended period to enact reform of U.S.

federal regulations, including cannabis rescheduling, which have been slow to develop and possibly leading cannabis operators to reduce investments in our products, particularly durable goods.

In addition, we believe our financial results have been negatively impacted by hydroponic retail store closings and, in some cases, associated accounts receivable allowances.

Despite these factors negatively impacting the cannabis industry, we believe the potential for growth in the industry exists based on industry publications.

We believe this growth in the U.S.

cannabis market may be attributable to (i) state initiatives for new adult use and/or medical use programs in additional U.S.

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Broad Portfolio with Innovative Proprietary Offerings and Recurring Consumables Sales

We have a large equipment and consumable product offering, including lighting solutions, grow media, nutrients, equipment and supplies.

We have a large durable and consumable product offering, including lighting solutions, grow media, nutrients, equipment and supplies.

We offer everything growers need to ensure their operations are maximizing efficiency, output and quality.

We maintain an extensive portfolio of products which includes approximately 35 proprietary brands across thousands of stock keeping units ("SKUs") as well as over 50 preferred brands.

Fifty-six percent of our 2024 revenue relates to sales of our proprietary brands, which generally provide for higher gross profit margins compared to preferred and distributed brands and a competitive advantage as we offer products that cannot be purchased elsewhere.

We estimate that approximately three-quarters of our net sales are generated from consumable products subject to recurring revenue that includes grow media, nutrients and supplies.

We sell proprietary and preferred brands across all of our product categories.

We selectively add distributed products when the brand or technology provides us with a more comprehensive assortment to satisfy our customers' needs.

We maintain an extensive portfolio of products which includes approximately 33 proprietary brands across thousands of stock keeping units ("SKUs") as well as approximately 40 distributed brands.

Fifty-six percent of our 2025 revenue relates to sales of our proprietary brands, which generally provide for higher gross profit margins compared to distributed brands and a competitive advantage as we offer products that cannot be purchased elsewhere.

We estimate that approximately three-quarters of our net sales are generated from consumable products that may be subject to recurring revenue, including grow media, nutrients and supplies.

We sell proprietary and distributed brands across all of our product categories.

We selectively add new products when the brand or technology provides us with a more comprehensive assortment to satisfy our customers' needs.

Manufacturing Capabilities

We currently operate three manufacturing facilities in North America which include organic certified and synthetic liquid and dry nutrient blending and bottling, organic certified soil blending and bagging, perlite production, and peat harvesting and baling.

We currently operate two manufacturing facilities in North America which include organic certified and synthetic liquid and dry nutrient blending and bottling, organic certified soil blending and bagging, perlite production, and peat harvesting and baling.

Our peat harvesting operation provides useful products for improving grow media and organic farming.

Supplier Relationships and Geographic Footprint

We have developed distribution relationships with a network of several hundred suppliers, giving us access to a best-in-class diverse product portfolio and allowing us to provide a full range of CEA solutions to our customers.

We have cultivated long-term relationships with several of our main suppliers.

We maintain a broad geographic footprint of eight distribution centers to efficiently serve our customers in North America.

We have developed distribution relationships with a network of suppliers, giving us access to a best-in-class diverse product portfolio and allowing us to provide a full range of CEA solutions to our customers.

We maintain a broad geographic footprint to efficiently serve our customers in North America.

We also operate a distribution center in Zaragoza, Spain, and we are focusing on expanding our international sales.

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We currently maintain long-standing relationships with a diversified range of specialty hydroponic retailers, commercial resellers and greenhouse builders, garden centers, hardware stores, and e-commerce retailers.

We serve over 2,000 wholesale customer accounts across multiple channels in North America, providing customers with the capability to purchase their entire product range from us.

We serve over 1,800 wholesale customer accounts across multiple channels in North America, providing customers with the capability to purchase

their entire product range from us.

We leverage a seasoned sales team and our internal product category experts to provide industry insights, product capabilities and customer support.

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Productivity and Cost Saving Initiatives

While maintaining our dedication to customer service and on-time delivery, we are focused on reducing costs and improving productivity within the organization.

Our initiatives have included implementing operational changes, consolidating our facility footprint, integrating our business into one operating segment, reducing headcount, and focusing our sales efforts on our proprietary brand offerings.

While maintaining our dedication to customer service and on-time delivery, we are focused on reducing costs and improving productivity within our organization.

Our cost-reduction and restructuring initiatives have included implementing operational changes, consolidating our facility footprint, integrating our business into one operating segment, reducing headcount, and focusing on our proprietary brand offerings.

We have executed on our previously announced restructuring plans to improve efficiency and reduce costs.

In addition, to improve our liquidity position we are negotiating with lenders and key vendors, and are pursuing additional financing or strategic alternatives including the sale of assets or businesses, or through an offering of equity securities.

Government Regulation

based operations, there is no national regulatory body providing oversight of our portfolio of products.

For U.S.-based operations, there is no national regulatory body providing oversight of our portfolio of products.

A substantial number of our products in our grow media and nutrients product lines are subject to U.S.

state specific registration requirements.

Organic listed products are audited in the US by the California Department of Food and Agriculture and/or the Organic Materials Review Institute.

Organic listed products are audited in the U.S.

by the California Department of Food and Agriculture and/or the Organic Materials Review Institute.

Finished goods and ingredients labeled as pesticides are regulated by federal and state offices of the Environmental Protection Agency (the "EPA").

Canadian based operations and product lines are regulated under the Canadian Food Inspection Agency and some organic certified products are audited and attested to by EcoCert and/or the Organic Materials Review Institute.

Canada-based operations and product lines are regulated under the Canadian Food Inspection Agency and some organic certified products are audited and attested to by EcoCert and/or the Organic Materials Review Institute.

Our peat harvesting operations are regulated by provincial and municipal bodies, including Alberta Environment and Parks regulations.

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Nonetheless, it is evident to us that the legalization of cannabis in many U.S.

states and Canada has ultimately had a significant, positive impact on our industry.

states and Canada has historically had a significant, positive impact on our industry.

Accordingly, laws and regulations governing the cultivation and sale of cannabis and related products have an indirect effect on our business.

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The cannabis industry is an early-stage business that is constantly evolving with no guarantee of viability.

The market for medical and adult use of cannabis is uncertain, and any adverse or negative publicity, scientific research, limiting regulations, medical opinion and public opinion (whether or not

accurate or with merit) relating to the consumption of cannabis, whether in the United States or internationally, may have a material adverse effect on our operational results, consumer base, and financial results.

The market for medical and adult use of cannabis is uncertain, and any adverse or negative publicity, scientific research, limiting regulations, medical opinion and public opinion (whether or not accurate or with merit) relating to the consumption of cannabis, whether in the United States or internationally, may have a material adverse effect on our operational results, consumer base, and financial results.

Among other things, such a shift in public opinion could cause state jurisdictions to abandon initiatives or proposals to legalize medical or adult cannabis or adopt new laws or regulations restricting or prohibiting the medical or adult use of cannabis where it is now legal, thereby limiting the potential customers and end-users of our products who are engaged in the cannabis industry (collectively "Cannabis Industry Participants").

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The Cole Memorandum provided guidance to all federal prosecutors and indicated that federal enforcement of the CSA against cannabis-related conduct should be focused on specific priorities, including cannabis distribution to minors, violence in connection with cannabis distribution, cannabis cultivation on federal property, and collection of cannabis-derived revenue by criminal enterprises, gangs and cartels.

• On January 4, 2018, the DOJ under the Trump administration issued a memorandum (the "Sessions Memorandum"), which effectively rescinded the Cole Memorandum and directed federal prosecutors to enforce the CSA and to follow well-established principles when pursuing prosecutions related to cannabis activities.

The DOJ under the Biden administration did not readopt the Cole Memorandum, but former President Biden indicated support for decriminalization of cannabis.

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The DEA held the preliminary hearing on the proposed rescheduling of cannabis on December 2, 2024.

• On December 18, 2025, President Trump issued an executive order instructing the Attorney General to expedite the rulemaking process related to rescheduling cannabis from a Schedule 1 to a Schedule III controlled substance under the CSA.

Despite these advancements in rescheduling, we cannot predict how the current administration or future administrations will enforce the CSA or other laws against cannabis activities.

Currently in the United States, 40 states and the District of Columbia, have adopted frameworks that authorize and regulate cannabis cultivation and sale for medical use, while 24 states and the District of Columbia legalized cannabis for medical and recreational use.

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Unless and until cannabis is de-scheduled entirely or rescheduled or Congress amends the CSA with respect to medical and/or adult use cannabis, there is a risk that federal prosecutors may enforce the existing CSA.

Federal authorities may decide to change their current posture and begin to enforce current federal cannabis law and, if they begin to aggressively enforce such laws, it is possible that they could allege that we violated federal laws by selling products used in the cannabis industry.

Federal authorities may decide to change their current posture and begin to enforce current federal cannabis laws and, if they begin to aggressively enforce such laws, it is possible that they could allege that we violated federal laws by selling products used in the cannabis industry.

As a result, active enforcement of the current federal regulatory position on cannabis may directly or indirectly adversely affect our revenues and profits.

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federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture.

This could have a material adverse effect on our business, including our reputation and ability to conduct business, the listing of our securities on any stock exchanges, the settlement of trades of our securities, our ability to obtain banking services, our financial position, operating results, profitability or liquidity or the market price of our publicly-traded shares.

position, operating results, profitability or liquidity or the market price of our publicly-traded shares.

In addition, it is difficult for us to estimate the time or resources that would be needed for the investigation of any such matters or their final resolution because, in part, the time and resources that may be needed are dependent on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial.

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Any abrogation or modification of the FinCEN Memo could negatively affect the ability of certain of the end users of our products to establish and maintain banking relationships.

House of Representatives passed the Secure and Fair Enforcement ("SAFE") Act (the "SAFE Banking Act") numerous times.

House of Representatives passed the Secure and Fair Enforcement Act (the "SAFE Banking Act") numerous times.

This bill was intended to protect banks and credit unions from federal prosecution for providing services to cannabis companies, thus allowing cannabis companies greater access to deposit accounts, insurance, and other financial institutions.

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In September 2023, the Secure and Fair Enforcement Regulation Banking Act ("SAFER Banking Act") passed the U.S.

Senate Banking Committee which expands on the financial institutions granted protection than those proposed to be covered by the SAFE Banking Act, provides uniform exam guidelines for cannabis banking institutions, among other changes.

Senate Banking Committee which expands on the financial institutions granted protection beyond those proposed to be covered by the SAFE Banking Act, and provides uniform exam guidelines for cannabis banking institutions, among other changes.

However, passage of the SAFER Banking Act in the U.S.

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• The failure of our Cannabis Industry Participants to comply with applicable controlled substance laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the demand for our products and, as a result, the financial results of our business operations and our financial condition.

On March 29, 2021, we and our subsidiaries (the "Subsidiary Obligors") entered into a senior secured revolving loan facility with JPMorgan Chase Bank, N.A.

("JPMorgan"), as administrative agent for the lenders, which was subsequently amended and currently provides for a maximum commitment amount of $35 million and terminates on June 30, 2026 (as amended, the "Revolving Credit Facility").

On October 25, 2021, we and the Subsidiary Obligors entered into a $125 million senior secured term loan facility with JPMorgan as administrative agent for the lenders, which was subsequently amended (the "Term Loan").

The Revolving Credit Facility and the Term Loan (collectively, the "Credit Facilities") each contain customary covenants, restrictions and defaults.

The Credit Facilities prohibit us and the Subsidiary Obligors from selling our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country.

As a result, the Company does not sell our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country.

See "Risk Factors— Risks Relating to our Indebtedness" for further detail.

On October 25, 2021, we and certain of our subsidiaries (the "Subsidiary Obligors") entered into a $125 million senior secured term loan facility with JPMorgan Chase Bank, N.A.

("JPMorgan") as administrative agent for the lenders, which was subsequently amended (the "Term Loan").

The Term Loan contains customary covenants, restrictions and defaults.

The Term Loan prohibits us and the Subsidiary Obligors from selling our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country.

As a result, we do not sell our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country.

See Part I, Item 1A, Risk Factors, Risks Relating to our Indebtedness for further detail.

Intellectual Property

We own 15 issued U.S.

design patents, 2 issued U.S.

utility patents, 4 issued foreign patents and designs, 103 registered U.S.

We own a number of U.S.

design patents, U.S.

utility patents, foreign patents and designs, registered U.S.

trademarks, and registered foreign trademarks.

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These issued patents and our registered trademarks allow us to build out our proprietary brand products.

Our owned U.S.

and foreign issued patents are expected to expire between 2025 and 2035.

Our ability to compete effectively depends in part on our rights to trademarks, patents and other intellectual property rights we own or license.

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However, if we are restricted in our ability to register, or maintain, our trademarks or to file for or enforce patents on any of our inventions, such an inability could materially affect our ability to protect our name, brand and proprietary technologies.

See "— Risks Relating to Our Intellectual Property" for more information on the risks associated with intellectual rights.

See Part I, Item 1A, Risk Factors, Risks Relating to Our Intellectual Property for more information on the risks associated with intellectual rights.

Human Capital

Our success depends on management implementing effective human resource initiatives in order to recruit, develop and retain key employees.

At Hydrofarm we believe that having a strong support base will allow for greater productivity and

satisfaction and we are committed to open and healthy communication with our workforce.

At Hydrofarm we believe that having a strong support base will allow for greater productivity and satisfaction and we are committed to open and healthy communication with our workforce.

We seek to create an inclusive work environment in order to foster an innovative and team-oriented culture.

As of December 31, 2025, we had 251 total employees globally, of which 250 are full-time employees, as compared to 286 total employees as of December 31, 2024.

Of our total employees, approximately 66% are located in the United States, and the remainder primarily in Canada.

During 2024 and 2023, we reduced headcount and we may implement further reductions in the future to create operational efficiencies.

Additionally, we use temporary workers as needed to provide flexibility for our business including for seasonal projects.

Of our total employees, approximately 68% are located in the United States, and the remainder are primarily in Canada.

In conjunction with our restructuring plan initiated in the second quarter of 2025 (the "2025 Restructuring Plan"), we reduced headcount in 2025 and year-to-date 2026.

We may implement further reductions in the future to create additional operational efficiencies.

We use temporary workers as needed to provide flexibility for our business including for seasonal projects.

Our compensation philosophy is to implement a program that enables us to attract, motivate, reward, and retain high-performing employees who can create and sustain value for our stockholders over the long term.

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We maintain health and safety programs, including our Environmental Health and Safety ("EHS") management system.

Our associates participate in safety committees, hazard identification, work order resolutions and mandatory compliance training.

Our associates participate in safety committees, hazard identification, work order resolutions and

mandatory compliance training.

Additionally, we participate in third party health and safety inspections to meet regulatory requirements.

To evaluate our health and safety performance, we use an EHS scorecard composed of leading and lagging indicators, such as progress measurements for behavioral-based safety and hazard observations, near-miss reporting, and total recordable incident rates.

Corporate Structure

We have been in the business of supplying indoor gardeners since 1977.

We conduct our business through our wholly-owned, direct and indirect subsidiaries.

Corporate Information

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Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are filed with the SEC.

Such reports and other information filed by us with the SEC are available free of charge on our website at investors.hydrofarm.com when such reports are available on the SEC’s website.

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Smaller Reporting Company

We qualify as a smaller reporting company in accordance with Rule 12b-2 under the Exchange Act, and have elected to follow certain of the scaled back disclosure accommodations within this Annual Report on Form 10-K.

We qualify as a smaller reporting company in accordance with Rule 12b-2 under the Exchange Act, and have elected to follow certain of the scaled-back disclosure accommodations available to smaller reporting companies within this Annual Report on Form 10-K.

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-K

Item 1. Business