HYFM 10-K & 10-Q changes, risk factors and insider trading
Hydrofarm Holdings Group, Inc. · Nasdaq · Wholesale-Miscellaneous Nondurable Goods · CIK 1695295 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We are not able to meet our current working capital needs and contractual obligations.”
New heading “We may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.”
New heading “Due to our recurring operating losses and negative cash flows from operations, there is substantial doubt as to our ability to continue as a going concern. We may need additional financing to execute our business plan, to fund our operations, and to continue as a going concern. Our disclosure regarding the substantial doubt as to our ability to continue as a going concern may hinder our ability to obtain further financing.”
New heading “We may not successfully develop new products, improve existing products, or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles.”
New heading “Substantially all of our and our Subsidiary Obligors’ assets are pledged to secure obligations under the Term Loan.”
New heading “Servicing our debt may require a significant amount of cash and is dependent on the performance of our business. If our business does not provide sufficient cash flow from operations or our business does not perform as we expect, our lenders may not refinance or restructure our debt on the terms that we find attractive, or at all.”
New heading “We are currently not in compliance with the continued listing standards of Nasdaq, and if we are unable to regain compliance, our common stock will be delisted from the exchange.”
New heading “If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.”
Removed heading “We may not successfully develop new products or improve existing products or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles.”
Removed heading “If we need additional capital to fund our operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.”
Removed heading “Substantially all of our and our Subsidiary Obligors’ assets are pledged to secure obligations under the Credit Facilities.”
Removed heading “We may not meet continued listing requirements, our common stock may be delisted from the Nasdaq Capital Market, which could affect the market price and liquidity for our common stock and reduce our ability to raise additional capital.”
Largest changes
“We may not meet continued listing requirements, our common stock may be delisted from the Nasdaq Capital Market, which could affect the market price and liquidity for our common stock and reduce our ability to raise additional capital.”see in full comparison
“Further, if we are unsuccessful with our restructuring and other cost-saving initiatives, improving our profitability or raising capital, it will have a material adverse effect on our business and financial position and we may choose to pursue a filing under Chapter 11 under the U.S. Bankruptcy Code or access receivership or similar processes, or otherwise wind-up our business and liquidate. …”see in full comparison
“Our ability to make scheduled payments of the principal of, to pay special interest, if any, on or to refinance the existing Term Loan depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate sufficient cash flow from operations to service our debt and make necessary capital expenditures. …”see in full comparison
“Due to our recurring operating losses and negative cash flows from operations, there is substantial doubt as to our ability to continue as a going concern. We may need additional financing to execute our business plan, to fund our operations, and to continue as a going concern. Our disclosure regarding the substantial doubt as to our ability to continue as a going concern may hinder our ability to obtain further financing.”see in full comparison
“We are currently not in compliance with the continued listing standards of Nasdaq, and if we are unable to regain compliance, our common stock will be delisted from the exchange.”see in full comparison
“We and our Subsidiary Obligors have granted a continuing security interest in substantially all of our assets to JPMorgan. …”see in full comparison
Full comparison: every changed paragraph (78)
•our ability to meet our current working capital needs and contractual obligations;
•possible difficulties in raising sufficient capital to fund our operations;
•our ability to continue as a going concern;
•long-lived assets and inventories represent a significant portion of our total assets and we may be required to record additional impairments or write-downs in future periods;
•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; and
•possible difficulties in raising sufficient capital to fund our operations; and
•our ability to make our debt service payments pursuant to the CreditTerm FacilitiesLoan; and
•restrictions imposed by ourthe CreditTerm Facilities,Loan, including on our ability to sell products directly to the cannabis industry.
•certain provisions in the CreditTerm Facilities,Loan, 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;
•our ability to meet the continued listing standards of Thethe Nasdaq Capital Market; and
We are not able to meet our current working capital needs and contractual obligations.
We face significant liquidity constraints that raise substantial uncertainty regarding our ability to meet our current obligations as they become due and as previously disclosed, we elected to defer making the interest payment of approximately $2.8 million on the Term Loan in February 2026. Our operating cash flows have been insufficient to fully support our working capital needs and contractual obligations, and we require additional sources of liquidity to satisfy upcoming payment obligations, including vendor payables, debt service requirements, lease commitments, and other contractual liabilities. If our cash flows from operations do not improve, or if we are unable to obtain additional financing on acceptable terms, we are unable to meet these obligations when due.
Management has developed and is implementing a plan intended to improve our liquidity position. These actions include cost‑reduction and restructuring initiatives, efforts to improve operating efficiency, negotiations with lenders and key vendors, and the pursuit of additional financing or strategic alternatives. While we believe these actions, if successfully executed, could provide sufficient liquidity to meet our obligations for the foreseeable future, there can be no assurance that these plans will be achieved within the necessary timeframes or at all. Our ability to execute these plans depends on factors that are outside of our control, including market conditions, lender and vendor cooperation, and the performance of our business.
If we are unable to generate sufficient liquidity or successfully implement our plans, we may need to delay or reduce expenditures, restructure or refinance existing obligations, seek additional debt or equity financing, or pursue other strategic alternatives. Failure to meet our obligations as they come due could have a material adverse effect on our business, financial condition, and results of operations.
We may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.
As of the date of this Annual Report on Form 10-K, we are experiencing increased capital needs and accordingly, we do not have sufficient capital to fund our future operations without additional capital investments. There can be no assurance that additional capital will be available to us to fund our operations and the execution of our strategies.
Due to our recurring operating losses and negative cash flows from operations, there is substantial doubt as to our ability to continue as a going concern. We may need additional financing to execute our business plan, to fund our operations, and to continue as a going concern. Our disclosure regarding the substantial doubt as to our ability to continue as a going concern may hinder our ability to obtain further financing.
Due to our recurring operating losses, negative cash flows from operations, and our $114.4 million reclassification of Term Loan principal to current portion of long-term debt, management has determined that our present capital resources may not be sufficient to fund our planned operations for at least one year from the date of this Annual Report on Form 10-K, and there is substantial doubt as to our ability to continue as a going concern. Our ability to continue as a going concern will depend on our ability to generate cash from operations and obtain additional financing to fund our operations after our current resources are exhausted, and no assurances can be given that additional financing will be available to us on commercially reasonable terms, or at all. If we are unable to raise sufficient capital when needed, our business, financial condition, and results of operations will be materially and adversely affected, and we will need to modify our operational plans to continue as a going concern. Moreover, the reaction of investors to the inclusion of a going concern statement in our financial statements and our potential inability to continue as a going concern could adversely affect the price of our common stock and our ability to raise new capital or enter into strategic or other transactions.
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. See Item 7, Management’s Discussion and Analysis of Financial Condition And Results of Operations – Market Conditions included elsewhere in this Annual Report on Form 10-K 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.
Further, if we are unsuccessful with our restructuring and other cost-saving initiatives, improving our profitability or raising capital, it will have a material adverse effect on our business and financial position and we may choose to pursue a filing under Chapter 11 under the U.S. Bankruptcy Code or access receivership or similar processes, or otherwise wind-up our business and liquidate. See the risk factor titled “We are subject to a number of risks, directly and indirectly through Cannabis Industry Participants, because cannabis is illegal under federal law” for further information on risks related to our access to federal bankruptcy protection as a cannabis-related businesses. Seeking bankruptcy court protection, accessing receivership or similar processes or otherwise winding up our business and liquidating could have a material adverse effect on our business, financial condition, results of operations and liquidity. While these proceedings or processes continue, our management would spend substantial time and effort on the reorganization instead of our business operations. These proceedings or processes also could make it more difficult to retain management and other key personnel necessary to the success and operation of our business. In addition, while we are involved in a bankruptcy proceeding, or similar process, our customers might lose confidence in our ability to reorganize our business successfully and seek to establish alternative commercial relationships. Because our indebtedness is senior to our common stock in our capital structure, a bankruptcy proceeding or similar process, could result in a limited recovery, if any, for our stockholders, and would place our stockholders at significant risk of losing all of their investment in our common stock.
We may not successfully develop new products, improve existing products, or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles.
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. See "Item 7. 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 may not successfully develop new products or improve existing products or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles.
Long-lived assets and inventories represent a significant portion of our total assets and we may be required to record additional 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. During the years ended December 31, 2024 and 2023, we recorded significant allowances for obsolete inventory and restructuring charges associated with inventory write-downs.
Long-livedOur assets,consolidated suchbalance sheet as intangibleof assets,December property,31, plant2025 andincludes equipment$33.3 andmillion of inventories, $37.8 million of operating lease right-of-use assetsassets, are$30.3 reviewed for impairment whenever events, changes or circumstances indicate that the carrying amountmillion of anproperty, assetplant, orand assetequipment, groupnet, mayand not$2.8 be recoverable. If we were to conclude that a future write-downmillion of ourintangible long-livedassets, assets is necessary, we would have to record the appropriate charge, which could result in a material adverse effect on our results of operations. Inventories consist of manufactured goods, goods acquired for resale, and materials consumed in business operations. Inventories are stated at the lower of cost or net realizable value, and we maintain an allowance for excess and obsolete inventory. The estimate for excess and obsolete inventory is based upon assumptions about current and anticipated demand, customer preferences, business strategies, and market conditions.net. We have experienced sales declines, which we believe are primarily a result of agricultural oversupply impacting our market. The extent to which these market conditions will continue to impact our business, results of operations, and cash flows are uncertain and difficult to predict at this time, and may result in lower margins, inventory write-downs, accounts receivable allowances, and additional impairments of our long-lived assets which could have a material adverse effect on our business, financial condition and results of operations.
During the year ended December 31, 2025, we recorded impairment charges of $232.2 million. Of the impairment charge, $228.4 million was related to finite-lived intangible assets and $3.8 million was related to property, plant, and equipment. Long-lived assets, such as intangible assets, property, plant and equipment and operating lease right-of-use assets are reviewed for impairment whenever events, changes or circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If we were to conclude that a future write-down of our long-lived assets is necessary, we would have to record the appropriate charge, which could result in a material adverse effect on our results of operations.
During the years ended December 31, 2025 and 2024, we recorded significant allowances for obsolete inventory and restructuring charges associated with inventory write-downs. Inventories consist of manufactured goods, goods acquired for resale, and materials consumed in business operations. Inventories are stated at the lower of cost or net realizable value, and we maintain an allowance for excess and obsolete inventory. The estimate for excess and obsolete inventory is based upon assumptions about current and anticipated demand, customer preferences, business strategies, and market conditions.
The United States has imposed tariffs on certain imports from China, Canada, Mexico, and Europe, 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. If the U.S. 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, should new tariffs be enacted on products imported into the United States from Canada, including relating to our peat business, they 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.future. Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations.
The manufacturing, composition, packaging, storage, distribution and labeling of our products and the manner in which our business operations are conducted must comply with an extensive array of federal, state and foreign laws and regulations. If we are not successful in complying with the requirements of all such regulations, we could be fined or other actions could be taken against us by the applicable governing body, including the possibility of a required product recall. Any such regulatory action could adversely affect our financial condition and results of operations. It is also possible that governments and regulatory agencies will increase regulation, including the adoption of further regulations relating to the transportation, storage or use of certain ingredients, to enhance homeland security or protect the environment and such increased regulation could negatively impact our ability to obtain raw materials, components and/or finished goods or could result in increased costs. In particular, certain legislators, consumers, investors and other stakeholders are increasingly focusing on climate change, petroleum usage, waste, recycled material content, and other sustainability concerns pertaining to companies’ ESG policies. ConcernTheir concerns 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.
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. In addition, permitting to develop additional peat bogs may be subject to challenges from communities that are purportedly affected by such development as part of the regulatory approval process for such development. Failure by the Company to comply with such oversight could result in fines, current or future loss of peat bog leases, or other penalties.
Increasing scrutinyScrutiny 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.
Companies are facing increasing scrutiny from certain customers, regulators, investors, and other stakeholders related to their ESG practices and disclosure. 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. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and our stock price.
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 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. 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.
From time to time, tax proposals are introduced, considered, or implemented by the U.S. Congress or the legislative bodies in local, state and foreign jurisdictions that could also affect our tax rate, the carrying value of our deferred tax assets, or our tax liabilities. For example, in July 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act of 2017, along with additional changes to certain U.S. corporate tax provisions. The Company is currently evaluating the impact of OBBBA, but does not believe that the tax provisions of the legislation will have a material impact on the Company's results of operations. Our tax liabilities are also affected by the amounts we charge for inventory, services, licenses and funding.
From time to time, tax proposals are introduced or considered by the U.S. Congress or the legislative bodies in local, state and foreign jurisdictions that could also affect our tax rate, the carrying value of our deferred tax assets, or our tax liabilities. Our tax liabilities are also affected by the amounts we charge for inventory, services, licenses and funding. We are subject to ongoing tax audits in various jurisdictions. 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 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.
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:
If we need additional capital to fund our operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.
We may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. There can be no assurance that additional capital will be available to us to fund our operations and the execution of our strategies.
Substantially all of our and our Subsidiary Obligors’ assets are pledged to secure obligations under the Term Loan.
On February 4, 2026, we elected to defer making an interest payment of approximately $2.8 million on the Term Loan. As a result of our failure to pay the interest within the grace period, an event of default occurred with respect to the Term Loan. On February 11, 2026, the lenders, through the administrative agent, notified us of such event of default and informed us that the administrative agent or the collateral agent may exercise any rights and remedies provided under the Term Loan agreement and related financing documents, but it did not seek to enforce such remedies as of such time.
We and our Subsidiary Obligors have granted a continuing security interest in substantially all of our assets to JPMorgan. As we have received a notice of default from JPMorgan, we note that they are entitled to exercise remedies available to them resulting from such default, including increasing the applicable interest rate on all amounts outstanding to the stated default rate, declaring all amounts due thereunder immediately due and payable, assuming possession of the secured assets, and exercising all other rights and remedies of a secured party under the Uniform Commercial Code, as applicable then in the United States, or the Personal Property Security Act, as applicable then in Canada. Our ability to conduct our business may be materially harmed as a result of the exercise of any remedies, in the event that such remedies are exercisable, by JPMorgan.
Servicing our debt may require a significant amount of cash and is dependent on the performance of our business. If our business does not provide sufficient cash flow from operations or our business does not perform as we expect, our lenders may not refinance or restructure our debt on the terms that we find attractive, or at all.
Our ability to make scheduled payments of the principal of, to pay special interest, if any, on or to refinance the existing Term Loan depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate sufficient cash flow from operations to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance the existing Term Loan will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt repayment.
TheOur CreditTerm FacilitiesLoan contain,contains, and future debt facilities may contain, restrictions that limit our flexibility in operating our business; we intend to fund interest and amortization payments from cash flows generated in our operations, and to the extent that cash flows deteriorate, it could be difficult or impossible to timely make our debt service payments or obtain additional debt financing.
•impacting our cash flows, results of operations and financial condition as interest rates fluctuate, as our CreditTerm FacilitiesLoan incurincurs interest at a floating rate;
•requiring us to refinance the Revolving Credit Facility if the lenders do not agree to extend the maturity date beyond June 30, 2026;
The existing CreditTerm FacilitiesLoan (as discussed in more detail in "Item 7.7, Management’s Discussion And Analysis of Financial Condition and Results of Operations –included theelsewhere Revolvingin Creditthis FacilityAnnual andReport Termon Loan"Form 10-K) contain,contains, and any documents governing our or our subsidiaries’ future indebtedness may contain, numerous financial and operating covenants that limit the discretion of management with respect to certain business matters. Such restrictive covenants include restrictions on, among others, our and our subsidiaries’ ability to: (1) incur additional indebtedness; (2) create or suffer to exist any liens upon any of our or our subsidiaries’ property; (3) pay dividends and other distributions or enter into agreements restricting our subsidiaries’ ability to pay dividends; (4) make investments; (5) make certain loans; (6) dispose of assets; (7) merge, amalgamate, combine or consolidate; (8) engage in certain transactions with stockholders or affiliates; (9) amend or otherwise alter the terms of our or our subsidiaries’ indebtedness; and (10) alter the business that we currently conduct. The existing CreditTerm FacilitiesLoan also requirerequires us, and any documents governing our and our subsidiaries’ future indebtedness may require,require us to meet certain financial ratios and tests in order to enter into certain transactions, incur additional indebtedness, pay dividends and take other actions. In addition, if we become subject to the financial ratios and tests that are specified in the Revolving Credit Facility, noncompliance with such ratios and tests would be an event of default.
We and our Subsidiary Obligors’ ability to comply with these and other provisions of the existing CreditTerm FacilitiesLoan is dependent on our future performance, which will be subject to many factors, some of which are beyond our control. The breach of any of these covenants or noncompliance with any applicable financial ratios and tests could result in an event of default under the existing debt agreements, which, if not cured or waived, could result in acceleration of the related debt and the acceleration of debt under other instruments evidencing indebtedness that may also contain cross-acceleration or cross-default provisions. Variable rate indebtedness subjects us and the Subsidiary Obligors to the risk of higher interest rates, which could cause our future debt service obligations to increase significantly.
The CreditTerm FacilitiesLoan havehas restrictions on our ability to sell our products directly to the cannabis industry.
Our CreditTerm FacilitiesLoan each containcontains customary covenants, restrictions and defaults. The CreditTerm FacilitiesLoan prohibitprohibits 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. We are in compliance with the relevant terms set forth in the Revolving Credit Facility and the Term Loan and maintain policies and procedures that are designed to promote and achieve continued compliance with such requirements.
These compliance requirements may require that we be more selective than our competitors when selecting to whom we sell our products, and in certain situations, may afford our competitors a competitive advantage if we are not able to sell our products to a certain customer, and may negatively impact our marketing efforts, sales and reputation in the market. Moreover, the breach of any of these compliance requirements may result in the occurrence of an event of default under each of the Revolving Credit Facility and the Term Loan, which would entitle JPMorgan, asthe administrative agent on behalf of the lenders party to such agreements, to terminate the commitments thereunder and declare all loans then outstanding to be due and payable. The foregoing events would have a material adverse effect on our business, results of operations and financial condition.
Substantially all of our and our Subsidiary Obligors’ assets are pledged to secure obligations under the Credit Facilities.
We and our Subsidiary Obligors have granted a continuing security interest in substantially all of our assets to JPMorgan. If we or the Subsidiary Obligors default on any of our obligations under such agreements, JPMorgan will be entitled to exercise remedies available to them resulting from such default, including increasing the applicable interest rate on all amounts outstanding to the stated default rate, declaring all amounts due thereunder immediately due and payable, assuming possession of the secured assets, and exercising all other rights and remedies of a secured party under the Uniform Commercial Code, as applicable then in the United States, or the Personal Property Security Act, as applicable then in Canada. Our ability to conduct our business may be materially harmed as a result of the exercise of any remedies, in the event that such remedies are exercisable, by JPMorgan.
It is evident to us that the movement towards the legalization of cannabis in the United States and its legalization in Canada has ultimately had a significant, positive impact on our industry. Accordingly, theThe risks referred to below, to the extent they relate to our customers could impact us indirectly. In addition, if our business is deemed to transact with companies in the United States involved in the cannabis business, these risks could apply directly to us. "Cannabis Industry Participants" means the potential customers and end-users of our products who are engaged in the cannabis industry.
CannabisAs of the date of this Annual Report on Form 10-K, cannabis is illegal under U.S. federal law. Federal law and enforcement may adversely affect the implementation of medical cannabis and/or adult use cannabis laws, and may negatively impact our revenues and profits.
Any presidential administration, current or future, could change federal enforcement policy or execution and decide to enforce the federal cannabis laws more strongly. Recent administrations have disagreed on how strongly to enforce federal cannabis laws. For example, on August 29, 2013, the DOJ under the Obama administration issued the Cole Memorandum, characterizing strict enforcement as an inefficient use of federal investigative and prosecutorial resources. The Cole Memorandum provided guidance to all federal prosecutors indicating 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 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. On October 6, 2022, former President Biden issued an executive order pardoning all persons convicted of simple possession of cannabis under the CSA. In the same executive order, former President Biden also directed the Secretary of HHS and the Attorney General to initiate an administrative process to review the scheduling of cannabis under the CSA, and on August 29, 2023, the Department of HHS officially recommended that the DEA reschedule cannabis from Schedule I to Schedule III, although the DEA is not obligated to follow this recommendation. Further, on December 2, 2022, former President Biden signed into law the Medical Marijuana and Cannabidiol Research Expansion Act, which streamlines and expands the process for researching the medical use of cannabis. On May 16, 2024, the DOJ announced that the Attorney General submitted a notice of proposed rulemaking process for rescheduling cannabis. The DEA held a preliminary hearing on the proposed rescheduling of cannabis on December 2, 2024.2024, Weand was scheduled to have another hearing on January 21, 2025. On January 15, 2025, the DEA indefinitely postponed this hearing regarding pending resolution of an appeal filed by a party in the proceedings. 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. Any change in the federal government’s enforcement of current federal laws could cause significant financial damage to us. The legal uncertainty and possible future changes in law could negatively affect our growth, revenues, results of operations and success generally.
•CannabisAs of the date of this Annual Report on Form 10-K, cannabis is currently a Schedule I drug under the CSA and regulated by the DEA as an illegal substance. The FDA, in conjunction with the DEA, licenses cannabis research and drugs containing active ingredients derived from cannabis. If cannabis were to become legal under federal law, its sale and use could become regulated by the FDA or another federal agency.
Furthermore, the CreditTerm FacilitiesLoan restrictrestricts our ability and the ability of the Subsidiary Obligors to sell our products directly to U.S. cannabisCannabis growers.Industry Participants.
We sell our products through third-party retailers and resellers, however, it is evident to us that the movement towards the legalization of cannabis in the United States and its legalization in Canada has ultimately had a significant, positive impact on our industry. We are not currently subject directly to any state laws or regulations controlling participants in the legal cannabis industry. However, regulation of the cannabis industry does impact those that we believe represent many end-users for our products and, accordingly, there can be no assurance that changes in regulation of the industry and more rigorous enforcement by federal authorities will not have a material adverse effect on us. For example, legalization of cannabis in the United States may invite into the market for hydroponic equipment and supplies for the CEA industry additional competitors who are better resourced than us.
Management's Discussion & Analysis (MD&A)
New heading “Subsequent Events”
Removed heading “Revolving Credit Facility”
Largest changes
“During the second quarter of 2025, we initiated the 2025 Restructuring Plan to reduce our product portfolio and operational footprint to decrease costs and improve efficiency. The 2025 Restructuring Plan actions entail (i) eliminating a significant portion of our product portfolio, primarily underperforming distributed brands, to improve supply chain and operational focus, (ii) further reductions in our distribution center network and manufacturing footprint, and (iii) corresponding headcount reductions. …”see in full comparison
“We and certain of our subsidiaries (the “Subsidiary Obligors”) entered into Credit and Guaranty Agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”) as administrative agent for the lenders, pursuant to which we borrowed a $125 million senior secured term loan (the “Term Loan”), which was subsequently amended. On February 4, 2026, we elected to defer making the interest payment of approximately $2.8 million on the Term Loan. As a result of our failure to pay the interest within the grace period, an event of default occurred with respect to the Term Loan. …”see in full comparison
“We continue to evaluate our product portfolio and supply chain, in order to improve efficiency, lower our costs and reduce footprint. We are also evaluating other opportunities to sell excess owned land, not currently being used in operations, to supplement our cash position and potential contract manufacturing or other outsourcing arrangements. …”see in full comparison
“The Term Loan requires us to maintain certain reporting requirements, affirmative covenants, and negative covenants. On February 4, 2026, we elected to defer making an interest payment of approximately $2.8 million on the Term Loan. As a result of our failure to pay the interest within the grace period, an event of default occurred with respect to the Term Loan. …”see in full comparison
“We have incurred recurring operating losses, negative cash flows from operations, and have significant debt obligations due within the next twelve months. These conditions and events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern. See Note 2 – Liquidity and Going Concern to our audited consolidated financial statements and our independent registered public accounting firm report included elsewhere in this Annual Report on Form 10-K for additional information.”see in full comparison
As a result of the continued adverse market conditions,see in full comparisonin the third quarter of 2023we began asecondrestructuringphaseplanofin 2023 (the "2023 Restructuring Plan"), and undertook significant actions to streamline operations, reduce costs and improve efficiencies. Restructuring actions in the 2023 Restructuring Planwhichwereincludedprimarily U.S. manufacturing facility consolidations, in particular with respect to our production of certain durable equipment products.InRestructuring2023,activitiesweincludedrecordedtermination$9.2and disposal costs associated with inventory, facilities, and headcount reductions, and non-cash charges consisting of fixed asset and inventory write-downs. Total costs incurred relating to the 2023 Restructuring Plan, from its commencement through completion in the first quarter of 2025 were (i) $9.7 million ofrestructuringnon-cash chargesforrelating primarily to inventory markdowns, and (ii) $2.0 million of cash charges relating primarily to thesecond phase. These charges primarily related to estimated non-cash raw material inventory write-downs as we reduced our capacity and facility space, given the change in customer demand for these products. These restructuring charges were primarily recorded within costconsolidation ofgoodsU.S.soldmanufacturingon the consolidated statements of operations.facilities.
Full comparison: every changed paragraph (65)
We are a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture ("CEA"),agriculture, including grow lights, climate control solutions, grow media and nutrients, as well as a broad portfolio of innovative, proprietary branded products. We primarily serve the U.S. and Canadian markets, and believe we are one of the leading companies in these markets in an otherwise fragmented industry. For over 40 years, we have helped growers make growing easier and more productive. Our mission is to empower growers, farmers and cultivators with products that enable greater quality, efficiency, consistency, and speed in their grow projects.
We have incurred recurring operating losses, negative cash flows from operations, and have significant debt obligations due within the next twelve months. These conditions and events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern. See Note 2 – Liquidity and Going Concern to our audited consolidated financial statements and our independent registered public accounting firm report included elsewhere in this Annual Report on Form 10-K for additional information.
Subsequent Events
We and certain of our subsidiaries (the “Subsidiary Obligors”) entered into Credit and Guaranty Agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”) as administrative agent for the lenders, pursuant to which we borrowed a $125 million senior secured term loan (the “Term Loan”), which was subsequently amended. On February 4, 2026, we elected to defer making the interest payment of approximately $2.8 million on the Term Loan. As a result of our failure to pay the interest within the grace period, an event of default occurred with respect to the Term Loan. On February 11, 2026, the lenders, through the administrative agent, notified us of such event of default and informed us that the administrative agent or the collateral agent may exercise any rights and remedies provided under the Credit and Guaranty Agreement and related financing documents, but it did not seek to enforce such remedies as of such time. See —Liquidity and Capital Resources for additional information.
In addition, on February 10, 2026, JPMorgan issued a notice to the Company and Lenders of its resignation as Administrative Agent and Collateral Agent under the Credit and Guaranty Agreement. Such resignation became effective on March 12, 2026, when FEAC Agent, LLC was appointed as the successor agent for the Lenders in accordance with Section 9 of the Credit and Guaranty Agreement.
On February 17, 2026, we entered into an agreement (the "Termination Agreement") to terminate that certain Credit Agreement, dated as of March 29, 2021, as amended, by among JPMorgan, as administrative agent, issuing bank and swingline lender, the other loan parties from time to time party thereto and the lenders from time to time party thereto (the "Revolving Credit Agreement"). Pursuant to the terms of the Termination Agreement, the parties agreed to terminate the Revolving Credit Agreement subject to the survival of each of the provisions of the Revolving Credit Agreement and Loan Documents (as defined in the Revolving Credit Agreement) and in the certificates delivered in connection with or pursuant to the Revolving Credit Agreement that survive termination of the Revolving Credit Agreement.
We have experienced adverse financial results which we believe isare primarily a result of an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation. The extent these market conditions will continue to negatively impact our business and results of operations is uncertain and difficult to predict at this time. We believe COVID-19 may have provided a positive demand impact for the Company in 2020 and 2021 from shelter-in-place orders in the United States, a possible negative supply chain impact from workforce disruption at international and domestic suppliers, and a possible negative growth rate impact in the periods since due to agricultural oversupply initiated during the height of COVID-related shelter-in-place orders in 2020 and 2021. 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.
During the fourth quarter of fiscal 2025, as a result of industry conditions, primarily attributable to an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation, as well as continued declines in operating cash flows and profitability, we assessed our long-lived assets for impairment and recorded an impairment charge of $232.2 million. Of the impairment charge, $228.4 million was related to finite-lived intangible assets and $3.8 million was related to property, plant, and equipment. The loss was recorded in Impairments in the consolidated statement of operations for the year ended December 31, 2025. We estimated fair value based on the income approach and market approach. Under the income approach, we estimated the fair value of the asset group on the present value of estimated future cash flows, which we considered to be a level 3 unobservable input in the fair value hierarchy.
In 2022, we undertook the following major initiatives in connection with the first phase of our previously disclosed restructuring plan (the "Restructuring Plan"): (i) narrowing our product and brand portfolio, including removing approximately one-third of all products and one-fifth of all brands relating to our primary product portfolio, which excluded our garden center business in Canada, and (ii) relocating and consolidating certain manufacturing and distribution centers, including headcount reductions and reorganization to drive a solution based approach, focusing commercial sales on competencies and product assortment from our 2021 acquisitions. Total costs incurred relating to this first phase of the Restructuring Plan from its commencement in 2022 to its completion in 2023, were (i) $6.4 million relating primarily to inventory markdowns, and (ii) $3.4 million relating primarily to the relocation and termination of certain facilities in Canada.
As a result of the continued adverse market conditions, in the third quarter of 2023 we began a secondrestructuring phaseplan ofin 2023 (the "2023 Restructuring Plan"), and undertook significant actions to streamline operations, reduce costs and improve efficiencies. Restructuring actions in the 2023 Restructuring Plan whichwere includedprimarily U.S. manufacturing facility consolidations, in particular with respect to our production of certain durable equipment products. InRestructuring 2023,activities weincluded recordedtermination $9.2and disposal costs associated with inventory, facilities, and headcount reductions, and non-cash charges consisting of fixed asset and inventory write-downs. Total costs incurred relating to the 2023 Restructuring Plan, from its commencement through completion in the first quarter of 2025 were (i) $9.7 million of restructuringnon-cash charges forrelating primarily to inventory markdowns, and (ii) $2.0 million of cash charges relating primarily to the second phase. These charges primarily related to estimated non-cash raw material inventory write-downs as we reduced our capacity and facility space, given the change in customer demand for these products. These restructuring charges were primarily recorded within costconsolidation of goodsU.S. soldmanufacturing on the consolidated statements of operations.facilities.
In 2024, we evaluated alternatives to maximize the recovery value of our assets and the cost structure associated with manufacturing our Innovative Growers Equipment ("IGE") branded durable equipment products. In the second quarter of 2024, we entered into an agreement (the "Purchase Agreement") with CM Fabrication, LLC (the "Buyer") to sell the inventories, and property, plant and equipment associated with our IGE branded products for approximately $8.7 million (the "IGE Asset Sale"), while retaining our proprietary brand and customer relationships. In connection with the IGE Asset Sale, we entered into an exclusive supply agreement with the Buyer, pursuant to which the Buyer provides contract manufacturing and we continue to sell our proprietary branded durable products, which include horticulture benches, racking and LED lighting systems. As a result of the Asset Sale and new contract manufacturing arrangement, we expect improved profitability on future IGE branded product sales from an anticipated decrease in fixed costs at current sales volumes. The Asset Sale closed on May 31, 2024 and we sold or disposed of approximately $11.6 million of inventories, $3.7 million of property, plant and equipment, and technology intangible assets of $2.6 million. In connection with the Asset Sale, we terminated and paid-off the facility operating lease for $1.3 million and certain equipment finance leases for $0.7 million. We recorded a loss on asset disposition of approximately $11.5 million on the consolidated statements of operations for the year ended December 31, 2024.
During the second quarter of 2025, we initiated the 2025 Restructuring Plan to reduce our product portfolio and operational footprint to decrease costs and improve efficiency. The 2025 Restructuring Plan actions entail (i) eliminating a significant portion of our product portfolio, primarily underperforming distributed brands, to improve supply chain and operational focus, (ii) further reductions in our distribution center network and manufacturing footprint, and (iii) corresponding headcount reductions. We incurred estimated restructuring costs of $5.2 million during the year ended December 31, 2025, for the 2025 Restructuring Plan. The charges were primarily associated with non-cash inventory write-downs, which were recorded in cost of goods sold on the condensed consolidated statements of operations, and cash charges which primarily comprised of charges incurred to relocate and terminate certain facilities. We anticipate the 2025 Restructuring Plan and related actions may result in additional restructuring charges of up to $3 million, primarily cash related, and annual cost savings of over $6 million plus additional working capital benefits. The 2025 Restructuring Plan is expected be completed by the end of 2026.
We continue to evaluate our product portfolio and supply chain, in order to improve efficiency, lower our costs and reduce footprint. We are also evaluating other opportunities to sell excess owned land, not currently being used in operations, to supplement our cash position and potential contract manufacturing or other outsourcing arrangements. Depending on the length and severity of the industry and market conditions, including the fluid and complex international tariff and trade policies, impacting our business, our ability to successfully negotiate with lenders and key vendors, and the pursuit of additional financing or strategic alternatives, it is possible we may execute additional restructuring plan actions and incur future associated charges, and we may not be able to realize the full extent of our anticipated cost savings.
Additionally, the amount we will ultimately realize as benefits associated with our restructuring plans could differ materially from our estimates, and we may incur additional non-cash charges in future periods depending on our ability to execute asset sales or pursue other alternatives. For additional information, see Part I, Item 1A, Risk Factors included in this Annual Report on Form 10-K, including the risk entitled “Our restructuring activities may increase our expenses and cash expenditures, and may not have the intended effects.”
During the year ended December 31, 2024, we executed further restructuring actions, including consolidation of other U.S. manufacturing facilities, and outsourcing certain distribution center locations to reduce costs and further consolidate our facility footprint. These actions resulted in restructuring charges of $2.2 million during 2024, including termination and disposal costs associated with inventory, facilities and headcount reductions. After completion of the Asset Sale and the aforementioned restructuring actions, we have now consolidated our manufacturing operations into two U.S. locations and our peat moss harvesting and processing operation in Canada. In addition, we reorganized and integrated our business activities into one operating segment in the fourth quarter of 2024. The second phase of our Restructuring Plan is substantially complete as of December 31, 2024. Given the current market conditions, we may initiate additional phases to our Restructuring Plan to further consolidate our operations and realize cost savings. We also continue to evaluate opportunities to sell excess owned land to supplement our cash position. We may incur additional charges associated with these potential actions. We anticipate the second phase of our Restructuring Plan and the related actions described above may result in annual cost savings of over $2.0 million.
We maintain an allowance for excess and obsolete inventory that is based upon assumptions about future demand and market conditions. While we believe our estimates of charges relating to our 2025 Restructuring Plan, long-lived assets, inventory obsolescence, and accounts receivable allowances are reasonable, it is possible that we may incur additional charges in the future and actual results may differ significantly from these estimates and assumptions. Depending on the length and severity of the industry and market conditions impacting our business, it is possible we may execute additional restructuring plan actions and incur future associated charges, and we may not be able to realize the full extent of our anticipated cost savings.
We are closely monitoring the recent tariff and trade policy actions taken by the United States and foreign governments. The situation remains fluid due to the rapidly changing global trade environment, and we continue to evaluate the potential implications of these actions on our business including net sales and profitability. High tariffs on imported products from China or other countries, or new tariffs from other countries, have impacted and could impact the cost of certain products and may negatively impact our financial performance. We have been able to help mitigate the impacts of tariffs through negotiations with vendors, and through passing nominal price increases to our customers, but we may be unable to quickly and effectively react to additional tariff and trade policy actions which may impact our business.
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 backscaled-back disclosure accommodations within this Annual Report on Form 10-K. As a result, our annual assessment of the effectiveness of our internal control over financial reporting does not require an audit by our external audit firm in compliance with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002 for this Annual Report on Form 10-K for the year ended December 31, 2024.2025.
Cost of goods sold consists primarily of material costs, inbound and outbound freight costs, labor costs primarily for manufacturing and warehouse personnel, facility costs for manufacturing operations, depreciation, depletion and amortization of manufacturing and warehouse improvements and equipment, restructuring costs, and inventory allowances. We expect that our cost of goods sold would increase in absolute dollars in conjunction with net sales growth when/if that occurs in the future. However, we expect that, over time, cost of goods sold may decrease as a percentage of net sales if we achieve higher throughput at our manufacturing facilities and achieve the anticipated savings from our Restructuringrestructuring Plan.plans and other productivity and cost-saving initiatives.
Net sales for the year ended December 31, 2024,2025, were $190.3$134.3 million, a decrease of $36.3$56.0 million, or 16.0%,29.4%, compared to the same period in 2023.2024. The 16.0%29.4% decline was primarily due to a 12%26.9% reduction in volume and mix of products sold and a 4%2.4% decrease in price. This decline was largely driven by the previously mentioned oversupplyindustry in the cannabis industry.oversupply.
Gross profit for the year ended December 31, 2024,2025, was $32.1$15.2 million, a decrease of $5.5$16.9 million, or 14.6%,52.7%, compared to the same period in 2023.2024. Our gross profit margin percentage increaseddecreased to 16.9%11.3% for the year ended December 31, 2024,2025, from 16.6%16.9% in the same period in 2023.2024. The decrease in gross profit and gross profit margin was primarily due to the lower net salessales, inlower themanufacturing currentproduction year.volume, Theas well as a $3.2 million increase in gross profit margin was largely driven by an $8.7 million decrease in restructuring charges.charges primarily comprised of inventory markdowns.
SG&A expenses for the year ended December 31, 2024,2025, were $72.8$59.9 million, a decrease of $14.5$12.8 million, or 16.6%,17.6%, compared to the same period in 2023.2024. SG&A expenses decreased in several areas, including as a result of our cost saving and restructuring initiatives: (i) $6.5a $6.4 million decrease in amortization and depreciation primarily due to intangible asset impairments in 2025, (ii) a $4.1 million decrease in employee compensation costs, including stock-based compensation andlower salaries and benefits, stock-based compensation, and performance bonus, (iiiii) $4.5a $1.2 million decrease in facility costs, (iii) $1.9 million decrease in insurance expenses,and (iv) $1.8a $0.7 million decrease in professional and outside services, and (v) $1.0 million decrease in amortization and depreciation, partially offset by $1.4 million change in accounts receivable reserves and related charges.fees.
Impairments
During the fourth quarter of fiscal 2025, as a result of industry conditions, primarily attributable to an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation, as well as continued declines in operating cash flows and profitability, we assessed our long-lived assets for impairment and recorded an impairment charge of $232.2 million. Of the impairment charge, $228.4 million was related to finite-lived intangible assets and $3.8 million was related to property, plant, and equipment. There were no impairment charges in the year ended December 31, 2024. Refer to Note 5 – Intangibles and Note 9 – Property, Plant and Equipment, Net for additional details.
As previously described, weWe entered into a Purchase Agreement with BuyerCM Fabrication, LLC to sell assets relating to the production of durable equipment products for $8.7 million. The IGE Asset Sale closed during the second quarter of 2024, and we sold or disposed of inventories and other assets. We recorded a loss on asset disposition of $11.5 million for the year ended December 31, 2024. Refer to Note 34 – Restructuring and Asset Sales for a further description of the IGE Asset Sale.
Interest expense for the year ended December 31, 2024,2025, was $15.2$13.4 million, a decrease of $0.2$1.8 million, or 1.3%,11.9%, compared to the same period in the prior year. The decrease was primarily due to lower debt outstanding due to principal repayments, partiallyas offsetwell byas higherlower variable interest rates on our Term Loan.
Other (expense) income, net
Other income,expense, net for the year ended December 31, 2024,2025, was $1.6$0.2 million, an increase of $1.5 million compared to theother sameincome, periodnet of $1.6 million in the prior year. Other expense, net for the year ended December 31, 2025, was primarily driven by a loss on debt extinguishment recorded in conjunction with the Term Loan prepayments during the year. Refer to Note 11 – Debt for additional details. Other income, net for the year ended December 31, 2024, was primarily driven by a cash settlement arising from an outstanding litigation matter of a previously acquired entity, foreign currency exchange rate gains and interest income. Other income, net for the year ended December 31, 2023 was primarily driven by foreign exchange rate gains, partially offset by legal fees associated with the amendment of the Term Loan.
Income tax benefit (expense) benefit
We recorded an income tax benefit of $0.7 million for the year ended December 31, 2025, representing an effective tax rate of 0.3%. Our effective tax rate for the year ended December 31, 2025, differs from the federal statutory rate of 21% primarily due to maintaining a full valuation allowance against our net deferred tax assets in the United States and most foreign jurisdictions. The income tax benefit for the year ended December 31, 2025, was primarily due to deferred tax benefits, partially offset by current state and foreign tax expense in certain jurisdictions.
We recorded an income tax benefit of $0.2 million for the year ended December 31, 2023, representing an effective tax rate of 0.3%. Our effective tax rate for the year ended December 31, 2023, differs from the federal statutory rate of 21% primarily due to maintaining a full valuation allowance against our net deferred tax assets in the United States and most foreign jurisdictions. The income tax benefit for the year ended December 31, 2023, was primarily due to minor foreign tax benefits in certain jurisdictions.
Net cash used in operating activities was $0.3$14.1 million for the year ended December 31, 2024.2025. The net cash usage was primarily due to a net loss, partially offset by $9.7$4.6 million net cash inflow from a reduction in working capital. The total 20242025 cash impact was a net loss of $66.7$289.8 million, less net non-cash items of $56.7$271.2 million.million, primarily impairments and depreciation, depletion and amortization. The $9.7$4.6 million net reduction in working capital was primarily comprised of a $14.4$12.1 million decrease of inventories, a $1.6$5.7 million decrease in accounts receivable, and a $1.6$0.1 million decrease of prepaid expenses and other current assets, partially offset by a $8.9$7.8 million decrease of lease liabilities. During the year ended December 31, 2024,2025, we paid $13.3$12.7 million in cash interest and we paid cash income taxes, net of refunds, of $0.2 million. As described in Note 3 – Restructuring and Asset Sales, in connection with the Asset Sale, we estimated the amount of cash proceeds associated with the sale of inventories as $5.0 million and classified the amount within net cash from operating activities. In addition, the Company paid cash of $1.3 million to terminate the facility operating lease in connection with the Asset Sale.interest.
Net cash fromused in operating activities was $7.0$0.3 million for the year ended December 31, 2023,2024. The net cash usage was primarily due to a $12.4net loss, partially offset by $9.7 million net cash inflow from a reduction ofin working capital,capital. partiallyThe offsettotal by2024 cash impact was a reported net loss of $64.8$66.7 millionmillion, less net non-cash items of $59.5$56.7 million. The $9.7 million net reduction in working capital was primarily drivencomprised byof a $26.1$14.4 million decrease of inventories, partiallya offset$1.6 bymillion decreasesdecrease in accounts receivable, and a $1.6 million decrease of $9.2 million of lease liabilities and $3.5 million of accruedprepaid expenses and other current assets, partially offset by a $8.9 million decrease of lease liabilities. During the year ended December 31, 2023,2024, we paid $13.1$13.3 million in cash interest and we receivedpaid cash income taxtaxes, refundsnet of $1.0refunds, of $0.2 million. InAs bothdescribed 2024in Note 4 – Restructuring and 2023,Asset the Company consolidated its operationsSales, in connection with restructuringthe IGE Asset Sale, we estimated the amount of cash proceeds associated with the sale of inventories as $5.0 million and relatedclassified costthe savingamount initiativeswithin andnet decreasedcash itsfrom inventory,operating contributingactivities. significantlyIn addition, the Company paid cash of $1.3 million to terminate the facility operating cashlease flows.in connection with the IGE Asset Sale.
The Company is continuing to consolidate its operations in connection with restructuring and related cost saving initiatives which has contributed to the aforementioned decrease in inventory in both the 2025 and 2024 periods.
Net cash from investing activities was $1.7 million for the year ended December 31, 2024. We received cash proceeds from the Asset Sale associated with the sale of property, plant and equipment of $3.7 million, and additional cash proceeds from the sale of property, plant and equipment of $0.9 million. These cash proceeds were partially offset by $2.9 million of capital expenditures of property, plant and equipment.
Net cash used in investing activities was $0.8 million for the year ended December 31, 2023, was $4.2 million,2025, due primarily to capital$1.0 expendituresmillion for property, plant and equipment. In both 2024 and 2023, theof capital expenditures of property, plant and equipment, partially offset by proceeds from the sale of property, plant and equipment primarilyof relates$0.2 to investments in our peat moss harvesting operation in Canada.million.
Net cash from investing activities was $1.7 million for the year ended December 31, 2024. We received cash proceeds from the IGE Asset Sale associated with the sale of property, plant and equipment of $3.7 million, and additional cash proceeds from the sale of property, plant and equipment of $0.9 million. These cash proceeds were partially offset by $2.9 million of capital expenditures of property, plant and equipment.
In both 2025 and 2024, the capital expenditures of property, plant and equipment primarily relates to investments in our peat moss harvesting operation in Canada.
Net cash used in financing activities was $4.8 million for the year ended December 31, 2024, primarily driven by (i) $3.2 million of Term Loan repayments relating to required quarterly payments of principal and payments made in conjunction with the Sale-Leaseback Transaction and (ii) finance lease principal payments of $1.4 million which included approximately $0.7 million relating to equipment finance lease payments made in connection with the Asset Sale. Refer to further description of the Sale-Leaseback Transaction and Term Loan reinvestment provision in Part II Item 7. Term Loan.
Net cash fromused in financing activities was $6.1$5.4 million for the year ended December 31, 2023,2025, primarily driven by $8.6(i) $4.9 million of proceedsTerm fromLoan repayments primarily made in conjunction with the Sale-Leasebackreinvestment Transaction,provisions, partiallyand offset(ii) byfinance $1.3 million of quarterlylease principal payments of the$0.5 Term Loan and $1.0 million of finance lease principal payments.million.
Net cash used in financing activities was $4.8 million for the year ended December 31, 2024, primarily driven by (i) $3.2 million of Term Loan repayments relating to required quarterly payments of principal and payments made in conjunction with a 2023 sale-leaseback transaction and (ii) finance lease principal payments of $1.4 million which included approximately $0.7 million relating to equipment finance lease payments made in connection with the IGE Asset Sale.
As of December 31, 2025, we had $6.3 million in cash and cash equivalents and a working capital deficit of $88.6 million. We have incurred recurring operating losses, negative cash flows from operations, and has significant debt obligations due within the next twelve months. These conditions and events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern.
Our plans to address these conditions include reducing costs through restructuring and other initiatives, including facility consolidations, headcount reductions, and focusing on our proprietary brand offerings. To improve liquidity 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. Any potential such event may be subject to provisions referenced in the Term Loan, such as subjecting us to make mandatory repayments prior to the originally stated maturity date. Although we believe such plans, if executed, should provide us with liquidity to meet our needs, successful completion of such plans is dependent on numerous factors, many of which are beyond our control as further discussed in Part I, Item 1A, Risk Factors included in this Annual Report on Form 10-K.
Our ability to make investments in our business, service our debt and maintain liquidity will primarily depend upon our ability to generate excess operating cash flows through our operating subsidiaries. We believe that our cash flows from operating activities, combined with current cash levels and borrowing availability under the Revolving Credit Facility, will be adequate to support our ongoing operations, to fund debt service requirements, capital expenditures, lease obligations and working capital needs through the next twelve months of operations. However, we cannot guarantee that our business will generate sufficient cash flow from operating activities or that future borrowings will be available under our borrowing agreements in amounts sufficient to pay indebtedness or fund other working capital needs. Actual results of operations will depend on numerous factors, many of which are beyond our control as further discussed in Part I, Item 1A, Risk Factors included in this Annual Report on Form 10-K.
In January 2023, Gotham Properties LLC, an Oregon limited liability company and our subsidiary ("Seller"), consummated a Purchase and Sale Agreement with J & D Property, LLC, a Nevada limited liability company ("Purchaser") pursuant to which certain real property located in the City of Eugene, County of Lane, State of Oregon (the “Eugene Property”) was sold to Purchaser for $8.6 million and then leased back by Seller (the "Sale Leaseback Transaction"). The new lease has a term of 15 years with annual rent starting at approximately $0.7 million and increases to the final year when annual rent is approximately $1.0 million. The Eugene Property serves as the manufacturing and processing site for certain of our grow media and nutrient brands.
As further described in Note 34 – Restructuring and Asset Sales to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we closed on anthe IGE Asset Sale and received gross proceeds of $8.7 million during the year ended December 31, 2024. In accordance with our Term Loan, the net proceeds, approximately $6.3 million, from the IGE Asset Sale transaction arewere required to be reinvested into certain permitted investments, such as capital expenditures or permitted acquisitions/ investments, or offered to prepay Term Loan principal. WeAs intendof December 31, 2025, we have satisfied this provision as related to reinvest the net proceeds from theIGE Asset SaleSale, intothrough a combination of certain permittedinvestments investments,and which may include capital expenditures or permitted acquisitions/ investments, if approved by the administrative agent, in accordance with provisionsprepayments of the Term Loan. Refer to further discussion below, relating to Term Loan reinvestment provisions regarding the net cash proceeds of the Sale Leaseback Transaction andIGE Asset Sale.
If necessary, we believe that we could supplement our cash position through additional asset sales or divestiture of one or more of our brands or lines of business. During 2024, we sold a portion of the excess owned land at our Goshen, New York location, and are evaluating other opportunities to sell excess owned land, not currently being used in operations, to supplement our cash position. We believe it is prudent to be prepared if required and, accordingly, continue to be engaged in the process of evaluating and preparing to implement one or more of the aforementioned activities. Any potential such event may be subject to provisions referenced in our Term Loan and Revolving Credit Facility,Loan, such as subjecting us to make mandatory prepayments.
Term Loan
On October 25, 2021, we and certain of our direct and indirect subsidiaries entered into the Term Loan with JPMorgan Chase Bank, N.A., as administrative agent for the lenders, pursuant to which we borrowed a $125 million senior secured term loan (the "Term Loan").loan. The Term Loan was amended by Amendment No. 1 effective as of June 27, 2023, to replace the London Interbank Offered Rate ("LIBOR") referenced rates with Secured Overnight Financing Rate ("SOFR") referenced rates. Pursuant to Amendment No. 1, any Term Loan that constitutes a Eurodollar Rate Loan that is outstanding as of the Amendment No. 1 closing date shall continue until the end of the applicable interest period for such Eurodollar Rate Loan and the provisions of the Term Loan applicable thereto shall continue and remain in effect (notwithstanding the occurrence of the Amendment No. 1 closing date) until the end of the applicable interest period for such Eurodollar Rate Loan, after which such provisions shall have had no further force or effect. Such Eurodollar Rate Loan shall subsequently either be an ABR Loan or a Term Benchmark Loan. The ABR Loans shall bear interest at the Alternate Base Rate (with a 2.0% floor) plus 4.50%, and Term Benchmark Loans shall bear interest at the Adjusted Term SOFR Rate (with a 1.0% floor) plus 5.50%. As of the date of filing this Annual Report on Form 10-K, the ABR Loan and Term Benchmark Loan credit spreads of 4.50% and 5.50%, respectively, within the Amendment No. 1 have not changed from the credit spreads in the original Term Loan. The Term Loan matures on October 25, 2028.2028, and is secured by a first lien on our non-working capital assets and a second lien on our working capital assets.
The principal amounts of the Term Loan are scheduled to be repaid in consecutive quarterly installments in amounts equal to 0.25% of the original principal amount of the Term Loan on the last day of each fiscal quarter commencing March 31, 2022, with the balance of the Term Loan payable on the Maturity Date of October 25, 2028.Date.
We are also required to make mandatory prepayments in the event of (i) achieving certain excess cash flow criteria, including the achievement and maintenance of a specific leverage ratio, (ii) certain asset sales that are collateral, or (iii) upon the issuance, offering, or placement of new debt obligations. As described in Note 74 – Leases,Restructuring and Asset Sales, we received net cash proceeds of approximately $6.3 million in JanuaryMay 20232024 from the IGE Asset Sale Leaseback Transaction and arewere subject to a provision whereby such net cash proceeds can be reinvested into certain investments, such as capital expenditures. This provision of the Term Loan includes (i) cash investments made within a one-year period from the SaleIGE LeasebackAsset Transaction,Sale, and (ii) investments which are contractually committed within one-year of the SaleIGE LeasebackAsset Transaction,Sale, and paid within 180 days after entering into such contractual commitment. The amount of any net cash proceeds which are not reinvested requiresrequired us to make an offer to prepay the corresponding amount on the Term Loan.Loan in 2025. In accordance with this provision, we made prepayments of $4.6 million during of 2025. The prepayments reduced our required quarterly installment amounts to zero for the remaining term. As of December 31, 2024,2025, we have satisfied this provision as related to the SaleIGE LeasebackAsset Transaction,Sale, through a combination of paymentscertain made pursuant to the contractual commitmentsinvestments and additional $2.0 million repaymentsprepayments of the Term Loan. The foregoing description of the reinvestment provision does not purport to be complete and is qualified in its entirety by reference to the provisions of the Term Loan. As described in Note 3 – Restructuring and Asset Sales, we sold assets for $8.7 million in May 2024. The net cash proceeds from the Asset Sale are subject to the same Term Loan reinvestment provision described above, including (i) cash investments made within a one-year period, and (ii) investments which are contractually committed within one-year of the Asset Sale and paid within 180 days after entering into such contractual commitment. We intend to reinvest the net proceeds from the Asset Sale into certain permitted investments, such as capital expenditures or permitted acquisitions/ investments, and no Term Loan debt principal was classified as current debt as of December 31, 2024 related to this provision. The foregoing description of the reinvestment provision does not purport to be complete and is qualified in its entirety by reference to the provisions of the Term Loan.
The Term Loan requires us to maintain certain reporting requirements, affirmative covenants, and negative covenants. On February 4, 2026, we elected to defer making an interest payment of approximately $2.8 million on the Term Loan. As a result of our failure to pay the interest within the grace period, an event of default occurred with respect to the Term Loan. On February 11, 2026, the lenders, through the administrative agent, notified us of such event of default and informed us that the administrative agent or the collateral agent may exercise any rights and remedies provided under the Term Loan agreement and related financing documents, but it did not seek to enforce such remedies as of such time.
On March 29, 2021, we and certain of our subsidiaries entered into the Revolving Credit Agreement with JPMorgan, as administrative agent, issuing bank and swingline lender for a revolving line of credit up to $50 million (the "Revolving Credit Facility") which was subsequently amended several times to, among other things, modify the maximum aggregate borrowing limit, transition the interest rate benchmark from LIBOR to SOFR, and extend the maturity date. We use the terms Revolving Credit Agreement and Revolving Credit Facility interchangeably.
As of December 31, 2025, and December 31, 2024, we had zero borrowed under the Revolving Credit Facility. On February 17, 2026, we entered into the Termination Agreement to terminate the Revolving Credit Agreement. Pursuant to the terms of the Termination Agreement, the parties agreed to terminate the Revolving Credit Agreement subject to the survival of each of the provisions of the Revolving Credit Agreement and Loan Documents (as defined in the Revolving Credit Agreement) and in the certificates delivered in connection with or pursuant to the Revolving Credit Agreement that survive termination of the Revolving Credit Agreement.
The Term Loan requires us to maintain certain reporting requirements, affirmative covenants, and negative covenants. We were in compliance with all debt covenants as of December 31, 2024. The Term Loan is secured by a first lien on our non-working capital assets and a second lien on our working capital assets.
Revolving Credit Facility
On March 29, 2021, we and certain of our subsidiaries entered into the Revolving Credit Facility (the "Revolving Credit Facility") with JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and swingline lender for a revolving line of credit up to $50 million. The Revolving Credit Facility was amended by the First Amendment dated August 31, 2021, which increased the revolving line of credit by an additional $50 million for an aggregate borrowing limit of $100 million. The Revolving Credit Facility was further amended by the Second Amendment dated October 25, 2021 which, among other things, permitted the incurrence of the Term Loan and made certain other changes including subordinating its liens on non-working capital assets to the obligations under the Term Loan. The Revolving Credit Facility was further amended by the Third Amendment and Joinder dated August 23, 2022, pursuant to which several previously acquired subsidiaries became parties to the Revolving Credit Facility and granted liens on their assets. On December 22, 2022, we entered into the Fourth Amendment to the Revolving Credit Facility pursuant to which a sale-leaseback transaction was permitted, and certain other changes were made, including a reduction of the maximum commitment amount under the Revolving Credit Facility from $100 million to $75 million and transitioning the LIBOR based rates to SOFR based rates. On March 31, 2023, we and certain of our subsidiaries entered into the Fifth Amendment to the Revolving Credit Facility, pursuant to which the maturity date was extended to June 30, 2026, the maximum commitment amount under the Revolving Credit Facility was reduced to $55 million, and the interest rate on borrowings was revised to various spreads, based on the Company's fixed charge coverage ratio. On November 1, 2024, we and certain of our subsidiaries entered into the Sixth Amendment to the Revolving Credit Facility pursuant to which the maximum commitment amount was reduced to $35 million.
The Revolving Credit Facility provides for various interest rate options including the Adjusted Term SOFR Rate, the Adjusted REVSOFR30 Rate, the CB Floating Rate, the Adjusted Daily Simple SOFR, or the CBFR. The rates that use SOFR as the reference rate (Adjusted Term SOFR Rate, the Adjusted REVSOFR30 Rate, the Adjusted Daily Simple SOFR and the CBFR rate) use the Term SOFR Rate plus 1.95%. Each rate has a 0.0% floor. A fee of 0.40% per annum is charged for available but unused borrowings. Our obligations under the Revolving Credit Facility are secured by a first priority lien (subject to certain permitted liens) in substantially all of our and our subsidiaries' respective personal property assets pursuant to the terms of a U.S. and Canadian Pledge and Security Agreement dated March 29, 2021 and other security documents, as amended to include additional subsidiaries.
The Revolving Credit Facility maintains certain reporting requirements, affirmative covenants, negative covenants and financial covenants. A certain financial covenant becomes applicable in the event that our excess availability under the Revolving Credit Facility is less than an amount equal to 10% of the Aggregate Revolving Commitment (currently $35 million) and would require us to maintain a minimum fixed charge coverage ratio of 1.1x on a rolling twelve-month basis.
In order to consummate permitted acquisitions or to make restricted payments, we would be required to comply with a higher fixed charge coverage ratio of 1.15x, but no such acquisitions or payments are currently contemplated. We received a consent from JPMorgan Chase Bank, N.A., as administrative agent, to permit the cash settlement of fractional shares in connection with the reverse stock split, which is described further in Part II, Item 5. Market Information.
What changed in the latest 10-Q
Risk Factors
Largest changes
“The Letter has no immediate impact on the listing of our common stock, which will continue to be listed and traded on the Nasdaq under the symbol “HYFM,” subject to our compliance with the other continued listing requirements. We have 45 calendar days from April 1, 2026, or until May 16, 2026, to submit to Nasdaq a plan to regain compliance with Listing Rule 5550(b)(1). If Nasdaq accepts our plan, Nasdaq may grant an extension of up to 180 calendar days from April 1, 2026, or until September 28, 2026, to regain compliance. …”see in full comparison
“On June 16, 2026, we received a letter from Nasdaq indicating that, based on Nasdaq’s review of the Company’s plan submitted on May 18, 2026 and related materials submitted on June 8, 2026, Nasdaq has granted the Company an extension to regain compliance with the Minimum Stockholders’ Equity Requirement. On July 2, 2026, we received a determination letter from Nasdaq notifying us that we did not meet the terms of the extension granted by Nasdaq to regain compliance with the Minimum Stockholders’ Equity Requirement (the “Nasdaq Determination Letter”). …”see in full comparison
“On July 6, 2026, we also received a letter from Nasdaq indicating that we are not in compliance with the minimum bid price requirement for continued listing on Nasdaq under Listing Rule 5550(a)(2) (the “Bid Price Requirement”) because we had not maintained a minimum closing bid price of $1 per share for the prior 30 consecutive business days. The Bid Price Requirement provides us a compliance period of 180 calendar days in which to regain compliance. …”see in full comparison
“We are considering all options available to us to regain compliance with the Minimum Stockholders’ Equity Requirement and Bid Price Requirement. However, there can be no assurance that we will be able to regain compliance with the Minimum Stockholders’ Equity Requirement and Bid Price Requirement or will otherwise be in compliance with other applicable Nasdaq Listing Rules, that the Panel will grant the Company an additional extension period to remain listed on Nasdaq, or that the Panel will be successful.”see in full comparison
“We are currently evaluating various courses of action to regain compliance and intends to submit to Nasdaq, within the requisite time period, a plan to regain compliance with Listing Rule 5550(b)(1). There can be no assurance that Nasdaq will accept our plan or that we will be able to regain compliance with Listing Rule 5550(b)(1) or maintain compliance with any other Nasdaq requirement in the future.”see in full comparison
On April 1, 2026, we received a letter (the “Letter”) from the Listing Qualifications Department of the Nasdaq indicating that we were not in compliance with thesee in full comparisonminimumMinimumstockholders’Stockholders’equityEquityrequirementRequirement for continued listing on theNasdaq Capital Market,Nasdaq, under Nasdaq Listing Rule 5550(b)(1), because our stockholders’ deficit of $($6363) million as reported in our 2025 Annual Report was below the required minimum of $2.5 million, and because, as of March 31, 2026, we did not meet thealternativeAlternativecompliance standardsRequirement relating to the market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years.
Full comparison: every changed paragraph (8)
We are currently not in compliance with the continued listing standards of Nasdaq, and if we are unable to regain compliance, our common stock willmay be delisted from the exchange.
Our common stock is currently listed for trading on the Nasdaq under the symbol “HYFM”. The continued listing of our common stock on Nasdaq is subject to our compliance with a number of listing standards, including Nasdaq Listing Rule 5550(b)(1) to maintain a minimum of $2.5 million in stockholders’ equity (the “Minimum Stockholders’ Equity Requirement”) or the alternative requirements of Nasdaq Listing Rule 5550(b)(2)-(3) of having a market value of listed securities of at least $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or two of the last three most recently completed fiscal years (the “Alternative Requirement”). As of December 31, 2025, we had a stockholder’sstockholders' deficit of approximately $(63) million, the market value of our listed securities was below $35 million as of the date of our 2025 Annual Report, and we realized a net loss in each of the past three fiscal years. Accordingly, we do not meet the requirements of the Minimum Stockholders’ Equity Requirement or Alternative Requirement.
On April 1, 2026, we received a letter (the “Letter”) from the Listing Qualifications Department of the Nasdaq indicating that we were not in compliance with the minimumMinimum stockholders’Stockholders’ equityEquity requirementRequirement for continued listing on the Nasdaq Capital Market,Nasdaq, under Nasdaq Listing Rule 5550(b)(1), because our stockholders’ deficit of $($6363) million as reported in our 2025 Annual Report was below the required minimum of $2.5 million, and because, as of March 31, 2026, we did not meet the alternativeAlternative compliance standardsRequirement relating to the market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years.
On June 16, 2026, we received a letter from Nasdaq indicating that, based on Nasdaq’s review of the Company’s plan submitted on May 18, 2026 and related materials submitted on June 8, 2026, Nasdaq has granted the Company an extension to regain compliance with the Minimum Stockholders’ Equity Requirement. On July 2, 2026, we received a determination letter from Nasdaq notifying us that we did not meet the terms of the extension granted by Nasdaq to regain compliance with the Minimum Stockholders’ Equity Requirement (the “Nasdaq Determination Letter”). The Nasdaq Determination Letter stated that we may request an appeal of this determination at a hearing before the Nasdaq Hearing Panel (the “Panel”) by July 9, 2026. On July 9, 2026, we timely requested a hearing before the Panel, which stayed any further action by Nasdaq at least pending completion of the hearing process and the expiration of any extension period that may be granted by the Panel.
On July 6, 2026, we also received a letter from Nasdaq indicating that we are not in compliance with the minimum bid price requirement for continued listing on Nasdaq under Listing Rule 5550(a)(2) (the “Bid Price Requirement”) because we had not maintained a minimum closing bid price of $1 per share for the prior 30 consecutive business days. The Bid Price Requirement provides us a compliance period of 180 calendar days in which to regain compliance. If at any time during the 180-day period, the closing bid price of our common stock is at least $1 for a minimum of ten consecutive business days, Nasdaq will provide written confirmation to us of compliance. In the event that we do not regain compliance with the Bid Price Requirement, we may be eligible for additional time. The Company intends to monitor the closing bid price of its common stock and is considering its options to regain compliance with the Bid Price Requirement.
We are considering all options available to us to regain compliance with the Minimum Stockholders’ Equity Requirement and Bid Price Requirement. However, there can be no assurance that we will be able to regain compliance with the Minimum Stockholders’ Equity Requirement and Bid Price Requirement or will otherwise be in compliance with other applicable Nasdaq Listing Rules, that the Panel will grant the Company an additional extension period to remain listed on Nasdaq, or that the Panel will be successful.
The Letter has no immediate impact on the listing of our common stock, which will continue to be listed and traded on the Nasdaq under the symbol “HYFM,” subject to our compliance with the other continued listing requirements. We have 45 calendar days from April 1, 2026, or until May 16, 2026, to submit to Nasdaq a plan to regain compliance with Listing Rule 5550(b)(1). If Nasdaq accepts our plan, Nasdaq may grant an extension of up to 180 calendar days from April 1, 2026, or until September 28, 2026, to regain compliance. If Nasdaq does not accept our plan, we will have the right to appeal such decision to a Nasdaq hearings panel. The hearing request would stay any suspension or delisting action pending the issuance of a written panel decision.
We are currently evaluating various courses of action to regain compliance and intends to submit to Nasdaq, within the requisite time period, a plan to regain compliance with Listing Rule 5550(b)(1). There can be no assurance that Nasdaq will accept our plan or that we will be able to regain compliance with Listing Rule 5550(b)(1) or maintain compliance with any other Nasdaq requirement in the future.
Management's Discussion & Analysis (MD&A)
Removed heading “Interest expense”
Largest changes
“SG&A expenses for the six months ended June 30, 2026, were $20.6 million, a decrease of $13.4 million, or 39.3% compared to the same period in 2025. SG&A expenses decreased in several areas, including as a result of our cost saving and restructuring initiatives: (i) a $11.9 million decrease in amortization and depreciation primarily due to intangible asset impairments in 2025, (ii) a $2.4 million decrease in employee compensation costs, including lower salaries and benefits, stock-based compensation, and performance bonus, and (iii) a $1.7 million decrease in facility expenses. …”see in full comparison
“Gross profit for the six months ended June 30, 2026, was $4.5 million, a decrease of $5.2 million, or 53.8%, compared to the same period in 2025. Our gross profit margin percentage decreased to 8.6% for the six months ended June 30, 2026, from 12.1% in the same period in 2025. …”see in full comparison
“During the second quarter of 2026, we sold approximately 38 acres of the 120 acres of excess owned land at the Goshen, New York location for $1.4 million. On July 31, 2026, the Company, through its wholly owned subsidiaries Aurora International, LLC, an Oregon limited liability company and Aurora Peat Products ULC, an Alberta unlimited liability corporation, entered into a Share Purchase Agreement with 2817049 Alberta Ltd., an Alberta corporation. …”see in full comparison
SG&A expenses for the three months endedsee in full comparisonMarchJune31,30, 2026, were$10.6$10.1 million, a decrease of$7.3$6.1 million, or40.8%37.7% compared to the same period in 2025. SG&A expenses decreased in several areas, including as a result of ourcost savingcost-saving and restructuring initiatives: (i) a $6.0 million decrease in amortization and depreciation primarily due to intangible asset impairments in 2025,and(ii) a $1.2 million decrease in facility expenses, and (iii) a $1.1 million decrease in employee compensation costs, including lower salaries and benefits, stock-based compensation, and performance bonus. The SG&A savings were partially offset by restructuring charges of $2.3 million during the period and costs associated with the Company's strategic alternatives.
We maintain an allowance for excess and obsolete inventory that is based upon assumptions about future demand and market conditions. While we believe our estimates of charges relating to our 2025 Restructuring Plan, long-lived assets, inventory obsolescence, and accounts receivable allowances are reasonable, it is possible that we may incur additional charges in the future and actual results may differ significantly from these estimates and assumptions.see in full comparisonDepending on the length and severity of the industry and market conditions impacting our business, it is possible we may execute additional restructuring plan actions and incur future associated charges, and we may not be able to realize the full extent of our anticipated cost savings.
Full comparison: every changed paragraph (41)
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operations and financial condition. You should read this analysis in conjunction with our audited and unaudited condensed consolidated financial statements and the notes contained elsewhere in this Quarterly Report on Form 10-Q and our 2025 Annual Report. This discussion and analysis contains statements of a forward-looking nature relating to future events or our future financial performance. Actual events or results may differ materially from forward-looking statements. In evaluating such statements, you should carefully consider the various factors identified in this Quarterly Report on Form 10-Q, which could cause actual results to differ materially from those expressed in, or implied by, any forward-looking statements, including those set forth in Item 1A. “Risk Factors” in our 2025 Annual Report. See “Special Note Regarding Forward-Looking Statements.”
We reach commercial farmers and consumers through a broad and diversified network of over 1,800 wholesale customer accounts,network, who we connect with primarily through our proprietary online ordering platform. Our products are distributed across the United States and Canada through a diversified range of retailers of commercial and home gardening equipment and supplies. Our customers include specialty hydroponic retailers, commercial resellers and greenhouse builders, garden centers, hardware stores, and e-commerce retailers. Specialty hydroponic retailers can provide growers with specialized merchandise assortments and knowledgeable staff. Our logistics services business manages the receipt, warehousing, and distribution of multiple customer accounts, leveraging our warehouse space in multiple distribution centers in the U.S. and Canada. These logistics agreements and operating subleases are accounted for as an offset and reduction to facility expense within SG&A.
We have incurred recurring operating losses, negative cash flows from operations, and have significant debt obligations due within the next twelve months due to an event of default on the Company's outstanding Term Loan.Loan and are not currently in compliance with certain Nasdaq listing requirements. These conditions and events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern.
On April 8, 2026 (the “Forbearance Effective Date”),2026, the Company entered into the Forbearance Agreement with the other Obligors, the Lenders, and FEAC, in connection with the Term Loan. Pursuant to the Forbearance Agreement, during the Forbearance Period (as defined in Note 11 – Debt to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), solely with respect to the Specified Event of Default, neither the Administrative Agent nor any Lender shall, upon the terms and conditions expressly specified therein, take any action, commence any proceedings against any Obligor or any other person with respect to the enforcement of any of its or their rights or remedies under the Credit Documents or applicable law, other than as expressly described in the Forbearance Agreement. [AsThe ofCompany, the dateLenders, ofand theFEAC Quarterlyagreed Reportto on Form 10-Q,extend the Forbearance Period isunder continuing.]the Forbearance Agreement through and including August 31, 2026.
During the second quarter of 2025, we initiated the 2025 Restructuring Plan to reduce our product portfolio and operational footprint to decrease costs and improve efficiency. The 2025 Restructuring Plan actions entail (i) eliminating a significant portion of our product portfolio, primarily underperforming distributed brands, to improve supply chain and operational focus, (ii) further reductions in our distribution center network and manufacturing footprint, and (iii) corresponding headcount reductions. Since the 2025 Restructuring Plan's inception, we have incurred estimated restructuring costs of $7.7$11.1 million. The charges were primarily associated with non-cash inventory write-downs, which were recorded in cost of goods sold on the condensed consolidated statements of operations, and cash and non-cash charges which primarily comprised of charges incurred to relocate and terminate certain facilities. We do not anticipate the 2025 Restructuring Plan and related actions maywill result in additional material restructuring charges of up to $4 million,charges, and anticipate annual cost savings of over $5 million plus additional working capital benefits. The 2025 Restructuring Plan is expected to be completed by the end ofduring 2026.
On April 30, 2026, the Company completed the closing of the previously announced 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 and Active Aqua. The transaction is part of our strategic plan to streamline our operations and improve the focus on our proprietary brands and core product categories.
We maintain an allowance for excess and obsolete inventory that is based upon assumptions about future demand and market conditions. While we believe our estimates of charges relating to our 2025 Restructuring Plan, long-lived assets, inventory obsolescence, and accounts receivable allowances are reasonable, it is possible that we may incur additional charges in the future and actual results may differ significantly from these estimates and assumptions. Depending on the length and severity of the industry and market conditions impacting our business, it is possible we may execute additional restructuring plan actions and incur future associated charges, and we may not be able to realize the full extent of our anticipated cost savings.
We are closely monitoring the recent tariff and trade policy actions taken by the United States and foreign governments. The situation remains fluid due to the rapidly changing global trade environment, and we continue to evaluate the potential implications of these actions on our business including net sales and profitability. High tariffs on imported products from China or other countries, or new tariffs from other countries, have impacted and could impact the cost of certain products and may negatively impact our financial performance. We have been able to help mitigate the impacts of tariffs through filing for refunds to the extent available to us, negotiations with vendors, and through passing nominal price increases to our customers, but we may be unable to quickly and effectively react to additional tariff and trade policy actions which may impact our businessbusiness.
Results of Operations—Comparison of three and six months ended MarchJune 31,30, 2026 and 2025
The following table sets forth our unaudited interim condensed consolidated statements of operations for the three and six months ended MarchJune 31,30, 2026, and 2025, including amounts and percentages of net sales for each period and the period-to-period change in dollars and percent (amounts in thousands):
Net sales
Net sales for the three months ended MarchJune 31,30, 2026, were $28.5$23.2 million, a decrease of $12.0$16.0 million, or 29.6%40.9% compared to the same period in 2025. Net sales for the six months ended June 30, 2026, were $51.7 million, a decrease of $28.0 million, or 35.2% compared to the same period in 2025.
The 29.6%40.9% decrease in net sales for the three months ended MarchJune 31,30, 2026, as compared to the same period in 2025, was primarily due to a 27.8%37.0% reduction in volume and mix of products sold and a 2.7%4.0% decrease in price. This decline was largely driven by the previously mentioned industry oversupply.oversupply and discontinuation of certain distributed brands. The 35.2% decrease in net sales for the six months ended June 30, 2026, as compared to the same period in 2025, was primarily due to a 31.9% reduction in volume and mix of products sold and a 3.8% decrease in price. This decline was largely driven by the previously mentioned industry oversupply and discontinuation of certain distributed brands.
Gross profit
Gross profit for the three months ended MarchJune 31,30, 2026, was $1.8$2.6 million, a decrease of $5.0$0.2 million, or 73.3%,5.7%, compared to the same period in 2025. Our gross profit margin percentage decreasedincreased to 6.4%11.3% for the three months ended MarchJune 31,30, 2026, from 17.0%7.1% in the same period in 2025. GrossThe profitincrease andin gross profit margin for the three months ended MarchJune 31,30, 2026,2026 decreasedwas aslargely driven by a result of lower net sales, lower production volumes and productivity at our manufacturing facilities, and a $1.3$2.3 million increasedecrease in restructuring charges primarilyfrom comprisedthe prior year period, as well as selling a higher proportion of inventoryproprietary markdowns,brand facilityproducts. shutdownThe costs,gross profit margin percentage increase was partially offset by higher freight and severance.labor costs as a percentage of net sales and lower manufacturing production volumes in certain grow media products.
Gross profit for the six months ended June 30, 2026, was $4.5 million, a decrease of $5.2 million, or 53.8%, compared to the same period in 2025. Our gross profit margin percentage decreased to 8.6% for the six months ended June 30, 2026, from 12.1% in the same period in 2025. Our gross profit margin percentage for the six months ended June 30, 2026 decreased primarily due to higher freight and labor costs as a percentage of net sales and the aforementioned lower manufacturing production volumes in certain grow media products, which more than offset a $0.9 million decrease in restructuring charges from the prior year period and the benefit from selling a higher proportion of proprietary brand products.
The decreases in gross profit for all periods presented were primarily due to the aforementioned lower net sales.
SG&A expenses for the three months ended MarchJune 31,30, 2026, were $10.6$10.1 million, a decrease of $7.3$6.1 million, or 40.8%37.7% compared to the same period in 2025. SG&A expenses decreased in several areas, including as a result of our cost savingcost-saving and restructuring initiatives: (i) a $6.0 million decrease in amortization and depreciation primarily due to intangible asset impairments in 2025, and (ii) a $1.2 million decrease in facility expenses, and (iii) a $1.1 million decrease in employee compensation costs, including lower salaries and benefits, stock-based compensation, and performance bonus. The SG&A savings were partially offset by restructuring charges of $2.3 million during the period and costs associated with the Company's strategic alternatives.
SG&A expenses for the six months ended June 30, 2026, were $20.6 million, a decrease of $13.4 million, or 39.3% compared to the same period in 2025. SG&A expenses decreased in several areas, including as a result of our cost saving and restructuring initiatives: (i) a $11.9 million decrease in amortization and depreciation primarily due to intangible asset impairments in 2025, (ii) a $2.4 million decrease in employee compensation costs, including lower salaries and benefits, stock-based compensation, and performance bonus, and (iii) a $1.7 million decrease in facility expenses. The SG&A savings were partially offset by restructuring charges of $3.1 million during the period and costs associated with the Company's strategic alternatives.
Interest expense
Interest expense for the three months ended MarchJune 31,30, 2026, was $5.9$3.5 million, an increase from $3.4 million of interest expense recorded in the same period in the prior year. Interest expense for the six months ended June 30, 2026, was $9.3 million, an increase from $6.8 million of interest expense recorded in the same period in the prior year. The increase for the threesix months ended MarchJune 31,30, 20262026, was primarily due to the acceleration of our Term Loan discount and deferred financing costs costs triggered by the Specified Event of Default.
Other income (expense) income,, net
Other expense,income, net for the three months ended MarchJune 31,30, 2026, was less than $0.1 million, compared to other income,expense, net of $0.1$0.2 million during the same period in the prior year. Other expense, net for the six months ended June 30, 2026, was $0.1 million, compared to other expense, net of $0.2 million during the same period in the prior year.
We recorded an income tax benefitbenefits of $0.1$0.2 million and $0.3 million for the three and six months ended MarchJune 31,30, 2026, respectively, representing an effective tax raterates of 0.7%.2.1% and 1.3%, respectively. Our effective tax raterates for the three and six months ended MarchJune 31,30, 2026, differsdiffer from the federal statutory rate of 21% primarily due to U.S. and foreign jurisdictions in full valuation allowance. The income tax benefit for the three and six months ended MarchJune 31,30, 2026, was primarily due to foreigncertain taxesbenefits in certainCanadian jurisdictions [and known return to provision items in Canada],jurisdictions, partially offset by certainforeign taxes in Spain and U.S. state taxes.
We recorded an income tax expensebenefits of $0.1 million and less than $0.1 million for the three and six months ended MarchJune 31,30, 2025, respectively, representing an effective tax raterates of (0.6)%.0.6% and 0.1%, respectively. Our effective tax raterates for the three and six months ended MarchJune 31,30, 2025, differsdiffer from the federal statutory rate of 21% primarily due to U.S. and foreign jurisdictions in full valuation allowance. The income tax expensebenefit for the three and six months ended MarchJune 31,30, 2025, was primarily due to certain benefits in Canadian jurisdictions, partially offset by foreign taxes in certain jurisdictions and U.S. state taxes.
Comparison of the threesix months ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025
The following table summarizes our cash flows for the threesix months ended MarchJune 31,30, 2026, and 2025 (amounts in thousands):
Net cash used in operating activities was $0.8$0.7 million for the threesix months ended MarchJune 31,30, 2026. The net cash usage was primarily due to a $14.6$25.2 million net loss, partially offset by net non-cash items of $7.0$12.3 million and a $6.8.million$12.2 million net cash inflow from a decrease in working capital. The $6.8$12.2 million net decrease in working capital was primarily comprised of a $4.8$9.0 million increasedecrease of accounts payable,inventories, a $4.5$6.3 million increase in accrued expenses and other current liabilities, and a $3.3$1.1 million decrease in prepaid expenses and other current assets, and a $1.0 million increase of inventories,accounts payable, partially offset by a $3.9 million increase in accounts receivable and a $1.9$3.7 million decrease of lease liabilities.liabilities and a $1.8 million decrease in deferred revenue. The increase in accrued expenses and other current liabilities was primarily attributable to accrued interest, which increased to $8.3 million as of June 30, 2026 from $1.9 million as of December 31, 2025. The Company is continuing to consolidate its operations in connection with restructuring and related cost saving initiatives which has contributed to the aforementioned decrease in inventory.
Net cash used in operating activities was $11.8$10.0 million for the threesix months ended MarchJune 31,30, 2025. The net cash usage was primarily due to a $14.4$31.2 million net loss and ana $8.3$3.8 million net cash outflow from an increase in working capital, partially offset by net non-cash items of $10.9$25.0 million. The $8.3$3.8 million net increase in working capital was primarily comprised of a $6.8$3.9 million increasedecrease inof accountslease receivable,liabilities, a $3.2$2.3 million decrease in accrued expenses and other current liabilities, and a $1.8 million decrease of lease liabilities, partially offset by a $3.8$2.9 million decrease in accounts payable.inventory. During the threesix months ended MarchJune 31,30, 2025, we paid $5.2$6.9 million in cash interest.
Net cash from investing activities was $1.4 million for the six months ended June 30, 2026, compared to net cash used in investing activities wasof less than $0.1$0.5 million for the threesix months ended MarchJune 31,30, 2026,2025. comparedThe tonet $0.2cash millionfrom investing activities for the threesix months ended MarchJune 31,30, 2025.2026 was primarily due to the sale of property, plant and equipment. We did not have any significant capital expenditures of property, plant and equipment during the six months ended June 30, 2026. The net cash used in investing activities for boththe periods,six months ended June 30, 2025 was primarily due to capital expenditures of property, plant and equipment.
Net cash used in financing activities was $0.1$0.3 million for the threesix months ended MarchJune 31,30, 2026, primarily driven by finance lease principal payments.
Net cash used in financing activities was $0.4$5.1 million for the threesix months ended MarchJune 31,30, 2025, primarily driven by (i) $0.3$4.9 million of Term Loan repayments relating to required quarterly payments of principal,principal and payments made in conjunction with the IGE Asset Sale reinvestment provision, and (ii) finance lease principal payments of $0.1$0.2 million.
As of MarchJune 31,30, 2026, we had $5.3$6.6 million in cash, cash equivalents and restricted cash and a working capital deficit of $98.0$108.1 million. We have incurred recurring operating losses, negative cash flows from operations, and hashave significant debt obligations due within the next twelve months. These conditions and events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern.
Our plans to address these conditions include reducing costs through restructuring and other initiatives, including facility consolidations, headcount reductions, and focusing on our proprietary brand offerings. To improve liquidityliquidity, 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. Any potential such event may be subject to provisions referenced in the Term Loan, such as subjecting us to make mandatory repaymentsprepayments prior to the originally stated maturity date. Although we believe such plans, if executed, should provide us with liquidity to meet our needs, successful completion of such plans is dependent on numerous factors, many of which are beyond our control as further discussed in Item 1A. "Risk Factors" included in this Quarterly Report on Form 10-Q and in our 2025 Annual Report.
During the second quarter of 2026, we sold approximately 38 acres of the 120 acres of excess owned land at the Goshen, New York location for $1.4 million. On July 31, 2026, the Company, through its wholly owned subsidiaries Aurora International, LLC, an Oregon limited liability company and Aurora Peat Products ULC, an Alberta unlimited liability corporation, entered into a Share Purchase Agreement with 2817049 Alberta Ltd., an Alberta corporation. Pursuant to the terms of the Share Purchase Agreement, Seller sold to Buyer and Buyer purchased from Seller all the issued and outstanding shares of APP for $16 million, subject to adjustments set forth in the Share Purchase Agreement. The net proceeds from the Transaction will be applied to reduce outstanding debt, including outstanding interest, under the Term Loan. The Share Purchase Agreement contains customary representations and warranties of the parties, covenants and indemnification provisions. The representations, warranties and covenants contained in the Share Purchase Agreement were made solely for the benefit of the parties to the Share Purchase Agreement and may be subject to limitations agreed upon by the contracting parties. In connection with the Share Purchase Agreement, the Seller and Buyer entered into a secured promissory note on the Closing Date, pursuant to which the Buyer issued, in favor of the Seller, a promissory note in the principal amount of $5 million, representing a deferred portion of the purchase price payable to the Seller under the Share Purchase Agreement. The secured promissory note was assigned to the lenders of the Company's Term Loan. Cash obligations in connection with the close of the transaction are estimated to be up to $3.1 million.
If necessary, we believe that we could supplement our cash position through additional asset sales or divestiture of one or more of our brands or lines of business. During May 2026, subsequent to the end of the fiscal quarter ended March 31, 2026, we sold approximately 38 acres of the 120 acres of excess owned land at the Goshen, New York location. The carrying value of the property was reclassified from property, plant and equipment, net to assets held for sale as of March 31, 2026, in the amount of $1,415, consistent with the sale price less costs to sell. We believe it is prudent to be prepared if required and, accordingly, continue to be engaged in the process of evaluating and preparing to implement one or more of the aforementioned activities. Any potential such event may be subject to provisions referenced in our Term Loan, such as subjecting us to make mandatory prepayments.
On October 25, 2021, we and certain of our direct and indirect subsidiaries entered into the Term Loan with JPMorgan Chase Bank, N.A., as administrative agent for the lenders, pursuant to which we borrowed a $125 million senior secured term loan. The Term Loan was amended by Amendment No. 1 effective as of June 27, 2023, to replace the LIBOR referenced rates with SOFR referenced rates. Pursuant to Amendment No. 1, any Term Loan that constitutes a Eurodollar Rate Loan that is outstanding as of the Amendment No. 1 closing date shall continue until the end of the applicable interest period for such Eurodollar Rate Loan and the provisions of the Term Loan applicable thereto shall continue and remain in effect (notwithstanding the occurrence of the Amendment No. 1 closing date) until the end of the applicable interest period for such Eurodollar Rate Loan, after which such provisions shall have had no further force or effect. Such Eurodollar Rate Loan shall subsequently either be an ABR Loan or a Term Benchmark Loan. The ABR Loans shall bear interest at the Alternate Base Rate (with a 2.0% floor) plus 4.50%, and Term Benchmark Loans shall bear interest at the Adjusted Term SOFR Rate (with a 1.0% floor) plus 5.50%. As of the date of filing thisthe 2025 Annual Report on Form 10-K,Report, the ABR Loan and Term Benchmark Loan credit spreads of 4.50% and 5.50%, respectively, within the Amendment No. 1 havehad not changed from the credit spreads in the original Term Loan. On April 8, 2026, we, the Lenders and the Agents entered into Amendment No. 2 to the Credit and Guaranty Agreement. Amendment No. 2 amends the Term Loan to, among other things, (i) replace JPMorgan with FEAC as the administrative agents; and (ii) require each credit party to covenant and agree to (A) regularly provide certain liquidity reports and cash flow forecasts, (B) regularly provide certain aging reports and inventory reports, and (C) maintain a minimum liquidity of $1 million.
On the Forbearance Effective Date, the Company entered into the Forbearance Agreement with the other Obligors, the Lenders, and FEAC, in connection with the Term Loan. Pursuant to the Forbearance Agreement, during the Forbearance Period (as defined in Note 11 – Debt to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), solely with respect to the Specified Event of Default, neither the Administrative Agent nor any Lender shall, upon the terms and conditions expressly specified therein, take any action, commence any proceedings against any Obligor or any other person with respect to the enforcement of any of its or their rights or remedies under the Credit Documents or applicable law, other than as expressly described in the Forbearance Agreement. AsThe ofCompany, the dateLenders, ofand theFEAC Quarterlyagreed Reportto on Form 10-Q,extend the Forbearance Period isunder continuing.the Forbearance Agreement through and including August 31, 2026.
As of MarchJune 31,30, 2026, and December 31, 2025, the outstanding principal balance on the Term Loan was $114.4 million.
The aforementioned financing arrangements and other transactions are more fully described in the notes to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
The cash andcash, cash equivalents and restricted cash balances of $4.8$6.6 million and $6.3 million at MarchJune 31,30, 2026, and December 31, 2025, respectively, included $2.1$3.7 million and $2.9 million, respectively, held by foreign subsidiaries.
HYFM insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-08 | Ackerman Erica |
Shares withheld for tax | 138 | $1.60 | $221 |
| 2026-08-08 | Parker Mark S |
Shares withheld for tax | 740 | $1.60 | $1.2K |
| 2026-06-23 | Yetter Richard Christopher |
Grant/award | 30,000 | — | — |
| 2026-06-23 | Chung Patrick |
Grant/award | 30,000 | — | — |
| 2026-06-23 | Persofsky Renah |
Grant/award | 30,000 | — | — |
| 2026-06-23 | Denis Melisa |
Grant/award | 30,000 | — | — |
Well-known investors holding HYFM (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 70,363 | $59.8K | 0.0% | Reduced 2% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 23,985 | $20.4K | 0.0% | New position |