GrowGeneration Corp.

Previous wording

GrowGeneration sources certain proprietary branded products and components used in our Cultivation & Gardening segment, including coir substrates, nutrients, irrigation parts, and lighting components, from suppliers located in India, Mexico, China, and other jurisdictions outside the United States. Beginning in the first quarter of 2025, the United States announced changes to U.S. trade policy, including increasing tariffs on imports, in some cases significantly, and potentially negotiating or terminating existing trade agreements. In April 2025, the United States announced changes to its trade policy, including a 10% baseline tariff on imports and additional country-specific tariffs for select trading partners. These new measures, implemented under Executive Order 14257, under presidential authority provided by the International Emergency Economic Powers Act (“IEEPA”) and other statutory authorities, reflected a markedly more dynamic tariff environment. The policies created cost and supply chain impacts for importers and providers of international goods. These actions have resulted in cost increases for certain imported products that collectively represent less than 10% of total company cost of goods sold. We have partially offset these cost pressures through (i) improved purchasing leverage and volume-based supplier discounts, (ii) targeted price adjustments on affected product categories, and (iii) a continuing shift in sourcing toward lower-tariff regions, including the United States and Southeast Asia. We are also expanding domestic manufacturing, assembly and packaging for select proprietary brands to reduce reliance on high-tariff import categories. On February 20, 2026, the U.S. Supreme Court struck down certain tariffs imposed under the IEEPA. The President immediately imposed replacement tariffs under Section 122 of the Trade Act of 1974, which are temporary (150-day maximum duration, expiring in mid-July 2026, unless such period is extended by Congress), and has indicated intent to impose tariffs under other statutory authorities going forward. It is unclear at this time what impact this decision will have on our future financial results, including whether we will be able to obtain refunds of amounts previously paid for the IEEPA tariffs or any fluctuations of the level of replacement tariffs imposed or the addition of any new tariffs through other means. We continue to actively monitor these developments and the evolving tariff environment and its potential effects on our cost structure and supply chain. We will continue to explore and adjust our mitigation strategies as circumstances develop.

Current wording

GrowGeneration sources certain proprietary branded products and components used in our Cultivation & Gardening segment, including coir substrates, nutrients, irrigation parts, and lighting components, from suppliers located in India, Mexico, China, and other jurisdictions outside the United States. Beginning in the first quarter of 2025, the United States announced changes to U.S. trade policy, including increasing tariffs on imports, in some cases significantly, and potentially negotiating or terminating existing trade agreements. In April 2025, the United States announced changes to its trade policy, including a 10% baseline tariff on imports and additional country-specific tariffs for select trading partners. These new measures, implemented under Executive Order 14257, under presidential authority provided by the International Emergency Economic Powers Act (“IEEPA”) and other statutory authorities, reflected a markedly more dynamic tariff environment. The policies created cost and supply chain impacts for importers and providers of international goods. These actions resulted in cost increases for certain imported products that collectively represent less than 10% of total company cost of goods sold. We partially offset these cost pressures through (i) improved purchasing leverage and volume-based supplier discounts, (ii) targeted price adjustments on affected product categories, and (iii) a continuing shift in sourcing toward lower-tariff regions, including the United States and Southeast Asia. We also expanded domestic manufacturing, assembly and packaging for select proprietary brands to reduce reliance on high-tariff import categories.

Previous wording

We sell a variety of hydroponic and organic gardening related products, including nutrients, additives, growing media, lighting, environmental control systems, and other products for indoor and outdoor cultivation. Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, Viagrow, and more, the development and expansion of which are a key component of our growth strategy. Our target customers include commercial, craft, and home growers in the plant-based medicine market, as well as commercial and home gardeners who grow organic herbs, fruits, and vegetables. Additionally, through our wholesale division, we distribute many of our proprietary products to customers that are wholesalers, resellers, major home improvement mass-market retailers, and retailers in the specialty retail hydroponic and organic gardening industry.

Current wording

We sell a variety of hydroponic and organic gardening related products, including nutrients, additives, growing media, lighting, environmental control systems, and other products for indoor and outdoor cultivation. Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, and more, the development and expansion of which are a key component of our growth strategy. Our target customers include commercial, craft, and home growers in the plant-based medicine market, as well as commercial and home gardeners who grow organic herbs, fruits, and vegetables. Additionally, through our wholesale division, we distribute many of our proprietary products to customers that are wholesalers, resellers, major home improvement mass-market retailers, and retailers in the specialty retail hydroponic and organic gardening industry.

Previous wording

We make our products available to growers through a variety of channels, including our hydroponic retail locations, a commercial sales division that provides white glove service to commercial cultivators, a wholesale division that markets to mass-market retailers and independent resellers in both the hydroponic and traditional gardening markets, and an online platform at growgeneration.com, which includes a B2B customer portal for commercial and wholesale customers. Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 19 retail locations across 9 states as of March 31, 2026. We closed four retail locations during the three months ended March 31, 2026. We continue to evaluate our retail footprint to identify cost redundancies and optimize coverage by leveraging nearby locations and our online sales platforms

Current wording

We make our products available to growers through a variety of channels, including our hydroponic retail locations, a commercial sales division that provides white glove service to commercial cultivators, a wholesale division that markets to mass-market retailers and independent resellers in both the hydroponic and traditional gardening markets, and an online platform at growgeneration.com, which includes a B2B customer portal for commercial and wholesale customers. Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 19 retail locations across 9 states as of June 30, 2026. We closed four retail locations during the six months ended June 30, 2026. We continue to evaluate our retail footprint to identify cost redundancies and optimize coverage by leveraging nearby locations and our online sales platforms.

Previous wording

As of March 31, 2025, we had substantially completed our restructuring activities, and we do not expect to incur significant additional restructuring and restructuring-related costs in future periods. Overall, we incurred a total of approximately $3.5 million in restructuring and restructuring-related costs. During the three months ended March 31, 2025, we incurred approximately $1.1 million of restructuring and restructuring related charges as described in Note 14, Restructuring of our Notes to Condensed Consolidated Financial Statements in this report.

Current wording

As of March 31, 2025, we had substantially completed our restructuring activities, and we do not expect to incur significant additional restructuring and restructuring-related costs in future periods. Overall, we incurred a total of approximately $3.5 million in restructuring and restructuring-related costs. During the six months ended June 30, 2025, we incurred approximately $1.1 million of restructuring and restructuring related charges as described in Note 15, Restructuring of our Notes to Condensed Consolidated Financial Statements in this report.

Previous wording

Our main growth strategy has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization. As a result, we have built a business that is driven by a wide selection of products, a strong portfolio of proprietary brands, a solutions-driven staff located in strategic markets around the country, and pick, pack, ship distribution and fulfillment capabilities.

Current wording

Our growth strategy is focused on expanding our portfolio and sales of proprietary brands, growing our commercial, wholesale, and e-commerce channels, increasing penetration of our Storage Solutions business across diversified end markets, and pursuing selective, accretive acquisitions that complement our existing businesses. As a result, we have built a business that is driven by a wide selection of products, a strong portfolio of proprietary brands, a solutions-driven staff located in strategic markets around the country, and pick, pack, ship distribution and fulfillment capabilities.

Previous wording

Since our founding in 2014, we have acquired or opened numerous specialty hydroponic and organic gardening center locations. Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 19 retail locations across 9 states as of March 31, 2026. We have also acquired several other types of businesses within or complementary to the hydroponic industry, such as online retailers, proprietary products, our wholesale distribution business, and our benching, racking, and storage solutions business, MMI. We regularly seek and evaluate accretive acquisition opportunities with similar or complementary businesses to those businesses we already operate, such as the acquisition of Hydro Generation Inc. (referred to as "Viagrow") on June 6, 2025, which further diversified our home gardening and hydroponic gardening proprietary brand product offerings as well as expanded our outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms.

Current wording

Since our founding in 2014, we have built our Cultivation and Gardening business through a combination of organic investment and targeted acquisitions, such as specialty hydroponic and organic gardening center locations, online retailers, proprietary products, and our wholesale distribution business. We continue to evaluate accretive acquisition opportunities involving businesses or proprietary brands that are similar or complementary to those we already operate, such as the acquisition of Hydro Generation Inc. (referred to as "Viagrow") on June 6, 2025, which further diversified our home gardening and hydroponic gardening proprietary brand product offerings as well as expanded our wholesale channel outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms.

Previous wording

Our main growth strategies for the Storage Solutions segment include expanding the types of customers and industries to which we sell our Storage Solutions products, including greater penetration in CEA, industrial, and country club verticals.

Current wording

Our main growth strategies for the Storage Solutions segment, which includes our benching, racking, and storage solutions business, MMI, are centered on driving recurring commercial sales opportunities and expanding the types of customers and industries to which we sell our Storage Solutions products, including greater penetration in CEA, industrial, and country club verticals.

Previous wording

The increase in net sales was driven in part by our Cultivation and Gardening segment, which had net sales of $31.9 million for the three months ended March 31, 2026 compared to $30.9 million for the three months ended March 31, 2025. This increase in net sales was primarily due to improvements in durable product sales driven by increased demand for capital investments by our customers in the three months ended March 31, 2026. As a result, the ratio of consumables net sales as a percentage of Cultivation and Gardening net sales was 72.1% in the three months ended March 31, 2026, as compared to consumables net sales representing 75.8% of Cultivation and Gardening net sales in the three months ended March 31, 2025. This increase in net sales was partially offset by retail store closures, including four retail locations during three months ended March 31, 2026 and eight retail locations closed in 2025 subsequent to March 31, 2025. Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended March 31, 2026 increased to 37.0% as compared to 32.0% for the three months ended March 31, 2025, largely driven by our continued strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands.

Current wording

The increase in net sales was driven in part by our Cultivation and Gardening segment, which had net sales of $34.9 million for the three months ended June 30, 2026 compared to $32.9 million for the three months ended June 30, 2025. This increase in net sales was primarily due to improvements in durable product sales driven by increased demand for capital investments by our customers in the three months ended June 30, 2026. As a result, the ratio of consumables net sales as a percentage of Cultivation and Gardening net sales was 72.0% in the three months ended June 30, 2026, as compared to consumables net sales representing 79.7% of Cultivation and Gardening net sales in the three months ended June 30, 2025. The increase in net sales was partially offset by retail store closures, including four retail locations closed during 2026 and six retail locations closed in 2025 subsequent to June 30, 2025. Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended June 30, 2026 increased to 39.7% as compared to 32.0% for the three months ended June 30, 2025, largely driven by our continued strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands.

Previous wording

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

Current wording

Net sales of commercial fixtures within our Storage Solutions segment increased to $8.3 million for the three months ended June 30, 2026 compared to $8.1 million for the three months ended June 30, 2025 as a result of increased demand for capital investments by our customers primarily in the retail industry.

Previous wording

Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, and depreciation and amortization expense. Operating expenses were $15.0 million for the three months ended March 31, 2026 and $19.6 million in the three months ended March 31, 2025, a decrease of $4.6 million or 23.4%.

Current wording

Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, depreciation and amortization, and impairment loss. Operating expenses were $14.7 million for the three months ended June 30, 2026 and $16.9 million in the three months ended June 30, 2025, a decrease of $2.2 million or 13.1%.

Previous wording

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and specifically identifiable operating costs related to our retail locations and distribution centers, were $6.4 million for the three months ended March 31, 2026 compared to $8.8 million for the three months ended March 31, 2025, a decrease of $2.4 million or 27.2%. The decrease in store operating costs was primarily due to the eight retail locations closed during 2025 as well as the closure of four retail locations during three months ended March 31, 2026.

Current wording

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and specifically identifiable operating costs related to our retail locations and distribution centers, were $6.1 million for the three months ended June 30, 2026 compared to $7.9 million for the three months ended June 30, 2025, a decrease of $1.7 million or 21.9%. The decrease in store operating costs was primarily due to the six retail locations closed in 2025 subsequent to June 30, 2025 as well as the closure of four retail locations during 2026.

Previous wording

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $8.6 million for the three months ended March 31, 2026 compared to $10.8 million for the three months ended March 31, 2025. Selling, general, and administrative costs decreased by $0.2 million or 2.6% for the three months ended March 31, 2026 primarily due to cost rationalization initiatives, which resulted in decreased corporate expenses and lower share-based compensation. Depreciation and amortization costs decreased by $2.0 million or 55.1% for the three months ended March 31, 2026, primarily as a result of asset retirements in conjunction with the restructuring plan and certain intangible assets reaching the end of their estimated useful lives.

Current wording

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $8.3 million for the three months ended June 30, 2026 compared to $9.0 million for the three months ended June 30, 2025. The decrease was largely driven by reduced depreciation and amortization costs, which decreased $1.2 million or 44.0% for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily as a result of asset retirements in conjunction with the restructuring plan and certain intangible assets reaching the end of their estimated useful lives. This was partially offset by increased selling, general, and administrative costs of $0.3 million, or 5.0%, largely due to increased professional services costs.

Previous wording

Other income was $0.3 million for the three months ended March 31, 2026 compared to $0.5 million for the three months ended March 31, 2025, a decrease of $0.2 million or 34.8%. The decrease in other income was primarily attributable to decreased investment income on our marketable securities.

Current wording

Other income was $0.3 million for the three months ended June 30, 2026 compared to $0.5 million for the three months ended June 30, 2025, a decrease of $0.1 million or 25.1%. The decrease in other income was primarily attributable to decreased investment income on our marketable securities.

Previous wording

Cost of sales for the three months ended March 31, 2026 was $28.7 million, an increase of $2.7 million or 10.2% compared to $26.0 million for the three months ended March 31, 2025. The increase in cost of sales largely corresponds to the 7.5% increase in net sales, with cost of sales increasing at a higher rate in part due to the increased sales mix of durable products previously discussed. The remaining increase in cost of sales relates to inventory disposal costs incurred in connection with the closure of four retail locations during three months ended March 31, 2026 whereas no such costs were incurred during the three months ended March 31, 2025.

Current wording

Cost of sales for the six months ended June 30, 2026 was $59.5 million, an increase of $4.2 million or 7.6% compared to $55.4 million for the six months ended June 30, 2025. The increase in cost of sales largely corresponds to the 6.4% increase in net sales, with cost of sales increasing at a higher rate in part due to the increased sales mix of durable products previously discussed. The remaining increase in cost of sales relates to inventory disposal costs incurred in connection with the closure of four retail locations during six months ended June 30, 2026 compared to two retail location closures during the six months ended June 30, 2025.

Previous wording

Gross profit was $9.7 million for each of the three months ended March 31, 2026 and 2025. Gross profit related to the Cultivation and Gardening segment decreased $0.7 million, or 9.3%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily as a result of the increased sales mix of durable products, which generally have lower margins than consumable products, as well as inventory disposal costs and inventory sales discounts incurred in connection with retail location closures during the three months ended March 31, 2026. Gross profit from our Storage Solutions segment increased $0.8 million or 42.7% in the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily as a result of increased sales volume and sales mix of large-scale projects.

Current wording

Gross profit was $22.1 million for the six months ended June 30, 2026 compared to $21.3 million for the six months ended June 30, 2025, an increase of $0.8 million or 3.6%. Gross profit related to the Cultivation and Gardening segment increased $0.1 million, or 0.7%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily as a result of the increased sales volume and mix of proprietary brand products and durable products during, which were partially offset by inventory disposal costs and inventory sales discounts incurred in connection with retail location closures during the six months ended June 30, 2026. Gross profit from our Storage Solutions segment increased $0.7 million or 12.4% in the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily as a result of increased sales volume.

Previous wording

Gross profit margin was 25.4% for the three months ended March 31, 2026, a decrease of 180 basis points from a gross profit margin of 27.2% for the three months ended March 31, 2025. The decrease in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 22.5% for the three months ended March 31, 2026 as compared to 25.6% for the three months ended March 31, 2025. This decrease was primarily driven by the increased sales mix of durable products, which generally have lower margins than consumable products, as well as additional cost of sales and inventory sales discounts incurred in the three months ended March 31, 2026. The Storage Solutions gross profit margin increased to 39.6% in the three months ended March 31, 2026 from 37.6% in the three months ended March 31, 2025, primarily as a result of the increased sales mix of large-scale projects.

Current wording

Gross profit margin was 27.0% for the six months ended June 30, 2026, a decrease of 80 basis points from a gross profit margin of 27.8% for the six months ended June 30, 2025. The decrease in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 24.2% for the six months ended June 30, 2026 as compared to 25.2% for the six months ended June 30, 2025. This decrease was primarily driven by the increased sales mix of durable products, which generally have lower margins than consumable products, as well as additional cost of sales and inventory sales discounts incurred in the six months ended June 30, 2026. These decreases were partially offset by the increased sales mix of proprietary brand products, which generally have higher margins than non-proprietary brand products. The Storage Solutions gross profit margin decreased to 39.7% in the six months ended June 30, 2026 from 40.6% in the six months ended June 30, 2025, primarily as a result of industry pricing compression for the Storage Solutions segment.

Previous wording

As of March 31, 2026, we had working capital of $75.1 million compared to working capital of $77.8 million as of December 31, 2025, a decrease of $2.7 million. The decrease in working capital from December 31, 2025 to March 31, 2026 was due primarily to a net decrease in cash, cash equivalents, and marketable securities as a result of net cash used in operating activities.

Current wording

As of June 30, 2026, we had working capital of $74.0 million compared to working capital of $77.8 million as of December 31, 2025, a decrease of $3.8 million. The decrease in working capital from December 31, 2025 to June 30, 2026 was due primarily to a net decrease in cash, cash equivalents, and marketable securities as a result of net cash used in operating activities.

Previous wording

As of March 31, 2026, we had cash, cash equivalents, and marketable securities of $41.1 million. Currently, we are not aware of any extraordinary demands, commitments, or uncertainties that would materially reduce our current working capital. Our material future cash requirements from contractual and other obligations relate primarily to our operating leases. Refer to Note 8, Leases, of the Condensed Consolidated Financial Statements for additional information regarding leases.

Current wording

As of June 30, 2026, we had cash, cash equivalents, and marketable securities of $41.0 million. Currently, we are not aware of any extraordinary demands, commitments, or uncertainties that would materially reduce our current working capital. Our material future cash requirements from contractual and other obligations relate primarily to our operating leases. Refer to Note 8, Leases, of the Condensed Consolidated Financial Statements for additional information regarding leases.

Previous wording

We may need additional financing through equity offerings and/or debt financings in the future to continue to expand our business consistent with our growth strategies. However, management believes that the Company has sufficient liquidity to fund operations and meet its obligations as they become due for at least the next twelve months from the date of this filing. To date we have financed our operations through the issuance of common stock, convertible notes, and warrants, as well as cash generated from operations.

Current wording

We may need additional financing through equity offerings and/or debt financings in the future to continue to expand our business consistent with our growth strategies. However, management believes that the Company has sufficient liquidity to fund operations and meet its obligations as they become due for at least the next twelve months from the date of this filing. To date we have primarily financed our operations through the issuance of common stock and warrants as well as cash generated from operations.

Previous wording

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

Current wording

The following discussion sets forth the major sources and uses of cash for the six months ended June 30, 2026 and 2025.

Previous wording

Net cash and cash equivalents used in operating activities for the three months ended March 31, 2026 was $5.0 million compared to net cash used in operating activities of $3.8 million for the three months ended March 31, 2025. The increase in cash used in operating activities was primarily related to changes in our operating assets and liabilities including the timing of cash receipts related to our accounts and notes receivables and customer deposits offset by the difference in sell through of inventory for the three months ended March 31, 2026 as compared to the build-up of inventory in three months ended March 31, 2025.

Current wording

Net cash and cash equivalents used in operating activities for the six months ended June 30, 2026 was $4.1 million compared to $6.8 million for the six months ended June 30, 2025. The decrease in cash used in operating activities was primarily related to changes in our operating assets and liabilities including the timing of cash receipts related to our accounts and notes receivables and customer deposits offset by the difference in sell through of inventory for the six months ended June 30, 2026 as compared to the build-up of inventory in six months ended June 30, 2025.

Previous wording

Net cash and cash equivalents used in investing activities for the three months ended March 31, 2026 was $3.7 million compared to net cash provided by investing activities of $9.2 million for the three months ended March 31, 2025. Investing activities for the three months ended March 31, 2026 were primarily attributable to investment of excess cash into marketable securities of $4.7 million, and purchases of property and equipment of $0.1 million, offset by maturity of marketable securities of $1.1 million. Investing activities for the three months ended March 31, 2025 were primarily attributable to investment of excess cash into marketable securities of $7.2 million and purchases of property and equipment of $0.2 million, offset by maturity of marketable securities of $16.6 million.

Current wording

Net cash and cash equivalents used in investing activities for the six months ended June 30, 2026 was $1.8 million compared to net cash provided by investing activities of $2.7 million for the six months ended June 30, 2025. Investing activities for the six months ended June 30, 2026 were primarily attributable to investment of excess cash into marketable securities of $8.9 million and purchases of property and equipment of $0.3 million, offset by maturity of marketable securities of $7.4 million. Investing activities for the six months ended June 30, 2025 were primarily attributable to investment of excess cash into marketable securities of $19.0 million, $1.0 million of cash paid for the Viagrow acquisition and purchases of property and equipment of $0.3 million, offset by maturity of marketable securities of $23.0 million.

Previous wording

There were no cash financing activities for the three months ended March 31, 2026. Net cash and cash equivalents used in financing activities for the three months ended March 31, 2025 was $0.1 million and was attributable to common stock withheld for employee payroll taxes.

Current wording

Net cash and cash equivalents used in financing activities for the six months ended June 30, 2026 was $1.1 million and was primarily attributable to common stock repurchased under our share repurchase program. Net cash and cash equivalents used in financing activities for the six months ended June 30, 2025 was $0.1 million and was attributable to common stock withheld for employee payroll taxes.