What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-03-20 compared with 2025-03-13 · 359 added, 350 removed, 783 unchanged (48% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reports of Independent Registered Public Accounting Firms (PCAOB ID 248 )

Report of Independent Registered Public Accounting Firm (BDO USA, P.C.;

PCAOB ID # 243 )

Report of Independent Registered Public Accounting Firm (Grant Thornton LLP;

PCAOB ID # 248 )

Consolidated Balance Sheets as of December 31, 202 5 and 20 24

4 unchanged sentences

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Stockholders and Board of Directors

GrowGeneration Corp.

Greenwood Village, Colorado

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of GrowGeneration Corp.

(a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”) .

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 13, 2025 expressed an adverse opinion .

We have audited the accompanying consolidated balance sheet of GrowGeneration Corp.

(the “Company”) as of December 31, 2025, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

During a portion of the year ended December 31, 2024, the Company’s previously reported material weaknesses related to the control environment, information and communication, and control activities (“the material weaknesses”) continued to exist.

The prevention, detection, and correction of material misstatements of the consolidated financial statements, is dependent, in part, on management (i) designing and maintaining an effective control environment, including maintaining sufficient resources within the accounting and financial reporting department to review complex financial reporting transactions;

and updating and distributing accounting policies and procedures across the organization (ii) designing and implementing effective information and communication processes to identify and assess the source of and controls necessary to ensure the reliability of information used in financial reporting and that communicates relevant information about roles and responsibilities for internal control over financial reporting and (iii) designing and implementing effective process-level control activities and general information technology controls related to financial reporting processes.

We identified the impact on our audit of the material weaknesses as a critical audit matter.

The principal consideration for our determination that the impact of the material weaknesses on our audit is a critical audit matter is that especially challenging auditor judgment was required in designing audit procedures and evaluating audit

evidence due to the ineffective system of internal control over financial reporting that existed during portions of the year, which affects substantially all consolidated financial statement account balances and disclosures.

Our audit procedures related to the material weaknesses included the following, among others:

• We determined the nature and extent of audit procedures that are responsive to the risk of material misstatement as a result of the material weaknesses and evaluated the evidence obtained from the procedures performed.

• We lowered the threshold used for investigating differences noted for recorded amounts.

• We selected larger sample sizes for tests of details.

• We substantively tested the accuracy and completeness of system-generated reports used in the audit and more extensively tested these reports.

• We increased the extent of supervision over the execution of audit procedures.

/s/ Grant Thornton LLP

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory - Valuation

As described in Note 2 to the consolidated financial statements, the Company’s inventory consists predominantly of gardening supplies and materials, fixtures, and equipment.

Inventory is valued at the lower of cost (moving average cost method) or net realizable value, inclusive of write-downs and write-offs in connection with its assessment of market conditions, slow-moving or obsolete inventory, and overstocked inventory based on trends and experience, including demand-based product rankings.

At December 31, 2025, the Company’s inventory balance was $38.8 million and the Company recognized inventory write-downs and write-offs of $2.4 million during the year.

We identified the auditing of certain inputs used to determine the inventory write-downs or write-offs, which include inventory quantities on hand and historical sales data, as well as assumptions over demand-based product rankings and the

associated write-down or write-off percentages applied as a critical audit matter.

Auditing these inputs and assumptions involved especially challenging auditor judgment due to the nature and extent of audit effort required to address this matter.

The primary procedures we performed to address this critical audit matter included:

• Testing the completeness and accuracy of underlying data inputs including inventory quantities on hand and historical sales data.

• Evaluating the reasonableness of the demand-based product rankings and write-downs and write-offs percentages applied by performing a retrospective comparison of prior estimates over customer demand to actuals.

• Testing the mathematical accuracy of the analysis used to determine inventory write-downs or write-offs.

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2025.

4 unchanged sentences

GrowGeneration Corp.

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of GrowGeneration Corp.

(a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, because of the effect of the material weakness described in the following paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment.

The Company identified a material weakness resulting from control deficiencies in information technology general controls related to a certain enterprise resource planning system for the operations within the Storage Solutions segment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2024.

The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our report dated March 13, 2025 which expressed an unqualified opinion on those financial statements.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of GrowGeneration Corp.

(a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2024, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2024 and December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the years ended December 31, 2024 and December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor from 2022 to 2025.

Denver, Colorado

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in thousands, except shares)

(in thousands, except share and per share amounts)

2025 December 31,

9 unchanged sentences

Property and equipment, net 9,795 15,493

Operating leases right-of-use assets, net 34,453 39,933

Notes receivable, long-term — 106

Operating lease right-of-use assets, net 27,050 34,453

Intangible assets, net 3,326 8,779

24 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 147,040 $ 174,352

The accompanying notes are an integral part of these audited Consolidated Financial Statements.

The accompanying notes are an integral part of these Consolidated Financial Statements.

GROWGENERATION CORP.

10 unchanged sentences

Selling, general, and administrative 26,266 29,243 29,799

Estimated credit (recoveries) losses ( 58 ) 955 1,737

Estimated credit losses (recoveries) 437 ( 58 ) 955

Depreciation and amortization 11,295 19,436 16,607

8 unchanged sentences

Net loss before taxes ( 23,855 ) ( 49,352 ) ( 46,464 )

(Provision) benefit for income taxes ( 158 ) ( 32 ) 2,885

Provision for income taxes ( 191 ) ( 158 ) ( 32 )

Net loss $ ( 24,046 ) $ ( 49,510 ) $ ( 46,496 )

3 unchanged sentences

Weighted average shares outstanding, diluted 59,671 60,176 61,181

The accompanying notes are an integral part of these audited Consolidated Financial Statements.

The accompanying notes are an integral part of these Consolidated Financial Statements.

GROWGENERATION CORP.

3 unchanged sentences

Common Stock Treasury Stock Additional

Capital Retained Earnings (Deficit) Total

Capital Accumulated Deficit Total

Stockholders’

1 unchanged sentence

Balance as of December 31, 2022 61,010 $ 61 — $ — $ 369,938 $ ( 153,603 ) $ 216,396

Common stock issued in connection with business combinations 650 1 — — 5,710 — 5,711

Adjustment for prior period acquisition — — — — 39 — 39

Common stock issued for share-based compensation 439 — — — — — —

Share-based compensation — — — — 4,514 — 4,514

Common stock withheld for employee payroll taxes — — — — ( 263 ) — ( 263 )

Common stock issued upon exercise of options 8 — — — 33 — 33

Common stock issued upon cashless exercise of options 20 — — — — — —

Common stock issued upon cashless exercise of warrants 14 — — — — — —

Common stock issued in connection with asset acquisition 50 — — — 173 — 173

Net loss — — — — — ( 163,747 ) ( 163,747 )

Balance as of December 31, 2022 61,010 $ 61 — $ — $ 369,938 $ ( 153,603 ) $ 216,396

Common stock issued for share-based compensation 439 — — — — — —

Common stock withheld for employee payroll taxes — — — — ( 263 ) — ( 263 )

Share-based compensation — — — — 2,985 — 2,985

10 unchanged sentences

Balance as of December 31, 2024 59,403 $ 59 — $ — $ 375,677 $ ( 255,643 ) $ 120,093

The accompanying notes are an integral part of these audited Consolidated Financial Statements.

Common stock issued for share-based compensation 567 1 — — — — 1

Common stock withheld for employee payroll taxes — — — — ( 221 ) — ( 221 )

Share-based compensation — — — — 1,513 — 1,513

Common stock issued in connection with acquisitions 121 — — — 159 — 159

Net loss — — — — — ( 24,046 ) ( 24,046 )

Balance as of December 31, 2025 60,091 $ 60 — $ — $ 377,128 $ ( 279,689 ) $ 97,499

The accompanying notes are an integral part of these Consolidated Financial Statements.

GROWGENERATION CORP.

8 unchanged sentences

Depreciation and amortization 11,295 19,436 16,607

Estimated credit (recoveries) losses ( 58 ) 955 1,737

Estimated credit losses (recoveries) 437 ( 58 ) 955

Share-based compensation 1,513 2,421 3,171

Impairment loss on held for sale property and equipment 130 — —

Impairment loss related to goodwill and intangible assets — 6,655 15,526

Impairment loss on operating lease right-of-use assets — 220 133

Provision for deferred income taxes — — ( 2,359 )

Loss on asset disposition 773 685 218

9 unchanged sentences

Sales taxes payable ( 441 ) 128 ( 156 )

Other 109 35 —

Net cash and cash equivalents (used in) provided by operating activities ( 9,447 ) ( 1,799 ) 1,421

10 unchanged sentences

Common stock repurchased — ( 6,037 ) —

Proceeds from the sales of common stock and exercise of warrants and options, net of expenses — — 33

Net cash and cash equivalents used in financing activities ( 220 ) ( 6,213 ) ( 313 )

Net decrease in cash and cash equivalents ( 2,286 ) ( 10,297 ) ( 1,318 )

Net increase (decrease) in cash and cash equivalents 2,935 ( 2,286 ) ( 10,297 )

Cash and cash equivalents at beginning of year 27,471 29,757 40,054

1 unchanged sentence

Supplemental Information:

Cash paid for interest $ 70 $ 98 $ 21

Cash paid for income taxes $ 125 $ 93 $ —

Right-of-use assets obtained in exchange for new or modified operating lease liabilities $ 1,049 $ 3,506 $ 4,289

Fair value of common stock issued in business combination $ 159 $ — $ —

Fair value of contingent consideration $ 83 $ — $ —

Cash paid for interest $ — $ 70 $ 98

Non-cash repurchase of liability awards $ — $ — $ 653

1 unchanged sentence

Liability redemption associated with business acquisition $ — $ — $ 120

Indemnity holdback from business acquisition $ — $ — $ 875

Common stock issued for business combinations $ — $ — $ 5,710

Common stock issued for intangible assets $ — $ — $ 173

The accompanying notes are an integral part of these audited Consolidated Financial Statements.

The accompanying notes are an integral part of these Consolidated Financial Statements.

GROWGENERATION CORP.

9 unchanged sentences

As of December 31, 2025, GrowGeneration has 23 retail locations across 10 states in the U.S.

The Company also operates an online superstore at growgeneration.com, as well as a wholesale distribution business for resellers, and a benching, racking, and storage solutions business, Mobile Media or MMI.

The Company also operates an online superstore at growgeneration.com, as well as a wholesale distribution business for resellers and mass-market retailers, and a benching, racking, and storage solutions business, Mobile Media or MMI.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The Consolidated Financial Statements have been prepared under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 105-10, Generally Accepted Accounting Principles , in accordance with accounting principles generally accepted in the U.S.

The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S.

("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect the financial position, results of operations and cash flows of the Company.

The Consolidated Financial Statements include the accounts of GrowGeneration Corp.

12 unchanged sentences

Based on the assessment of control indicators, product sales are typically recognized when product is delivered to or picked up by the customer.

Promises related to product installation are considered a separate performance obligation from the product sale because the products can be used without customization or modification and the installation is not complex and can be performed by other vendors.

Promises related to product installation are considered a separate and distinct performance obligation from the product sale because the products can be used without customization or modification and the installation is not complex and can be performed by other vendors.

Installation revenue is recognized upon completion of the installation services.

9 unchanged sentences

Payment for goods and services sold by the Company is typically due upon satisfaction of the performance obligations.

Under certain circumstances, the Company does provide goods and services to customers on a credit basis (see Accounts Receivable, Notes Receivable and Concentration of Credit Risk below).

Under certain circumstances, the Company does provide goods and services to customers on a credit basis which are due under customary payment terms (see Accounts Receivable, Notes Receivable and Concentration of Credit Risk below).

When the Company receives payment from customers before the customer obtains control of the merchandise or the service has been performed, the amount received is recorded as a customer deposit in the accompanying Consolidated Balance Sheets until the sale or service is complete.

15 unchanged sentences

Marketable Securities

Marketable securities investments primarily consist of fixed-income securities with short-term maturities, which are not actively traded by the Company.

Marketable securities investments primarily consist of fixed-income securities with short-term maturities, including debt instruments of the U.S.

government and its agencies as well as high quality corporate bonds, which are not actively traded by the Company.

The marketable securities are classified as available-for-sale and are carried at fair value based on quoted market prices.

Changes in fair value of marketable securities, principally derived from accretion of discounts, were $ 1.3 million and $ 1.4 million for the years ended December 31, 2024 and 2023 and were immaterial for the year ended December 31, 2022.

Changes in fair value of marketable securities are included in Interest income on the Consolidated Statements of Operations.

Changes in fair value of marketable securities, principally derived from accretion of discounts, were $ 0.8 million, $ 1.3 million and $ 1.4 million for the years ended December 31, 2025, 2024 and 2023, respectively, and are included in Interest income on the Consolidated Statements of Operations.

Accounts Receivable

2 unchanged sentences

Accounts receivable are written off or fully reserved when collection of amounts due is deemed improbable.

Indicators of improbable collection include client bankruptcy, client litigation, client cash flow difficulties, and ongoing service or billing disputes.

Credit is generally extended on a short-term basis, thus current receivables do not bear interest.

Interest on past due balances are subject to an interest charge of 1.5 % per month.

Indicators of improbable collection include client bankruptcy, client litigation, client cash flow

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

difficulties, and ongoing service or billing disputes.

Credit is generally extended on a short-term basis, thus current receivables do not bear interest.

Interest on past due balances are subject to an interest charge of 1.5 % per month.

Notes Receivable

From time-to-time, the Company has executed notes receivables to third parties secured by collateral.

From time-to-time, the Company has executed notes receivable to third parties secured by collateral.

Notes receivable generally have terms of 12 months to 18 months and bear interest from 12 to 14 % per annum.

15 unchanged sentences

As of December 31, 2025 and 2024, the Company does not believe that it has significant credit risk.

Inventory consists predominantly of gardening supplies and materials, fixtures, and equipment, and is recorded at the lower of cost (weighted average cost method) or net realizable value.

The inventory balance includes raw materials of $ 2.4 million for each of the years ended December 31, 2024 and 2023, with the remainder consisting of finished goods.

The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions.

Write-downs and write-offs are charged to cost of sales.

During the years ended December 31, 2024, 2023, and 2022, the Company recorded $ 6.5 million, $ 4.8 million, and $ 7.8 million, respectively, to inventory write-downs due to shrink and obsolescence.

Inventory consists predominantly of gardening supplies and materials, fixtures, and equipment, and is recorded at the lower of cost (moving average cost method) or net realizable value.

The inventory balance includes raw materials of $ 2.2 million and $ 2.4 million each of the years ended December 31, 2025 and 2024, respectively, with the remainder consisting of finished goods.

The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions, slow-moving or obsolete inventory, and overstocked inventory based on trends and experience, including demand-based product rankings.

Write-downs and write-offs are recorded to cost of sales on the Consolidated Statements of Operations and charges during the years ended December 31, 2025, 2024 and 2023, were $ 2.4 million, $ 6.5 million and $ 4.8 million, respectively.

Property and Equipment

Property and equipment are recorded at cost, or at the allocated fair value for assets acquired in accordance with ASC 805, Business Combinations , and depreciated on a straight-line basis over their estimated useful lives.

Property and equipment are recorded at cost, or at fair value for assets acquired in accordance with ASC 805, Business Combinations , and depreciated on a straight-line basis over their estimated useful lives.

Leasehold improvements are amortized on a straight-line basis over the shorter of the remaining term of the lease or the useful life of the improvement.

2 unchanged sentences

Costs for maintenance and repairs are expensed as incurred.

Computer software development costs and website development costs are expensed as incurred, except for internal-use software or website development costs that qualify for capitalization in accordance with ASC 350, Intangibles—Goodwill and Other , and include certain employee related expenses, including salaries, bonuses, benefits, and share-based compensation expenses;

costs of computer hardware and software;

and costs incurred in developing features and functionality.

The Company expenses costs incurred in the preliminary project and post-implementation stages of software

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

development and capitalizes costs incurred in the application development stage and costs associated with significant enhancements to existing internal use software applications.

costs of computer hardware and software;

and costs incurred in developing features and functionality.

The Company expenses costs incurred in the preliminary project and post-implementation stages of software development and capitalizes costs incurred in the application development stage and costs associated with significant enhancements to existing internal use software applications.

Costs incurred related to less significant modifications and enhancements as well as maintenance are expensed as incurred.

4 unchanged sentences

Buildings 20 - 30 years

Furniture and fixtures 3 - 7 years

Computers and equipment 3 - 5 years

Furniture, fixtures and equipment

Capitalized software 3 - 8 years

7 unchanged sentences

Intangible assets are amortized over their estimated useful lives on a straight-line basis, which approximates the pattern in which the economic benefits associated with the asset are expected to be consumed.

The estimated useful lives for trade names, customer relationships, non-compete agreements, and intellectual property are generally five to six years .

The estimated useful lives for trade names, customer relationships, non-compete agreements, and intellectual property are generally five to nine years .

Goodwill represents the excess purchase price over the fair value of identifiable assets acquired and liabilities assumed in connection with acquisitions in accordance to ASC 805, Business Combinations .

Goodwill is not amortized but instead is tested for impairment at the reporting unit level at least annually, or more frequently if indicators of impairment exist.

Effective the fourth quarter of 2023 and prospectively, the Company performs its required annual goodwill impairment test as of December 1 rather than on December 31, which was the Company's previous practice.

The Company performs its required annual goodwill impairment test as of December 1.

Goodwill is assessed using either a qualitative or quantitative approach to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

5 unchanged sentences

Impairment is indicated if the estimated fair value of the reporting unit is less than the carrying amount, and an impairment loss is recognized for the differential.

The Company performs a quantitative impairment assessment for a reporting unit using a fair value method based on management's judgements and assumptions or third-party valuations.

The Company performs a quantitative impairment assessment for a reporting unit using a fair value method based on management's judgments and assumptions or third-party valuations.

The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date.

The Company determines fair value using the income approach, where estimated future cash flows are discounted to present value at an appropriate rate of return.

Multiples of earnings based on the average of historical, published multiples of earnings of comparable entities with similar operations and economic characteristics are also used in developing estimated fair values.

The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, Fair Value Measurement .

Multiples of earnings

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

based on the average of historical, published multiples of earnings of comparable entities with similar operations and economic characteristics are also used in developing estimated fair values.

The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, Fair Value Measurement .

Impairment losses related to goodwill are included in Impairment loss on the Consolidated Statements of Operations.

26 unchanged sentences

The Company has elected the practical expedient to account for lease and non-lease components as a single component for all leases.

The Company monitors for triggering events or conditions that require a reassessment of its leases.

When the reassessment requires a re-measurement of the lease liability, a corresponding adjustment is made to the carrying amount of the right-of-use asset.

Additionally, the Company reviews for impairment indicators of its right-of-use assets and other long-lived assets as described in the Recoverability of long-lived assets significant accounting policy.

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company monitors for triggering events or conditions that require a reassessment of its leases.

When the reassessment requires a re-measurement of the lease liability, a corresponding adjustment is made to the carrying amount of the right-of-use asset.

Lease expense is recorded within the Company's Consolidated Statements of Operations based upon the nature of the operating lease right-of-use assets.

26 unchanged sentences

The Company accounts for acquisitions in accordance with ASC 805, Business Combinations .

Assets acquired and liabilities assumed are recognized at their estimated fair values in accordance with ASC 820, Fair Value Measurements , as of the acquisition date.

For all acquisitions, the preliminary allocation of the purchase price was based upon a preliminary valuation, and the Company's estimates and assumptions are subject to change as valuations are finalized within the measurement period, which cannot extend beyond one year from the acquisition date.

Measurement period adjustments are recognized in the reporting period in which the adjustments were determined and calculated as if the accounting had been completed at the acquisition date.

The process for estimating fair values requires the use of significant estimates,

Assets acquired and liabilities assumed are recognized at their estimated fair values in accordance with ASC 820, Fair Value Measurements , as

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

assumptions and judgments, including determining the timing and estimates of future cash flows and developing appropriate discount rates.

of the acquisition date.

Measurement period adjustments are recognized in the reporting period in which the adjustments were determined and calculated as if the accounting had been completed at the acquisition date.

The process for estimating fair values requires the use of significant estimates, assumptions and judgments, including determining the timing and estimates of future cash flows and developing appropriate discount rates.

Any changes to these estimates may have a material impact on the Company's operating results or financial position.

All acquisition costs are expensed as incurred and recorded in Selling, general and administrative expense in the Consolidated Statements of Operations.

All transaction costs are expensed as incurred and recorded in Selling, general and administrative expense in the Consolidated Statements of Operations.

Refer to Note 13, Acquisitions, for additional information regarding the Company's business combinations.

22 unchanged sentences

The treasury stock method is used in calculating diluted EPS for potentially dilutive stock options, restricted stock units, and common stock warrants, which assumes that any proceeds received from the exercise of in-the-money stock options, restricted stock units, and common stock warrants, would be used to purchase common shares at the average market price for the period.

Share-Based Compensation

The Company uses share-based compensation, including stock options, restricted stock units, and common stock warrants, to provide long-term performance incentives for its employees, non-employee members of its Board of Directors, and consultants.

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Compensation

The Company uses share-based compensation, primarily restricted stock units, to provide long-term performance incentives for its employees, non-employee members of its Board of Directors, and consultants.

The Company records share-based compensation in accordance with ASC 718, Compensation-Stock Compensation .

The Company estimates the fair value of stock options and common stock warrants on the grant date using the Black-Scholes option pricing model.

Restricted stock units are valued using the market value on the grant date.

1 unchanged sentence

Forfeitures are recognized as they occur.

Periodically, the Company has issued stock options and common stock warrants for which the fair value is estimated on the grant date using the Black-Scholes option pricing model.

The Black-Scholes option pricing model requires subjective assumptions, including future stock price volatility and expected time to exercise, which affect the calculated values.

4 unchanged sentences

These factors could change in the future, affecting the determination of share-based compensation expense in future periods.

Periodically, the Company has issued certain stock awards classified as liabilities based on the guidance set forth at ASC 480, Distinguishing Liabilities from Equity , and ASC 718, Compensation-Stock Compensation .

The Company has also periodically issued certain stock awards classified as liabilities based on the guidance set forth at ASC 480, Distinguishing Liabilities from Equity , and ASC 718, Compensation-Stock Compensation .

These awards generally entitle the employees to receive a specified dollar value of common stock on future dates and vest over time subject to the employee's continued employment.

15 unchanged sentences

Exit or disposal costs include, but are not limited to, the costs of termination benefits, such as one-time involuntary severance or retention bonuses, one-time contract termination costs (excluding leases), and other costs associated with non-termination type costs related to restructuring initiatives.

Liabilities from exit and disposal costs are recorded for estimated costs to be incurred.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

from exit and disposal costs are recorded for estimated costs to be incurred.

Refer to Note 17, Restructuring, for additional information related to restructuring activities.

2 unchanged sentences

Updates to the FASB Accounting Standards Codification are communicated through the issuance of an Accounting Standards Update ("ASU").

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements.

1 unchanged sentence

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280) ("ASU 2023-07"), which expanded disclosure requirements for reportable segments on an annual and interim basis primarily through enhanced disclosures about significant segment expenses and the composition of other segment items for each segment's reported profit or loss.

The Company adopted this standard retrospectively as of December 31, 2024.

Refer to Note 15, Segments for segment disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740)—Improvements to income tax disclosures ("ASU 2023-09"), expanding the disclosures requirement for income taxes primarily by requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted, and adoption of ASU 2023-09 can be applied prospectively or retrospectively.

The Company is currently evaluating the impact of this standard.

The Company adopted ASU 2023-09 on a prospective basis for the annual reporting period beginning January 1, 2025.

Refer to Note 7, Income Taxes for changes in disclosures resulting from adoption of ASU 2023-09.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU No.

3 unchanged sentences

The Company is currently evaluating the impact of this standard.

In July 2025, the FASB issued ASU No.

2025-05, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"), which provides a practical expedient to measure credit losses on accounts receivable and contract assets.

ASU 2025-05 is effective for annual periods beginning after December 15, 2025.

Early adoption of ASU 2025-05 is permitted and should be applied prospectively.

The Company will adopt the standard for the annual reporting period beginning January 1, 2026 and does not expect the standard to have a material impact on the consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU No.

2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)—Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"), which amends current guidance for capitalizing internal use software costs by removing all references to prescriptive and sequential software development stages to better align with current iterative development methods.

ASU 2025-06 is effective for interim and annual periods beginning after December 15, 2027.

Early adoption is permitted as of the beginning of an annual reporting period, and ASU 2025-06 can be applied prospectively, retrospectively, or on a modified transition approach.

The Company will adopt the standard prospectively as of January 1, 2026 and does not expect the standard to have a material impact on the consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU No.

2025-11, Interim Reporting (Topic 270)—Narrow-Scope Improvements (“ASU 2025-11”), which is intended to clarify interim disclosure requirements and the applicability of Topic 270.

ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity.

ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted, and adoption of ASU 2025-11 can be applied either prospectively or retrospectively.

The Company is currently evaluating the impact of this standard.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE RECOGNITION

2 unchanged sentences

Refer to Note 15, Segments, for disaggregated revenue disclosures.

Contract Assets and Liabilities

Depending on the timing of when title of product transfers to a customer and when a customer makes payments for such product, the Company recognizes an accounts receivable (contract asset) or a customer deposit (contract liability).

The opening and closing balances of the Company's accounts receivables and customer deposits are as follows:

Accounts Receivable and Contract Liabilities

Depending on the timing of when title of product transfers to a customer and when a customer makes payments for such product, the Company recognizes an accounts receivable or a customer deposit.

The opening and closing balances of the Company's accounts receivables and customer deposits were as follows:

Accounts Receivable, Net Customer Deposits

1 unchanged sentence

Balance as of December 31, 2025 10,668 4,015

Decrease $ ( 1,534 ) $ ( 2,955 )

Increase $ 3,307 $ 1,611

Balance as of January 1, 2024 $ 8,895 $ 5,359

Balance as of December 31, 2024 7,361 2,404

Increase $ 559 $ 1,021

Decrease $ ( 1,534 ) $ ( 2,955 )

Of the total amount of customer deposits as of January 1, 2025, $ 1.9 million was reported as revenue during the year ended December 31, 2025.

Of the total amount of customer deposits as of January 1, 2024, $ 4.8 million was reported as revenue during the year ended December 31, 2024.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Of the total amount of customer deposits as of January 1, 2023, $ 3.4 million was reported as revenue during the year ended December 31, 2023.

The Company also has notes receivable under longer term financing arrangements at interest rates typically ranging from 12 % to 14 % with repayment terms typically ranging for 12 to 18 months.

Notes receivable at December 31, 2024 and 2023 are as follows:

Notes receivable $ 1,056 $ 2,031

Allowance for credit losses — ( 1,732 )

Notes receivable, net $ 1,056 $ 299

The following table summarizes changes in notes receivable balances that have been deemed impaired.

Notes receivable at December 31, 2025 and 2024 were as follows:

Notes receivable $ 721 $ 1,056

3 unchanged sentences

Refer to Note 16, Commitment and Contingencies, for additional information regarding the settlement.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2024 and 2023 consists of the following:

Property and equipment at December 31, 2025 and 2024 consisted of the following:

Vehicles $ 2,504 $ 2,553

9 unchanged sentences

In conjunction with the Company's restructuring activities as discussed in Note 17, Restructuring, the Company reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in a $ 5.3 million increase to depreciation and amortization expense related to property and equipment for the year ended December 31, 2024.

These capitalized software assets became fully amortized and were retired during the year ended December 31, 2025.

Refer to Note 17, Restructuring, for additional information on the restructuring activities.

During the year ended December 31, 2025, the Company concluded that a closed retail location, wholly-owned by the Company, met the criteria for classification as held for sale.

The Company determined that the carrying value of the building and related improvements was greater than the fair value less costs to sell and recognized a $ 0.1 million impairment loss in the year ended December 31, 2025.

Property and equipment in the above table includes building and land amounts classified as held for sale with a carrying value of $ 0.3 million.

As of December 31, 2025, the Company continues to actively market the asset and expects to sell the asset within one year.

GOODWILL AND INTANGIBLE ASSETS

2 unchanged sentences

The adjusted carrying amount of goodwill shall be its new accounting basis.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the goodwill impairment test performed on December 1, 2025, only two of the Company's four reporting units had remaining goodwill balances.

The Company elected to qualitatively review both reporting units for events and circumstances which would indicate whether it was more than likely than not reporting unit fair values were below carrying values.

The qualitative assessment did not identify any indicators of impairment, and accordingly, no further impairment assessments were necessary.

For the goodwill impairment test performed on December 1, 2024, the Company elected different approaches based on the circumstances surrounding each reporting unit.

5 unchanged sentences

The estimated fair value of each reporting unit was compared to each respective carrying amount, and, as a result of changes to the business and future projections, the Company recorded a goodwill impairment loss of $ 5.9 million.

The estimated fair value of each reporting

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

unit was compared to each respective carrying amount, and, as a result of changes to the business and future projections, the Company recorded a goodwill impairment loss of $ 5.9 million for the year ended December 31, 2024.

In conjunction with the quantitative impairment assessment on December 1, 2024, the Company performed a recoverability test on the following finite-lived intangible assets:

9 unchanged sentences

As a result, the Company identified a $ 6.2 million impairment loss for the year ended December 31, 2023 related to its finite-lived intangible assets, including trade names, patents, customer relationships, non-competes, and intellectual property.

For the year ended December 31, 2022, the Company recorded a total impairment loss of $ 127.8 million related to goodwill and intangible assets.

During the second quarter of 2022, the Company's market capitalization fell below total net assets.

In addition, financial performance continued to weaken during the quarter, which was contrary to prior experience.

Management reassessed business performance expectations following persistent adverse developments in equity markets, deterioration in the environment in which the Company operates, inflation, lower than expected sales, and an increase in operating expenses.

These indicators, in the aggregate, required impairment testing for finite-lived intangible assets at the asset group level and goodwill at the reporting unit level as of June 30, 2022.

As a result, the Company performed a recoverability test on the following finite-lived intangible assets:

customer relationships, trade names, and non-competes.

For goodwill impairment testing purposes, the Company determined three of its four reporting units required quantitative assessment as it was more likely than not that the fair value of those reporting units were less than their carrying values.

The Company determined the fair value of its reporting units and finite-lived intangible assets using the income approach.

The Company recognized impairment losses of $ 11.2 million related to its finite-lived intangibles and $ 116.7 million related to goodwill on June 30, 2022.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in goodwill, including the impairments discussed above, by segment for the years ended December 31, 2025 and 2024 were as follows:

1 unchanged sentence

Balance as of December 31, 2023 $ 5,920 $ 1,605 $ 7,525

Acquisitions and measurement period adjustments 830 — 830

Impairment ( 5,920 ) — ( 5,920 )

Balance as of December 31, 2024 — 1,605 1,605

Impairment ( 5,920 ) — ( 5,920 )

Acquisitions and measurement period adjustments 475 — 475

Balance as of December 31, 2025 $ 475 $ 1,605 $ 2,080

Accumulated impairment for goodwill was $ 131.9 million, $ 125.9 million, and $ 116.7 million as of December 31, 2024, 2023, and 2022, respectively.

Accumulated impairment for goodwill related entirely to the Cultivation and Gardening segment and totaled $ 131.9 million, $ 131.9 million and $ 125.9 million as of December 31, 2025, 2024, and 2023, respectively.

The changes in intangible assets, including the impairments discussed above, by segment for the years ended December 31, 2025 and 2024 were as follows:

2 unchanged sentences

Amortization ( 5,885 ) ( 781 ) ( 6,666 )

Acquisitions and measurement period adjustments 440 — 440

Impairment ( 735 ) — ( 735 )

1 unchanged sentence

Amortization ( 5,221 ) ( 702 ) ( 5,923 )

Impairment ( 735 ) — ( 735 )

Acquisitions 470 — 470

Balance as of December 31, 2025 $ 2,130 $ 1,196 $ 3,326

Intangible assets on the Company's Consolidated Balance Sheets consist of the following:

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On June 6, 2025, the Company purchased substantially all of the assets of Hydro Generation Inc.

(referred to as "Viagrow"), a domestic supplier of gardening and hydroponic equipment.

The acquisition related assets in the preceding tables represent the estimated fair values of goodwill and identified intangible assets.

As of December 31, 2025, the Company has finalized its purchase price allocation.

Refer to Note 13, Acquisitions, for additional information regarding the Viagrow acquisition.

Intangible assets on the Company's Consolidated Balance Sheets consisted of the following:

December 31, 2025 December 31, 2024

4 unchanged sentences

Trade names $ 27,790 $ ( 26,764 ) $ 1,026 $ 27,790 $ ( 21,908 ) $ 5,882

Patents, trademarks 69 ( 69 ) — 69 ( 69 ) —

Customer relationships 13,339 ( 11,040 ) 2,299 12,869 ( 9,974 ) 2,895

1 unchanged sentence

Intellectual property 1,136 ( 1,136 ) — 1,136 ( 1,136 ) —

Patents, trademarks 69 ( 69 ) — 69 ( 69 ) —

Total $ 43,194 $ ( 39,868 ) $ 3,326 $ 42,724 $ ( 33,945 ) $ 8,779

Amortization expense for the years ended December 31, 2025, 2024, and 2023 was $ 5.9 million, $ 6.7 million and $ 8.7 million, respectively.

Future amortization expense as of December 31, 2025 was as follows:

Thereafter 178

Total $ 3,326

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law, introducing significant changes to U.S.

federal income tax law.

The OBBBA made permanent or modified several provisions originally enacted under the Tax Cuts and Jobs Act of 2017, and introduced new rules affecting both domestic and international tax regimes.

Under ASC 740, the effects of new tax legislation are recognized in the period that includes the enactment date.

The Company has evaluated the provisions of the OBBBA and their impact on its financial statements as of the enactment date, in accordance with ASC 740.

The legislation did not have a material impact on the Company's income tax expense or effective income tax rate for the year ended December 31, 2025.

The ultimate impact of the OBBBA on the Company’s tax position and financial statements will depend on future guidance, the Company’s actual results, and potential changes in state tax conformity.

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amortization expense for the years ended December 31, 2024, 2023, and 2022 was $ 6.7 million, $ 8.7 million, and $ 9.9 million respectively.

Future amortization expense as of December 31, 2024 is as follows:

Total $ 8,779

The provision (benefit) for income taxes for the years ended December 31, 2024, 2023, and 2022 consisted of the following:

The Company's income is derived solely from operations in the in the United States.

The provision for income taxes for the years ended December 31, 2025, 2024, and 2023 consisted of the following:

Year Ended December 31,

5 unchanged sentences

Federal — — —

State — — ( 180 )

Provision (benefit) for income taxes $ 158 $ 32 $ ( 2,885 )

Provision for income taxes $ 191 $ 158 $ 32

The tax effects of temporary differences that gave rise to the Company's deferred tax assets and liabilities as of December 31, 2025 and 2024 were as follows:

13 unchanged sentences

Net deferred tax asset after valuation allowance $ — $ —

The Company regularly assesses the ability to realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction by jurisdiction basis.

In the event that the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

The Company’s management believes that, based on a number of factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized;

and accordingly, for the year ended December 31, 2025, the Company has provided a valuation allowance against the Company’s U.S.

net deferred tax assets.

The net change in the valuation allowance for the year ended December 31, 2025 was an increase of $ 4.9 million.

As of December 31, 2025, the Company had cumulative federal net operating losses of $ 126.8 million, which have an indefinite carryforward period.

1 unchanged sentence

State net operating loss carryforwards will begin to expire in calendar year 2035.

In certain circumstances, due to ownership changes, the Company’s net operating loss carryforwards may be subject to limitations under Section 382 of the Internal Revenue Code ("IRC").

The Company has not completed a study to assess whether an ownership change has occurred, as defined by IRC Section 382, or whether there have been ownership changes since the Company's formation due to the complexity of cost associated with such a study.

The Company estimates that if

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net operating loss carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions.

This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change.

The Company has completed an analysis of any limitations on its tax attributes and has assigned a full valuation allowance against them as of December 31, 2024.

such a change did occur, the federal and state net operating loss carryforwards that can be utilized in the future could be significantly limited.

There can be no assurance that the Company will ever be able to realize the benefit of some or all of the federal and state loss carryforwards, either due to ongoing operating losses or due to ownership change limitations.

The Company has assessed potential limitations on its tax attributes and has assigned a full valuation allowance against them as of December 31, 2025.

A reconciliation of the U.S.

federal statutory income tax rate to the Company's effective income tax rate is as follows for the years ended December 31, 2024 and 2023, and 2022:

Years Ended December 31,

federal statutory income tax rate to our effective tax rate after the adoption of ASU 2023-09 for the year ended December 31, 2025 is as follows:

Year ended December 31,

(in thousands) Percent

Statutory Rate $ ( 4,976 ) 21 %

State and Local Income Taxes, Net of Federal Benefit (1)

1,533 ( 6 ) %

Changes in Valuation Allowances 3,121 ( 13 ) %

Nondeductible items 164 ( 1 ) %

Other items adjustments 349 ( 1 ) %

Effective Tax Rate $ 191 — %

(1) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California and Michigan.

A reconciliation of the U.S.

federal statutory income tax rate to the Company's effective income tax rate prior to the adoption of ASU 2023-09 for the years ended December 31, 2024 and 2023 was as follows:

Year Ended December 31,

Federal statutory income tax rate 21 % 21 %

4 unchanged sentences

Effective income tax rate — % — %

The amounts of cash income taxes paid by the Company during the year ended December 31, 2025 were as follows:

Year ended December 31,

State and local $ 141

Income taxes, net of amounts refunded $ 141

The Company paid $ 0.1 million of cash for income taxes during each of the years ended December 31, 2024 and 2023.

Uncertain Tax Benefits

7 unchanged sentences

Generally, the Company's 2022 through 2024 fiscal years remain open for examination and assessment.

For various states, the examination and assessment remain open for 2020 through 2023.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

various states, the examination and assessment remain open for 2020 through 2024.

Years prior to 2020 remain open solely for purpose of examination of the Company's loss and credit carryforwards.

The right-of-use assets and corresponding liabilities related to the Company's operating leases were as follows:

Operating leases right-of-use assets, net $ 34,453 $ 39,933

Current maturities of operating lease liability 7,398 8,021

Operating lease liability, net of current maturities 29,633 34,448

Total lease liability $ 37,031 $ 42,469

Operating lease right-of-use assets, net $ 27,050 $ 34,453

Current maturities of operating lease liabilities 6,455 7,398

Operating lease liabilities, net of current maturities 23,022 29,633

Total lease liabilities $ 29,477 $ 37,031

The weighted-average remaining lease terms and weighted-average discount rates for operating leases were as follows:

1 unchanged sentence

Weighted average discount rate 6.1 % 6.2 %

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of lease costs were as follows:

19 unchanged sentences

imputed interest ( 4,620 )

Operating lease liability as of December 31, 2024 $ 37,031

Operating lease liabilities as of December 31, 2025 $ 29,477

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental and other information related to leases was as follows:

5 unchanged sentences

Equity Incentive Plans Overview

The Company maintains a long-term incentive plan, the Second Amended and Restated 2018 Equity Incentive Plan, for employees, non-employee members of its Board of Directors (the "Board"), and consultants.

The plan allows the Company to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, common stock warrants, or a combination of awards (collectively, "share-based awards").

On January 7, 2018, the Board adopted the 2018 Equity Incentive Plan (the "2018 Plan"), and on April 20, 2018, the shareholders approved the 2018 Plan.

On February 7, 2020, the Board approved the amendment and restatement of the 2018 Plan to increase the number of shares issuable thereunder from 2,500,000 to 5,000,000 , which amendment was approved by the shareholders on May 11, 2020 (the "First Restated 2018 Plan").

On April 22, 2024, the Board approved another amendment of the First Restated 2018 Plan to increase the number of shares issuable thereunder from 5,000,000 to

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6,500,000 , which amendment was approved by shareholders on June 20, 2024 (the "Second Restated 2018 Plan").

As of December 31, 2024, there were 1.4 million shares available for issuance under the 2018 Plan.

The 2018 Plan is administered by the Board.

The Board may grant options to purchase shares of common stock, stock appreciation rights, restricted stock units, restricted or unrestricted shares of common stock, performance shares, performance units, other cash-based awards and other share-based awards.

The Company maintains a long-term incentive plan, the Second Amended and Restated 2018 Equity Incentive Plan (collectively with all amendments referred to as the "2018 Plan"), for employees, non-employee members of its Board of Directors (the "Board"), and consultants.

The plan, which is administered by the Board, allows the Company to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, common stock warrants, or a combination of awards (collectively, "share-based awards").

The Board also has broad authority to determine the terms and conditions of each option or other kind of equity award, adopt, amend and rescind rules and regulations for the administration of the 2018 Plan and amend or modify outstanding options, grants and awards.

On January 7, 2018, the Board adopted the 2018 Equity Incentive Plan, which was approved by shareholders on April 20, 2018.

On February 7, 2020, the Board approved the amendment and restatement of the 2018 Equity Incentive Plan to increase the number of shares issuable thereunder from 2.5 million to 5.0 million, and the amendment was approved by the shareholders on May 11, 2020.

On April 22, 2024, the Board approved another amendment to increase the number of shares issuable thereunder from 5.0 million to 6.5 million, which was approved by shareholders on June 20, 2024.

As of December 31, 2025, there were 1.2 million shares available for issuance under the 2018 Plan.

No options, stock purchase rights or awards may be made under the 2018 Plan on or after the ten-year anniversary of the adoption of the 2018 Plan by the Board, but the 2018 Plan will continue thereafter while previously granted options, stock appreciation rights or awards remain subject to the 2018 Plan.

4 unchanged sentences

Share-Based Compensation

The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based awards made to employees, non-employee members of the Board, and consultants of the Company, including stock options, restricted stock units, and common stock warrants.

The following table presents share-based compensation expense for the years ended December 31, 2025, 2024 and 2023.

Year ended December 31,

2025 2024 2023

Restricted stock units $ 1,513 $ 2,421 $ 3,171

Stock options — — 59

Common stock warrants — — 1,019

Total $ 2,421 $ 3,171 $ 4,967

As of December 31, 2025, the Company had $ 1.7 million of unamortized share-based compensation for share-based awards, which are expected to be recognized over a weighted average period of 1.9 years.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

The Company issues shares of restricted stock units to eligible employees, which are subject to forfeiture until the end of an applicable vesting period.

The awards generally vest on the first, second, third, or fourth anniversary of the date of grant, subject to the employee's continuing employment as of that date.

Restricted stock units are valued using market value on the grant date.

The awards generally vest annually or biannually over three to five years following the date of grant, subject to the employee's continuing employment as of that date.

Restricted stock units are valued using the market value on the grant date.

Restricted stock unit activity for the year ended December 31, 2025 is presented in the following table:

5 unchanged sentences

Nonvested as of December 31, 2025 1,136 $ 1.92

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The weighted-average grant-date fair value of restricted stock units granted during the years ended December 31, 2024, 2023 and 2022 was $ 2.14 , $ 3.73 , and $ 8.85 , respectively.

Stock Options

The table below summarizes all option activity under all plans during the year ended December 31, 2024:

Options Shares Weighted-

Average Exercise

Price Weighted- Average Remaining

Contractual Term (Years) Weighted-

Average Grant Date Fair Value

Outstanding, vested and exercisable as of December 31, 2023 577 $ 4.01 0.95 $ 2.25

Granted — $ — $ —

Exercised — $ — $ —

Forfeited or expired ( 561 ) $ 3.99 $ 2.24

Outstanding, vested and exercisable as of December 31, 2024 16 $ 4.63 0.36 $ 2.56

The aggregate intrinsic value of stock options is calculated as the amount by which the fair value of the underlying stock exceeds the exercise price of the stock options.

The aggregate intrinsic value of stock options outstanding, vested, and exercisable was less than $ 0.1 million for the years ended December 31, 2024 and 2023, and $ 0.1 million for the year ended December 31, 2022.

Liability Awards

In August 2022, the Company issued certain stock awards classified as liabilities based on the guidance set forth at ASC 480, Distinguishing Liabilities from Equity , and ASC 718, Compensation-Stock Compensation .

These awards entitled the employees to receive an equity award with a specified dollar value of common stock on future dates ranging from June 15, 2023, through June 15, 2025.

The awards generally vested over three years subject to the employee's continued employment.

On June 15, 2023, the three employees subject to these awards entered into new employment agreements which superseded the prior agreements and removed the liability awards from their compensation package.

In accordance with ASC 718-20-35-2A through 718-20-35-9, these awards were evaluated and accounted for as modified awards.

The liability of $ 0.7 million was relieved to additional paid-in capital, and the incremental expense of $ 0.1 million will be recognized over the remaining term of the modified awards.

The expense related to liability-classified stock awards for the years ended December 31, 2023 and 2022 was $ 0.2 million, and $ 0.5 million, respectively.

As of December 31, 2024 and 2023, the Company no longer had any outstanding liability-classified stock awards.

The weighted-average grant-date fair value per restricted stock unit granted during the years ended December 31, 2025, 2024 and 2023 was $ 1.30 , $ 2.14 and $ 3.73 , respectively.

EARNINGS PER SHARE

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive loss per share computation for the years ended December 31, 2024, 2023, and 2022.

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and diluted loss per share computation for the years ended December 31, 2025, 2024 and 2023.

Year Ended December 31,

2 unchanged sentences

Weighted average shares outstanding, basic 59,671 60,176 61,181

Effect of dilutive outstanding warrants and stock options — — —

Weighted average shares outstanding, dilutive 60,176 61,181 60,813

Effect of dilutive outstanding restricted stock units and stock options — — —

Weighted average shares outstanding, diluted 59,671 60,176 61,181

Basic loss per share $ ( 0.40 ) $ ( 0.82 ) $ ( 0.76 )

Diluted loss per share $ ( 0.40 ) $ ( 0.82 ) $ ( 0.76 )

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Diluted loss per share calculations for the year ended December 31, 2024 excluded 0.5 million shares of common stock issuable upon exercise of stock options and 0.9 million non-vested restricted stock units that would have been anti-dilutive.

Diluted loss per share calculations for the year ended December 31, 2023 excluded 0.6 million shares of common stock issuable upon exercise of stock options and 1.0 million non-vested restricted stock units.

For the year ended December 31, 2022, there were 0.6 million shares of common stock issuable upon exercise of stock options, 0.6 million non-vested restricted stock units, and 33 thousand shares of common stock issuable upon exercise of the stock purchase warrants that would have been anti-dilutive.

Diluted loss per share calculations for the years ended December 31, 2025, 2024 and 2023 excluded 5.9 thousand, 0.5 million, and 0.6 million shares of common stock issuable upon exercise of stock options that would have been anti-dilutive, respectively.

Diluted loss per share calculations for the years ended December 31, 2025, 2024 and 2023 excluded 1.3 million, 0.9 million and 1.0 million non-vested restricted stock units that would have been anti-dilutive, respectively.

STOCKHOLDERS' EQUITY

On March 20, 2024, the Board authorized a share repurchase program, whereby the Company could repurchase up to $ 6.0 million worth of its common stock in open market transactions pursuant to Rule 10b-18 of the Exchange Act and a 10b5-1 trading plan.

The program began on April 1, 2024.

The program began on April 1, 2024, and, as of December 31, 2024, the Company completed all purchases available under the stock repurchase program.

This share repurchase program was intended to enhance long-term shareholder value.

3 unchanged sentences

During the year ended December 31, 2024, the Company repurchased 2.5 million shares of common stock at an average price of $ 2.38 per share, exclusive of incremental direct costs.

As of December 31, 2024, the Company completed all purchases available under the stock repurchase program.

The Company retired all 2.5 million shares of treasury stock acquired under the share repurchase program during the year ended December 31, 2024.

The Company retired all 2.5 million shares of treasury stock

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

acquired under the share repurchase program during the year ended December 31, 2024.

The shares were returned to the status of authorized but unissued shares.

1 unchanged sentence

The Company has a 401(k) Savings Retirement Plan that covers substantially all full-time employees who meet the plan's eligibility requirements and provides for an employee elective contribution.

The Company made immaterial matching contributions to the plan in the year ended December 31, 2024, and matching contributions of $ 0.6 million for each of the years ended December 31, 2023 and 2022.

The Company made immaterial matching contributions to the plan in the years ended December 31, 2025 and 2024, and matching contributions of $ 0.6 million in the year ended December 31, 2023.

The Company's acquisition strategy has been primarily to acquire (i) well-established, profitable hydroponic garden centers in markets where the Company does not have a market presence or in markets where it is increasing its market presence;

6 unchanged sentences

Any changes to these estimates may have a material impact on the Company's operating results or financial position.

During the year ended December 31, 2025, the Company recognized measurement period adjustments of $ 0.5 million resulting in a reduction to estimated fair value of acquired intangible assets and an increase to deferred equity compensation payments in excess of the initial holdback liability.

As a result of this measurement period adjustments, the Company increased acquired goodwill, which represents the expected value of organic growth and an opportunity for the Company to expand into a new market.

There were no measurement period adjustments during the years ended December 31, 2024 and 2023.

During the year ended December 31, 2022, the Company's measurement period adjustments included a $ 1.3 million reduction to estimated fair value of acquired intangible assets with the offset to goodwill.

As a result of these measurement period adjustments, the Company made an insignificant reduction in amortization expense.

All acquisition costs are expensed as incurred and recorded in Selling, general and administrative expense in the Consolidated Statements of Operations.

All transaction costs are expensed as incurred and recorded in Selling, general and administrative expense in the Consolidated Statements of Operations.

Acquisition costs were less than $ 0.1 million for the years ended December 31, 2025 and 2023.

The Company incurred no acquisition costs in the year ended December 31, 2024.

Acquisition costs were less than $ 0.1 million for the year ended December 31, 2023 and were $ 0.2 million for the year ended December 31, 2022.

2025 Acquisitions

On June 6, 2025, the Company purchased substantially all of the assets of Viagrow, a domestic supplier of gardening and hydroponic equipment.

The acquisition further diversifies the Company's home gardening and hydroponic gardening proprietary brand product offerings as well as expands the Company's outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms.

The total consideration transferred for the purchase of Viagrow was $ 1.3 million including cash paid and common stock issued on the date of acquisition, with certain additional amounts to be paid in future periods.

The purchase price included deferred equity consideration, which was issued in the fourth quarter of 2025 upon settling discrepancies of net assets acquired, and contingent consideration, which is to be paid in cash over three years dependent on the achievement of certain performance goals.

As of December 31, 2025, the Company has finalized its purchase price allocation.

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below details the acquisition-date fair value of consideration transferred and the purchase price allocation of acquired net assets during the year December 31, 2025.

Consideration

Common stock 109

Contingent consideration 83

Deferred equity consideration 50

Total consideration 1,255

Assets and liabilities acquired

Inventory 275

Prepaids and other current assets 10

Property and equipment 41

Intangible assets 470

Customer deposits ( 16 )

Total $ 1,255

The following table represents the estimated fair value of identified intangible assets and the related estimated remaining useful lives.

Estimated Fair Value Estimated Useful Life

Customer relationships $ 470 9.0 years

The following table represents the revenue and earnings included in the Consolidated Statement of Operations from the date of acquisition for the year ended December 31, 2025.

Net sales $ 714

Net loss $ ( 134 )

The following table represents the pro forma Condensed Consolidated Statement of Operations as if the acquisition was completed on January 1, 2024.

Year ended December 31,

(Unaudited) 2025 2024

Net sales $ 163,015 $ 191,520

Net loss $ ( 23,740 ) $ ( 49,568 )

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the Viagrow acquisition had been consummated as of the beginning of the periods presented or of results that may occur in the future.

2024 Acquisitions

3 unchanged sentences

The total consideration for the purchase of the SGS assets was $ 2.0 million, including $ 1.9 million in cash and an indemnity holdback of $ 0.1 million.

The SGS asset acquisition also included acquired goodwill of $ 0.6 million, which represents the value expected to rise from organic growth and an opportunity for the Company to expand into a new market.

The SGS asset acquisition also

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

included acquired goodwill of $ 0.6 million, which represents the value expected to rise from organic growth and an opportunity for the Company to expand into a new market.

SGS is included in the Company's Cultivation and Gardening segment.

23 unchanged sentences

Net income (loss) $ 41 ( 40 ) 1

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following represents the pro forma Consolidated Statement of Operations as if the acquisitions had been included in the consolidated results of the Company for the entire period for the years ended December 31, 2023 and 2022.

December 31, 2023 (Unaudited) December 31, 2022 (Unaudited)

Year ended December 31,

(Unaudited) 2023

Net sales $ 228,032

Net income (loss) $ ( 46,524 ) $ ( 163,712 )

2022 Acquisitions

On February 1, 2022, the Company purchased all of the assets of Horticultural Rep Group, Inc.

("HRG"), a specialty marketing and sales organization of horticultural products based in Ogden, Utah.

The total consideration for the purchase of the assets of HRG was $ 13.4 million, including $ 6.8 million in cash and common stock valued at $ 5.7 million.

The asset purchase agreement also provided for an indemnity holdback to be settled in common stock of the Company valued at $ 0.9 million.

Acquired goodwill of $ 5.8 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

HRG is included in the Company's Cultivation and Gardening segment.

On November 3, 2022, the Company purchased certain assets of St.

Louis Hydroponic Company ("STL"), a hydroponic retail store in St.

Louis, Missouri.

The total consideration for the purchase of the assets of STL was $ 0.4 million in cash.

Acquired goodwill of $ 0.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

STL is included in the Company's Cultivation and Gardening segment.

The table below represents the allocation of the purchase price to the acquired net assets during the year ended December 31, 2022.

HRG STL Total

Inventory $ 4,170 $ 279 $ 4,449

Prepaids and other current assets 76 10 86

Furniture and equipment 148 — 148

Operating lease right of use asset 666 — 666

Operating lease liability ( 666 ) — ( 666 )

Customer relationships 2,430 — 2,430

Trademark 496 — 496

Non-compete 255 — 255

Goodwill 5,816 135 5,951

Total $ 13,391 $ 424 $ 13,815

The table below represents the consideration paid for the net assets acquired in business combinations.

HRG STL Total

Cash $ 6,806 $ 424 $ 7,230

Indemnity stock holdback 875 — 875

Common stock 5,710 — 5,710

Total $ 13,391 $ 424 $ 13,815

Net loss $ ( 46,524 )

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table discloses the date of the acquisition noted above and the revenue and earnings included in the Consolidated Statement of Operations for the year ended December 31, 2022.

Revenue and earnings amounts include other proprietary brands now being included under HRG for operations.

HRG STL Total

Acquisition date February 1, 2022 November 3, 2022

Revenue $ 19,239 $ 178 $ 19,417

Net Income (loss) $ ( 629 ) $ 41 $ ( 588 )

The following represents the pro forma Consolidated Income Statement as if the acquisitions had been included in the consolidated results of the Company for the entire period for the year ended December 31, 2022.

2022 (Unaudited)

Revenue $ 280,897

Net loss $ ( 162,156 )

RELATED PARTIES

7 unchanged sentences

In addition to sales by operating segment, which represent the Company's principal lines of business, the chief operating decision maker ("CODM") evaluates the Company's operations by regularly reviewing sales by major product line, including proprietary brands, non-proprietary brands, and commercial fixtures, and by product type, including consumable and durable products.

Profit measures are evaluated for each reportable segment based on income from operations with identifiable expenses allocated to each reporting unit from which the expense line item was derived.

The profit measure that is evaluated for each reportable segment is based on segment income from operations with identifiable expenses allocated to each reporting unit from which the expense line item was derived.

The CODM compares actual results to prior year and current year budgeted income statements to identify areas for improvement and make capital allocation decisions.

1 unchanged sentence

The Company's CODM is the chief executive officer.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated revenue by segment is presented in the following tables:

Year ended December 31,

Net sales 2025 2024 2023

7 unchanged sentences

Total $ 161,741 $ 188,866 $ 225,882

Year ended December 31,

Net sales 2025 2024 2023

10 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Selected disaggregated information by segment is presented in the following tables for the years ended:

December 31, 2024

Cultivation & Gardening Storage Solutions Corporate Total

Selected disaggregated information by segment, including significant segment expenses, is presented in the following tables for the years ended:

Year ended December 31, 2025

Cultivation & Gardening Storage Solutions Total

Net sales $ 134,238 $ 27,503 $ 161,741

9 unchanged sentences

Total store operations and other operational expenses 25,500 5,232 30,732

Other operating expenses

Segment income from operations 6,693 5,850 12,543

Other corporate operating expenses

Selling, general, and administrative 26,266

2 unchanged sentences

Impairment loss 130

Total operating expenses 34,943 5,255 55,496 95,694

(Loss) income from operations ( 2,779 ) 6,303 ( 55,496 ) ( 51,972 )

Total other corporate expenses 38,128

Loss from operations ( 25,585 )

Other income 1,730

Net (loss) income before taxes $ ( 2,779 ) $ 6,303 $ ( 52,876 ) $ ( 49,352 )

Net loss before taxes $ ( 23,855 )

(1) Other segment items for each reportable segment include travel expenses, transaction fees, and other miscellaneous expenses.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

Cultivation & Gardening Storage Solutions Corporate Total

Year ended December 31, 2024

Cultivation & Gardening Storage Solutions Total

Net sales $ 163,510 $ 25,356 $ 188,866

9 unchanged sentences

Total store operations and other operational expenses 34,943 5,255 40,198

Other operating expenses

Segment (loss) income from operations ( 2,779 ) 6,303 3,524

Other corporate operating expenses

Selling, general, and administrative 29,243

Estimated credit losses — — 955 955

Estimated credit recoveries ( 58 )

Depreciation and amortization 19,436

Impairment loss 6,875

Total operating expenses 43,139 4,943 63,020 111,102

Income (loss) from operations 4,265 8,911 ( 63,020 ) ( 49,844 )

Total other corporate expenses 55,496

Loss from operations ( 51,972 )

Other income 2,620

Net income (loss) before taxes $ 4,265 $ 8,911 $ ( 59,640 ) $ ( 46,464 )

(1) Other segment items for each reportable segment include marketing costs, travel expenses, transaction fees, and other miscellaneous expenses.

December 31, 2022

Cultivation & Gardening Storage Solutions Corporate Total

Net loss before taxes $ ( 49,352 )

(1) Other segment items for each reportable segment include travel expenses, transaction fees, and other miscellaneous expenses.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year ended December 31, 2023

Cultivation & Gardening Storage Solutions Total

Net sales $ 194,464 $ 31,418 $ 225,882

9 unchanged sentences

Total store operations and other operational expenses 43,139 4,943 48,082

Other operating expenses

Segment income from operations 4,265 8,911 13,176

Other corporate operating expenses

Selling, general, and administrative 29,799

2 unchanged sentences

Impairment loss 15,659

Total operating expenses 50,362 4,318 183,458 238,138

Income (loss) from operations 8,475 7,108 ( 183,458 ) ( 167,875 )

Total other corporate expenses 63,020

Loss from operations ( 49,844 )

Other income 3,380

Net income (loss) before taxes $ 8,475 $ 7,108 $ ( 182,215 ) $ ( 166,632 )

Net loss before taxes $ ( 46,464 )

(1) Other segment items for each reportable segment include marketing costs, travel expenses, transaction fees, and other miscellaneous expenses.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company does not evaluate segments by assets or capital expenditures as it is not practical and does not inform any of its decision making processes.

6 unchanged sentences

From time to time, the Company has been and may again become involved in legal proceedings arising in the ordinary course of its business, including the initiation and defense of proceedings related to contract and employment disputes.

It is the Company's opinion that these claims individually and in the aggregate are not expected to have a material adverse effect on its financial condition, results of operations or cash flows.

In accordance with ASC 450, Contingencies , the Company regularly evaluates the status of its legal proceedings and establishes a liability for litigation and loss contingencies when information related to those contingencies show both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

Due to the unpredictable nature of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time is normally difficult to ascertain.

Legal and loss contingency accruals are recorded within Accrued liabilities on the Consolidated Balance Sheets and within Selling, general, and administrative expense in the Consolidated Statements of Operations.

During the year ended December 31, 2025, the Company was engaged in two ongoing legal matters related to a California employment class action dispute and a vendor contract dispute resulting in a loss contingency accruals of $ 1.1 million.

GROWGENERATION CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2021, the Company was sued in the U.S.

7 unchanged sentences

The remainder of the Note & Option, which were fully reserved, were written off during the year ended December 31, 2024.

It is the Company's opinion that the legal proceedings disclosed above, in addition to the other legal proceedings and claims in which the Company has been involved, individually and in the aggregate are not expected to have a material adverse effect on its financial condition, results of operations or cash flows.

There can be no assurance that future developments related to pending claims or claims filed in the future, whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material effect on the Company's financial condition, results of operations or cash flows.

12 unchanged sentences

The restructuring plan primarily included reductions in cost structure by closing and consolidating 12 redundant or underperforming retail locations, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.

The Company's restructuring and restructuring related charges consists of inventory disposal costs, retail location closure costs including related contract termination costs and fixed asset disposals, employee termination benefits, asset impairments including the impairment of operating lease right-of-use assets, and other associated costs.

The Company substantially completed its restructuring activities as of March 31, 2025.

Overall, the Company incurred aggregate restructuring and restructuring-related costs of $ 3.5 million, of which $ 1.1 million, and $ 2.4 million, were incurred during the years ended December 31, 2025 and 2024, respectively.

These costs are presented on the Consolidated Statements of Operations in the following table.

The Company does not expect to incur significant additional restructuring and restructuring-related costs in future periods.

GROWGENERATION CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Since the restructuring activities were announced in July 2024, the Company incurred aggregate restructuring and restructuring-related costs of $ 2.4 million, presented on the Consolidated Statements of Operations for the year ended December 31, 2024 as follows:

Restructuring

Year ended December 31,

Cultivation and Gardening segment:

2 unchanged sentences

Store operations and other operational expenses (2)

Segment operating loss ( 1,890 )

Restructuring costs in segment income from operations ( 765 ) ( 1,890 )

Corporate expenses:

1 unchanged sentence

Impairment loss (4)

Other expense (5)

Total restructuring and restructuring related charges $ ( 2,365 )

Other expense (income) (5)

Total restructuring and restructuring related activities $ ( 1,141 ) $ ( 2,365 )

(1) Includes inventory disposal costs

(2) Costs consist of retail location closure costs and employee termination benefits

(3) Includes employee termination benefits and other associated costs

(2) Costs consist primarily of property and equipment disposals, lease contract termination costs and employee termination benefits

(3) Costs consist of corporate operational and administrative contract terminations and employee termination benefits

(4) Consists of asset impairments for operating lease right-of-use assets

(5) Includes non-operating losses related to retail location closures

In conjunction with the Company's restructuring activities related to operational and administrative improvements, the Company reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in an $ 5.3 million increase to depreciation and amortization expense related to property and equipment in the year ended December 31, 2024.

Additionally, certain facilities costs related to closed retail locations for which the Company is pursuing sublease arrangements will be paid over the remaining terms which extend through 2032.

The liabilities associated with restructuring costs are included in Accrued liabilities and Payroll and payroll tax liabilities on the Consolidated Balance Sheets.

Activities related to liabilities incurred under the restructuring plan are as follows:

In conjunction with the Company's restructuring activities related to operational and administrative improvements, the Company reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in a $ 5.3 million increase to depreciation and amortization expense related to property and equipment in the year ended December 31, 2024.

These capitalized software assets became fully amortized and were retired during the year ended December 31, 2025.

The liabilities associated with restructuring costs were included in Accrued liabilities and Payroll and payroll tax liabilities on the Consolidated Balance Sheets.

Activities related to liabilities incurred under the restructuring plan were as follows:

Retail Location Closures Termination Benefits Other Associated Costs Total

Balance as of January 1, 2024 $ — $ — $ — $ —

Balance as of December 31, 2023 $ — $ — $ — $ —

Additions 715 317 65 1,097

1 unchanged sentence

Balance as of December 31, 2024 $ 115 $ 9 $ — $ 124

Overall, the Company expects to incur a total of $ 2.7 million in restructuring and restructuring-related costs, including the $ 2.4 million previously incurred.

The remainder of the expected charges primarily relate to corporate operational and administrative contract terminations and other associated costs.

The Company expects that these restructuring activities will be substantially completed by the end of the first quarter of 2025.

Additions 765 — — 765

Payments and other adjustments ( 880 ) ( 9 ) — ( 889 )

Balance as of December 31, 2025 $ — $ — $ — $ —

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The information required by this Item 9 was previously reported in our Current Report on Form 8-K that was filed with the SEC on July 14, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data