GrowGeneration Corp. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) GROWGENERATION CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except share and per share amounts) March 31, 2026 December 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 21,679 $ 30,406 Marketable securities 19,440 15,658 Accounts receivable, net of allowance for credit losses of $ 2,142 and $ 2,109 at March 31, 2026 and December 31, 2025, respectively 13,999 10,668 Notes receivable, current, net of allowance for credit losses of $ 196 and $ 214 at March 31, 2026 and December 31, 2025, respectively 495 507 Inventory 36,953 38,776 Prepaid income taxes 60 60 Prepaid and other current assets 7,062 7,672 Total current assets 99,688 103,747 Property and equipment, net 9,034 9,795 Operating lease right-of-use assets, net 25,191 27,050 Intangible assets, net 2,569 3,326 Goodwill 2,080 2,080 Other assets 1,016 1,042 TOTAL ASSETS $ 139,578 $ 147,040 LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,582 $ 8,775 Accrued liabilities 3,857 3,269 Payroll and payroll tax liabilities 1,858 2,589 Customer deposits 2,643 4,015 Sales tax payable 840 872 Current maturities of operating lease liabilities 5,831 6,455 Total current liabilities 24,611 25,975 Operating lease liabilities, net of current maturities 21,627 23,022 Other long-term liabilities 508 544 Total liabilities 46,746 49,541 Commitments and contingencies (Note 12) Stockholders' equity: Common stock; $ 0.001 par value; 100,000,000 shares authorized, 60,090,905 and 60,090,905 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively 60 60 Additional paid-in capital 377,383 377,128 Accumulated deficit ( 284,611 ) ( 279,689 ) Total stockholders' equity 92,832 97,499 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 139,578 $ 147,040 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 1 GROWGENERATION CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except share and per share amounts) Three Months Ended March 31, 2026 2025 Net sales $ 38,391 $ 35,703 Cost of sales (exclusive of depreciation and amortization shown below) 28,651 25,996 Gross profit 9,740 9,707 Operating expenses: Store operations and other operational expenses 6,401 8,792 Selling, general, and administrative 6,926 7,112 Estimated credit losses 67 92 Depreciation and amortization 1,611 3,585 Total operating expenses 15,005 19,581 Loss from operations ( 5,265 ) ( 9,874 ) Other income: Interest income 324 497 Total other income 324 497 Net loss before income taxes ( 4,941 ) ( 9,377 ) Benefit for income taxes 19 — Net loss $ ( 4,922 ) $ ( 9,377 ) Net loss per share, basic $ ( 0.08 ) $ ( 0.16 ) Net loss per share, diluted $ ( 0.08 ) $ ( 0.16 ) Weighted average shares outstanding, basic 60,090,905 59,441,330 Weighted average shares outstanding, diluted 60,090,905 59,441,330 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 2 GROWGENERATION CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited, in thousands except shares) Common Stock Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity Shares Amount Balance as of December 31, 2025 60,090,905 $ 60 $ 377,128 $ ( 279,689 ) $ 97,499 Share-based compensation — — 255 — 255 Net loss — — — ( 4,922 ) ( 4,922 ) Balance as of March 31, 2026 60,090,905 $ 60 $ 377,383 $ ( 284,611 ) $ 92,832 Common Stock Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity Shares Amount Balance as of December 31, 2024 59,402,628 $ 59 $ 375,677 $ ( 255,643 ) $ 120,093 Common stock issued for share-based compensation 84,849 — — — — Common stock withheld for employee payroll taxes — — ( 60 ) — ( 60 ) Share-based compensation — — 503 — 503 Net loss — — — ( 9,377 ) ( 9,377 ) Balance as of March 31, 2025 59,487,477 $ 59 $ 376,120 $ ( 265,020 ) $ 111,159 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 GROWGENERATION CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Three Months Ended March 31, 2026 2025 Cash flows from operating activities: Net loss $ ( 4,922 ) $ ( 9,377 ) Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: Depreciation and amortization 1,611 3,585 Share-based compensation 255 503 Estimated credit losses 67 92 Loss on asset disposition 22 658 Change in value of marketable securities ( 133 ) ( 234 ) Changes in operating assets and liabilities, net of acquisitions: Accounts and notes receivable ( 3,386 ) 333 Inventory 1,823 ( 1,834 ) Prepaid expenses and other assets 636 1,613 Accounts payable and accrued liabilities 1,310 1,600 Operating leases ( 160 ) ( 176 ) Payroll and payroll tax liabilities ( 731 ) ( 634 ) Customer deposits ( 1,372 ) ( 54 ) Sales tax payable ( 32 ) 96 Other ( 36 ) — Net cash and cash equivalents used in operating activities ( 5,048 ) ( 3,829 ) Cash flows from investing activities: Purchase of marketable securities ( 4,718 ) ( 7,186 ) Maturities of marketable securities 1,069 16,568 Purchase of property and equipment ( 88 ) ( 237 ) Proceeds from disposals of assets 58 15 Net cash and cash equivalents (used in) provided by investing activities ( 3,679 ) 9,160 Cash flows from financing activities: Common stock withheld for employee payroll taxes — ( 60 ) Net cash and cash equivalents used in financing activities — ( 60 ) Net (decrease) increase in cash and cash equivalents ( 8,727 ) 5,271 Cash and cash equivalents at the beginning of period 30,406 27,471 Cash and cash equivalents at the end of period $ 21,679 $ 32,742 Supplemental cash flow disclosures and non-cash investing and financing transactions: Purchase of property and equipment in accounts payable and accrued liabilities $ 85 $ 5 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) 1. GENERAL GrowGeneration Corp. (together with its direct and indirect wholly-owned subsidiaries, collectively "GrowGeneration" or the "Company") was incorporated in Colorado in 2014. Since then, GrowGeneration has grown from a small chain of specialty retail hydroponic and organic garden centers to a multifaceted business with diverse assets. Today, GrowGeneration operates two major lines of business: its Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business; and its Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business. As of March 31, 2026, GrowGeneration has 19 retail locations across 9 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 mass-market retailers, and a benching, racking, and storage solutions business, Mobile Media or MMI. Basis of Presentation The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 ("2025 Form 10-K"). There were no significant changes to the Company's significant accounting policies as disclosed in the 2025 Form 10-K. The results reported in these unaudited Condensed Consolidated Financial Statements are not necessarily indicative of results for the full fiscal year. All amounts included in the accompanying notes to the Condensed Consolidated Financial Statements, except per share data, are in thousands (000). Use of Estimates The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and the reported revenues and expenses during the reporting period. Actual results could vary from the estimates that were used. 2. RECENT ACCOUNTING PRONOUNCEMENTS From time to time, the Financial Accounting Standard Board ("FASB") or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through the issuance of an Accounting Standards Update ("ASU"). The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements. In addition to the accounting pronouncements discussed below, no other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material effect on the Company's Condensed Consolidated Financial Statements or disclosures. Recently Adopted Accounting Pronouncements 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 adopted ASU 2025-05 prospectively as of January 1, 2026 and adoption of the standard did not have a material impact on the Company's Condensed 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 5 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) 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 adopted ASU 2025-06 prospectively as of January 1, 2026 and adoption of this standard did not have a material impact on the Company's Condensed Consolidated Financial Statements and related disclosures. Recently Issued Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"), which requires disclosure on an annual and interim basis of disaggregated information about certain income statement expense line items in the notes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted, and adoption of ASU 2024-03 can be applied prospectively or retrospectively. The Company is currently evaluating the impact of this standard. 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. 3. FAIR VALUE MEASUREMENTS Fair Value Measurements Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1—Quoted prices in active markets for identical assets or liabilities. • Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. • Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies, and similar techniques. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. 6 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and all other current liabilities approximate fair values due to their short-term nature. The fair value of notes receivable approximates the outstanding balance net of reserves for expected credit loss. 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 $ 0.1 million and $ 0.2 million for the three months ended March 31, 2026 and 2025, respectively. Changes in fair value of marketable securities are included in Interest income on the Condensed Consolidated Statements of Operations. Level March 31, 2026 December 31, 2025 Cash equivalents 1 $ 12,937 $ 20,431 Marketable securities U.S. Treasury and agency securities 2 $ 3,039 $ 3,014 Corporate bonds 2 16,401 12,644 Total marketable securities $ 19,440 $ 15,658 4. REVENUE RECOGNITION Disaggregation of Revenues Net sales are disaggregated by the Company's segments, which represent its principal lines of business, as well as by major product line, including proprietary brands, non-proprietary brands, and commercial fixtures, and by product type, including consumable and durable products. Refer to Note 13, Segments, for disaggregated revenue disclosures. 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 Balance as of January 1, 2026 $ 10,668 $ 4,015 Balance as of March 31, 2026 13,999 2,643 Increase (decrease) $ 3,331 $ ( 1,372 ) Balance as of January 1, 2025 $ 7,361 $ 2,404 Balance as of March 31, 2025 6,936 2,350 Decrease $ ( 425 ) $ ( 54 ) Of the total amount of customer deposits as of January 1, 2026, $ 2.8 million was reported as net sales during the three months ended March 31, 2026. Of the total amount of customer deposits as of January 1, 2025, $ 1.1 million was reported as net sales during the three months ended March 31, 2025. Notes receivable at March 31, 2026 and December 31, 2025 were as follows: March 31, 2026 December 31, 2025 Notes receivable $ 691 $ 721 Allowance for credit losses ( 196 ) ( 214 ) Notes receivable, net $ 495 $ 507 7 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) 5. PROPERTY AND EQUIPMENT Property and equipment at March 31, 2026 and December 31, 2025 consisted of the following: March 31, 2026 December 31, 2025 Vehicles $ 2,537 $ 2,504 Building and land 1,991 1,991 Leasehold improvements 10,233 10,312 Furniture, fixtures and equipment 10,995 11,704 Capitalized software 9,342 9,155 Construction-in-progress 16 58 Total property and equipment, gross 35,114 35,724 Accumulated depreciation and amortization ( 26,080 ) ( 25,929 ) Property and equipment, net $ 9,034 $ 9,795 Depreciation and amortization expense related to property and equipment was $ 0.9 million and $ 2.0 million for the three months ended March 31, 2026 and 2025, respectively. Depreciation and amortization expense during the three months ended March 31, 2025 included the effects of the reassessment and shortening of estimated useful lives of certain capitalized software assets in conjunction with the Company's restructuring activities as discussed in Note 14, Restructuring. Depreciation and amortization expense related to these capitalized software assets was $ 0.8 million for the three months ended March 31, 2025. These capitalized software assets became fully amortized and were retired during the three months ended March 31, 2025. Refer to Note 14, 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. 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 March 31, 2026, the Company continues to actively market the asset and expects to sell the asset within one year. 6. GOODWILL AND INTANGIBLE ASSETS The carrying value of goodwill by segment was as follows: Cultivation and Gardening Storage Solutions Total Balance as of December 31, 2025 $ 475 $ 1,605 $ 2,080 Acquisitions and measurement period adjustments — — — Balance as of March 31, 2026 $ 475 $ 1,605 $ 2,080 Accumulated impairment for goodwill related entirely to the Cultivation and Gardening segment and totaled $ 131.9 million as of March 31, 2026 and December 31, 2025. The changes in intangible assets by segment for the three months ended March 31, 2026 were as follows: Cultivation and Gardening Storage Solutions Total Balance as of December 31, 2025 $ 2,130 $ 1,196 $ 3,326 Amortization ( 582 ) ( 175 ) ( 757 ) Balance as of March 31, 2026 $ 1,548 $ 1,021 $ 2,569 8 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) Intangible assets on the Condensed Consolidated Balance Sheets consisted of the following: March 31, 2026 December 31, 2025 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Trade names $ 27,790 $ ( 27,250 ) $ 540 $ 27,790 $ ( 26,764 ) $ 1,026 Customer relationships 13,339 ( 11,310 ) 2,029 13,339 ( 11,040 ) 2,299 Non-competes 860 ( 860 ) — 860 ( 859 ) 1 Intellectual property 1,136 ( 1,136 ) — 1,136 ( 1,136 ) — Patents, trademarks 69 ( 69 ) — 69 ( 69 ) — Total $ 43,194 $ ( 40,625 ) $ 2,569 $ 43,194 $ ( 39,868 ) $ 3,326 Amortization expense was $ 0.8 million and $ 1.5 million for the three months ended March 31, 2026 and 2025, respectively. Future amortization expense as of March 31, 2026 was as follows: 2026 (remainder of the year) $ 1,310 2027 817 2028 135 2029 77 2030 52 Thereafter 178 Total $ 2,569 7. INCOME TAXES For the three months ended March 31, 2026 and 2025, the effective tax rate was ( 0.4 )% and 0.0 %, respectively. The effective tax rate for each of the three months ended March 31, 2026 and 2025 was lower than the U.S. federal statutory rate of 21.0% primarily due to the Company's valuation allowance against deferred tax assets. As of March 31, 2026, the Company concluded that its deferred tax assets are not expected to be realizable, based on positive and negative evidence, therefore it has assigned a full valuation allowance against them. 8. LEASES The right-of-use assets and corresponding liabilities related to the Company's operating leases were as follows: March 31, 2026 December 31, 2025 Operating lease right-of-use assets, net $ 25,191 $ 27,050 Current maturities of operating lease liabilities $ 5,831 $ 6,455 Operating lease liabilities, net of current maturities 21,627 23,022 Total lease liabilities $ 27,458 $ 29,477 The weighted-average remaining lease terms and weighted-average discount rates for operating leases were as follows: March 31, 2026 2025 Weighted average remaining lease term 4.8 years 5.4 years Weighted average discount rate 6.1 % 6.2 % 9 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) The components of lease costs were as follows: Three Months Ended March 31, 2026 2025 Operating lease costs $ 2,011 $ 2,292 Variable lease costs 616 153 Short-term lease costs 40 88 Sublease income ( 634 ) ( 380 ) Total operating lease costs $ 2,033 $ 2,153 Future maturities of the Company's operating lease liabilities and receipts from subleases as of March 31, 2026 were as follows: Lease Payments Sublease Receipts 2026 (remainder of the year) $ 5,671 $ ( 1,636 ) 2027 6,360 ( 2,332 ) 2028 6,032 ( 2,533 ) 2029 5,402 ( 2,619 ) 2030 4,911 ( 2,309 ) Thereafter 3,259 ( 1,383 ) Total lease payments (receipts) $ 31,635 $ ( 12,812 ) Less: imputed interest ( 4,177 ) Operating lease liability as of March 31, 2026 $ 27,458 Supplemental and other information related to leases was as follows: Three Months Ended March 31, 2026 2025 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 2,018 $ 2,358 9. EARNINGS PER SHARE 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 three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 Net loss $ ( 4,922 ) $ ( 9,377 ) Weighted average shares outstanding, basic 60,090,905 59,441,330 Effect of dilutive outstanding restricted stock units and stock options — — Weighted average shares outstanding, diluted 60,090,905 59,441,330 Basic loss per share $ ( 0.08 ) $ ( 0.16 ) Diluted loss per share $ ( 0.08 ) $ ( 0.16 ) Diluted loss per share calculations for the three months ended March 31, 2026 and 2025 excluded 1.1 million and 1.4 million non-vested restricted stock units that would have been anti-dilutive, respectively. In addition, diluted loss per share calculations for the three months ended March 31, 2025, excluded 17 thousand shares of common stock issuable upon exercise of stock options that would have been anti-dilutive. 10 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) 10. SHARE-BASED PAYMENTS 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 2018 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. The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based awards, primarily restricted stock units, made to employees, non-employee members of the Board, and consultants of the Company. The Company recorded share-based compensation expense of $ 0.3 million and $ 0.5 million in the three months ended March 31, 2026 and 2025, respectively. Restricted Stock Units The Company issues restricted stock units to eligible employees, which are subject to forfeiture until the end of an applicable vesting period. 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 three months ended March 31, 2026 is presented in the following table: Units Weighted Average Grant Date Fair Value Nonvested as of December 31, 2025 1,045,584 $ 2.01 Granted 80,000 $ 1.27 Forfeited ( 25,000 ) $ 3.35 Nonvested as of March 31, 2026 1,100,584 $ 1.92 During the three months ended March 31, 2025, 244 thousand restricted stock units were granted at a weighted average grant date fair value of $ 1.26 . As of March 31, 2026, the Company had approximately $ 1.5 million of unrecognized share-based compensation related to restricted stock units, which is expected to be recognized over a weighted average period of approximately 1.8 years. 11. STOCKHOLDERS' EQUITY On February 24, 2026, the Board authorized a share repurchase program, whereby the Company could repurchase up to $ 10.0 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. Repurchases under the program can commence on April 24, 2026 and may continue for up to two years . The program does not obligate the Company to acquire any specific number of shares or to acquire any shares over any specific period of time. The timing and amount of any repurchases is dependent upon factors such as the stock price, trading volumes, market conditions, and regulatory requirements. The stock repurchase program may be amended, suspended, or discontinued at any time. 12. COMMITMENTS AND CONTINGENCIES Legal Matters 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. In accordance 11 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) 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 Condensed Consolidated Balance Sheets and within Selling, general, and administrative expense in the Condensed Consolidated Statements of Operations. During the year ended December 31, 2025 and the three months ended March 31, 2026, the Company has been engaged in two legal matters related to a California employment class action dispute and a vendor contract dispute. As of March 31, 2026, the Company has recorded cumulative loss contingencies of approximately $ 1.6 million related to these matters. No loss contingency accruals were recorded in the three months ended March 31, 2026 or March 31, 2025. The Company continues to evaluate these matters and, while an additional loss is reasonably possible, the Company is unable to estimate a range of potential additional loss, if any. 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. The Company believes that its assessment of contingencies is reasonable and that the related accruals, in the aggregate, are adequate; however, there can be no assurance that the final resolution of these matters will not have a material effect on the Company's financial condition, results of operations or cash flows. Indemnifications In the ordinary course of its business, the Company makes certain indemnities under which it may be required to make payments in relation to certain transactions. As of March 31, 2026, the Company did not have any liabilities associated with indemnities. In addition, the Company, as permitted under Colorado law and in accordance with its amended and restated certificate of incorporation and amended and restated bylaws, in each case, as amended to date, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company's request in such capacity. The duration of these indemnifications varies. The Company has a director and officer insurance policy that may enable it to recover a portion of any future amounts paid. The Company accrues for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable. No such losses have been recorded to date. 13. SEGMENTS The Company has two operating segments, each its own reportable segment, based on its major lines of business: the Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business; and the Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business. 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. The profit measure that is evaluated for each reportable segment is based on 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. The CODM uses gross profit measures to evaluate pricing decisions and product mix, also reviewing proprietary brand versus non-proprietary brand sales to assess the Company’s progress with key performance initiatives. The Company's CODM is the chief executive officer. 12 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) Disaggregated revenue by segment is presented in the following tables. Three Months Ended March 31, Net sales 2026 2025 Cultivation and Gardening Proprietary brand sales $ 11,803 $ 9,883 Non-proprietary brand sales 20,094 21,028 Total Cultivation and Gardening 31,897 30,911 Storage Solutions Commercial fixture sales 6,494 4,792 Total Storage Solutions 6,494 4,792 Total $ 38,391 $ 35,703 Three Months Ended March 31, Net sales 2026 2025 Cultivation and Gardening (1) Consumables $ 23,002 $ 23,434 Durables 8,895 7,477 Total Cultivation and Gardening 31,897 30,911 Storage Solutions Durables 6,494 4,792 Total Storage Solutions 6,494 4,792 Total $ 38,391 $ 35,703 (1) During the first quarter of 2026, the Company internally began viewing certain items' product type designations (i.e., consumable or durable) differently. Comparative prior period disclosures have been reclassified to conform to the current period segment presentation. 13 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) Selected disaggregated information by segment, including significant segment expenses, is presented in the following tables for the three months ended: Three Months Ended March 31, 2026 Cultivation & Gardening Storage Solutions Total Net sales $ 31,897 $ 6,494 $ 38,391 Cost of sales 24,729 3,922 28,651 Gross profit 7,168 2,572 9,740 Operating expenses Store operations and other operational expenses: Employee costs 1,942 736 2,678 Facilities 2,034 405 2,439 External service providers 68 17 85 Other segment items (1) 1,035 164 1,199 Total store operations and other operational expenses 5,079 1,322 6,401 Segment income from operations 2,089 1,250 3,339 Other corporate operating expenses Selling, general, and administrative 6,926 Estimated credit losses 67 Depreciation and amortization 1,611 Total other corporate expenses 8,604 Loss from operations ( 5,265 ) Other income 324 Net loss before taxes $ ( 4,941 ) (1) Other segment items for each reportable segment include travel expenses, transaction fees, and other miscellaneous expenses. 14 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) Three Months Ended March 31, 2025 Cultivation & Gardening Storage Solutions Total Net sales $ 30,911 $ 4,792 $ 35,703 Cost of sales 23,007 2,989 25,996 Gross profit 7,904 1,803 9,707 Operating expenses Store operations and other operational expenses: Employee costs 2,661 747 3,408 Facilities 2,756 394 3,150 External service providers 95 14 109 Other segment items (1) 1,857 268 2,125 Total store operations and other operational expenses 7,369 1,423 8,792 Segment income from operations 535 380 915 Other corporate operating expenses Selling, general, and administrative 7,112 Estimated credit losses 92 Depreciation and amortization 3,585 Total other corporate expenses 10,789 Loss from operations ( 9,874 ) Other income 497 Net loss before taxes $ ( 9,377 ) (1) Other segment items for each reportable segment include travel expenses, transaction fees, and other miscellaneous expenses. 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. The CODM neither reviews nor requests this information. 14. RESTRUCTURING On July 22, 2024, the Company announced a strategic restructuring plan focused on long-term profitability and advancing growth initiatives in key areas of its Cultivation and Gardening segment such as its proprietary brands, commercial sales, and e-commerce business. 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. 15 GROWGENERATION CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (Unaudited) The Company substantially completed its restructuring activities and had no remaining liability associated with restructuring costs as of March 31, 2025. The Company incurred no costs related to restructuring activities during the three months ended March 31, 2026 and does not expect to incur significant additional restructuring and restructuring-related costs in future periods. Overall, the Company incurred aggregate restructuring and restructuring-related costs of $ 3.5 million, of which $ 1.1 million were incurred during the three months ended March 31, 2025. These costs are presented on the Condensed Consolidated Statements of Operations in the following table. Three Months Ended March 31, 2025 Cultivation and Gardening segment: Store operations and other operational expenses (1) 765 Restructuring costs in segment income from operations ( 765 ) Corporate expenses: Selling, general, and administrative (2) 376 Total restructuring and restructuring-related charges $ ( 1,141 ) (1) Costs consist primarily of property and equipment disposals and lease contract termination costs for previously closed retail locations (2) Costs consist of corporate operational and administrative contract terminations 16