What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-27 compared with 2025-03-05 · 304 added, 296 removed, 728 unchanged (45% of the section changed)

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Consolidated Statements of Comprehensive Loss

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of

Hydrofarm Holdings Group, Inc.

To the stockholders and the Board of Directors of Hydrofarm Holdings Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Hydrofarm Holdings Group, Inc.

and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, changes in stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, changes in stockholders' equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the financial statements, at December 31, 2025, the Company has incurred recurring operating losses, negative cash flows from operations, and has significant debt obligations due within the next twelve months, which raises substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We believe that our audits provide 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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Inventory Valuation - Refer to Notes 3 and 7 to the financial statements

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The Company’s inventories are stated at the lower of cost or net realizable value, principally determined by the first in, first out method of accounting.

As described in Notes 2 and 6 to the consolidated financial statements, the Company maintains an allowance for excess and obsolete inventory that is based upon assumptions about current and anticipated demand, customer preferences, business strategies, and market conditions.

As described in Notes 3 and 7 to the consolidated financial statements, the Company maintains an allowance for excess and obsolete inventory that is based upon assumptions about current and anticipated demand, customer

preferences, business strategies, and market conditions.

Management reviews these assumptions periodically to determine if any adjustments are needed to the allowance for excess and obsolete inventory.

We identified inventory valuation as a critical audit matter because of the quantitative and qualitative materiality of the inventory excess and obsolescence reserve balance, coupled with the judgments necessary to identify and record the inventory excess and obsolescence reserve timely.

Additionally, our audit procedures performed to evaluate management’s estimates of the net realizable value for the inventory on-hand as of the reporting date involved a high degree of auditor judgment.

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Our audit procedures related to the inventory valuation included the following, among other things:

• We tested the design and implementation of internal controls over the inventory valuation process, including controls over the inputs that are used in management's valuation of the excess and obsolescence reserve analysis.

• We tested the design and implementation of internal controls over management’s inventory excess and obsolescence reserve.

• We evaluated the appropriateness and consistency of management’s methodology and assumptions used in determining the inventory valuation of the excess and obsolescence reserve.

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• We selected a sample of inventory items and compared the recorded unit cost against the most recent sales price to determine if inventory was recorded at lower of cost or net realizable value.

• We selected a sample of inventory items and evaluated historical sales trends, gross margins, and management’s ability to sell-through inventory.

• We selected a sample of inventory items and evaluated the appropriateness of and performed audit procedures over specified inputs supporting management's inventory excess and obsolescence reserve, including the historical sales of inventory and gross margins.

Impairment of Long-Lived Assets - Refer to Notes 3, 5 and 9 to the financial statements

Critical Audit Matter Description

The Company’s long-lived tangible assets and finite-lived intangible assets are stated at cost.

All intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.

As described in Note 5 to the consolidated financial statements, as a result of industry conditions the Company performed an impairment assessment and recorded an impairment of $232.2 million for the year ended December 31, 2025.

Given the significant judgments made by management to estimate the fair value of long-lived assets and the difference between fair value and the carrying value, performing audit procedures to evaluate the reasonableness of management's estimates and assumptions related to revenue growth rate, operating margins, discount rate, and market approach, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the determination of fair value of long-lived assets, included the following, among others:

• We tested the design and implementation of internal controls over management’s review over the long-lived asset valuation.

• We evaluated management's ability to accurately forecast by comparing management's historical projections to actual performance.

• We evaluated whether the estimated future earnings were consistent with evidence obtained in other areas of the audit.

• We evaluated the reasonableness of management's revenue growth rate and operating margins by comparing management's projections to historical amounts and internal communications to management and the Board of Directors.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the Company’s valuation methodology and mathematical accuracy.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the Company’s discount rate by testing source information and developing a range of independent estimates and comparing those to the discount rate selected by management.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the Company’s market approach by evaluating the reasonableness of selected peer companies and market multiple calculations.

/s/ Deloitte & Touche LLP

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Total assets $ 123,804 $ 426,104

Liabilities and stockholders’ equity

Liabilities and stockholders’ (deficit) equity

Current liabilities:

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Commitments and contingencies (Note 15)

Stockholders’ equity

Stockholders’ (deficit) equity

Common stock ($ 0.0001 par value;

300,000,000 shares authorized;

4,614,279 and 4,578,841 shares issued and outstanding at December 31, 2024, and December 31, 2023, respectively, giving retroactive effect to the 1-10 reverse split effected on February 12, 2025)

4,667,004 and 4,614,279 shares issued and outstanding at December 31, 2025, and December 31, 2024, respectively)

Additional paid-in capital 791,227 790,094

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Accumulated deficit ( 847,251 ) ( 557,461 )

Total stockholders’ equity 223,722 290,610

Total liabilities and stockholders’ equity $ 426,104 $ 507,643

Total stockholders’ (deficit) equity ( 63,296 ) 223,722

Total liabilities and stockholders’ (deficit) equity $ 123,804 $ 426,104

The accompanying notes are an integral part of the consolidated financial statements.

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Selling, general and administrative 59,948 72,794

Impairments 232,179 —

Loss on asset disposition — 11,520

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Interest expense ( 13,427 ) ( 15,237 )

Other income, net 1,570 118

Other (expense) income, net ( 185 ) 1,570

Loss before tax ( 290,530 ) ( 65,848 )

Income tax (expense) benefit ( 869 ) 213

Income tax benefit (expense) 740 ( 869 )

Net loss $ ( 289,790 ) $ ( 66,717 )

5 unchanged sentences

Diluted 4,647,945 4,598,640

(1) Net loss per share and Weighted-average shares of common stock outstanding amounts have been adjusted to give retroactive effect to the 1-for-10 reverse stock split effected on February 12, 2025.

The accompanying notes are an integral part of the consolidated financial statements.

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Other comprehensive income (loss):

Foreign currency translation (loss) gain ( 2,414 ) 738

Foreign currency translation gain (loss) 1,639 ( 2,414 )

Total comprehensive loss $ ( 288,151 ) $ ( 69,131 )

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Hydrofarm Holdings Group, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except for share amounts)

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Stockholders’

Shares Amount

Balance, December 31, 2023 4,578,841 $ — $ 787,851 $ ( 6,497 ) $ ( 490,744 ) $ 290,610

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Net loss — — — — ( 66,717 ) ( 66,717 )

Foreign currency translation gain — — — 738 — 738

Foreign currency translation loss — — — ( 2,414 ) — ( 2,414 )

Balance, December 31, 2024

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Net loss — — — — ( 289,790 ) ( 289,790 )

Foreign currency translation (loss) — — — ( 2,414 ) — ( 2,414 )

Foreign currency translation gain — — — 1,639 — 1,639

Balance, December 31, 2025

4,667,004 $ — $ 791,227 $ ( 7,272 ) $ ( 847,251 ) $ ( 63,296 )

(1) Common share and par value amounts have been adjusted to give retroactive effect to the 1-for-10 reverse stock split effected on February 12, 2025.

The accompanying notes are an integral part of the consolidated financial statements.

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Net loss $ ( 289,790 ) $ ( 66,717 )

Adjustments to reconcile net loss to net cash from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation, depletion and amortization 23,142 30,691

Provision for (benefit from) doubtful accounts 314 ( 386 )

Provision for credit losses 838 314

Provision for inventory obsolescence 1,398 2,002

Non-cash restructuring expenses 806 9,703

Restructuring expenses 4,386 806

Stock-based compensation expense 1,179 2,385

Non-cash operating lease expense 7,933 8,248

Impairments 232,179 —

Non-cash loss from asset disposition — 11,103

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Other long-term liabilities 59 11

Net cash (used in) from operating activities ( 324 ) 7,044

Net cash used in operating activities ( 14,059 ) ( 324 )

Investing activities

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Proceeds from sale of property, plant and equipment 183 861

Proceeds from Asset Sale for property, plant and equipment 3,700 —

Other — ( 51 )

Net cash from (used in) investing activities 1,669 ( 4,170 )

Cash proceeds from IGE Asset Sale for property, plant and equipment — 3,700

Net cash (used in) from investing activities ( 841 ) 1,669

Financing activities

Proceeds from Sale-Leaseback Transaction — 8,598

Payment of withholding tax related to stock awards ( 46 ) ( 142 )

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Finance lease principal payments ( 463 ) ( 1,362 )

Net cash (used in) from financing activities ( 4,776 ) 6,065

Net cash used in financing activities ( 5,438 ) ( 4,776 )

Effect of exchange rate changes on cash and cash equivalents 536 ( 770 )

Net (decrease) increase in cash and cash equivalents ( 4,201 ) 9,021

Cash and cash equivalents at beginning of year 30,312 21,291

Net decrease in cash and cash equivalents ( 19,802 ) ( 4,201 )

Cash and cash equivalents cash at beginning of year 26,111 30,312

Cash and cash equivalents at end of year $ 6,309 $ 26,111

Non-cash investing and financing activities

Right-of-use assets relinquished under operating lease obligation $ ( 1,924 ) $ ( 1,067 )

Assets acquired under finance lease obligation — 185

Right-of-use assets acquired (relinquished) under operating lease obligation $ 2,166 $ ( 1,924 )

Capital expenditures included in accounts payable and accrued liabilities 31 76

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Cash paid for interest 12,677 13,289

Cash paid (refunds) for income taxes 201 ( 1,000 )

Cash paid for income taxes 44 201

The accompanying notes are an integral part of the consolidated financial statements.

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Products offered include agricultural lighting devices, indoor climate control equipment, nutrients, and plant additives used to grow, farm and cultivate cannabis, flowers, fruits, plants, vegetables, grains and herbs in controlled environment settings that allow end users to control key farming variables including temperature, humidity, CO 2 , light intensity and color, nutrient concentration and pH.

Subsequent Events

The Company and its Board of Directors are exploring strategic alternatives to strengthen the Company’s liquidity and capital structure.

In connection with such process, the Company and its financial advisors have engaged in ongoing discussions with the lenders under the Term Loan.

While these discussions have continued, on February 4, 2026, the Company elected to defer making the interest payment of approximately $ 2.8 million on the Term Loan.

As a result of the Company’s failure to pay the interest within the grace period, an event of default occurred with respect to the Term Loan.

On February 11, 2026, the lenders, through the administrative agent, notified the Company of such event of default and informed the Company that the administrative agent or the collateral agent may exercise any rights and remedies provided under the Credit and Guaranty Agreement and related financing documents, but it did not seek to enforce such remedies as of such time.

As a result of the event of default, the Term Loan was reclassified to current portion of long-term debt from long-term debt and interest began accruing at a rate that is 2 % per annum in excess of the interest rate otherwise payable.

On February 10, 2026, JPMorgan issued a notice to the Company and Lenders of its resignation as Administrative Agent and Collateral Agent under the Credit and Guaranty Agreement.

Such resignation became effective on March 12, 2026, when FEAC Agent, LLC was appointed as the successor agent for the Lenders in accordance with Section 9 of the Credit and Guaranty Agreement.

Revolving Credit Facility

On February 17, 2026, the Company entered into the Termination Agreement to terminate the Revolving Credit Agreement.

Pursuant to the terms of the Termination Agreement, the parties agreed to terminate the Revolving Credit Agreement subject to the survival of each of the provisions of the Revolving Credit Agreement and Loan Documents (as defined in the Revolving Credit Agreement) and in the certificates delivered in connection with or pursuant to the Revolving Credit Agreement that survive termination of the Revolving Credit Agreement.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

LIQUIDITY AND GOING CONCERN

The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Management evaluated whether conditions or events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date the financial statements are issued.

The Company has incurred recurring operating losses, negative cash flows from operations, and has significant debt obligations due within the next twelve months.

These conditions and events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans to address these conditions include reducing costs through restructuring and other initiatives, including facility consolidations, headcount reductions, and focusing on our proprietary brand offerings.

To improve liquidity the Company is negotiating with lenders and key vendors, and is pursuing additional financing or strategic alternatives including the sale of assets, businesses, or through an offering of equity securities.

These plans are not within the Company’s control, and therefore cannot be deemed probable.

As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

These consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue as a going concern.

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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All intercompany balances and transactions have been eliminated in consolidation.

Subsequent Event - Reverse Stock Split

On February 12, 2025, the Company effected a one-for-ten reverse stock split of its common stock, whereby each lot of ten shares of common stock issued and outstanding immediately prior to the reverse stock split was converted into and became one share of common stock (the "Reverse Stock Split").

In lieu of issuing any fractional shares, any stockholder entitled to receive less than one share of common stock received cash for such stockholder’s fractional share.

There is no change to the par value of $ 0.0001 .

There was no change to the par value of $ 0.0001 .

Accordingly, the presentation of all periods covered by the consolidated financial statements, and notes to the consolidated financial statements, contained herein have been adjusted to give retroactive effect to the Reverse Stock Split.

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Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

Significant estimates include provisions for sales returns, rebates and claims from customers, realization of accounts receivable and inventories, fair value of assets acquired and liabilities assumed for business combinations, valuation of intangible assets, estimated useful lives of long-lived assets, incremental borrowing rate applied in lease accounting, valuation of stock-based compensation, recognition of deferred income taxes, classification of debt pursuant to certain terms in the Company's credit agreements, recognition of liabilities related to commitments and contingencies, asset retirement obligations, and valuation allowances.

Actual results may differ from these estimates.

On an ongoing basis, the Company reviews its estimates to ensure that these estimates appropriately reflect changes in its business or new information available.

Segment and entity-wide information

Segment information

The Company's chief operating decision maker ("CODM") is the Chief Executive Officer (the "CEO") who reviews financial information for the purposes of making operating decisions, assessing financial performance and allocating resources.

The Company no longer aggregates its operating segments as it has reorganized and integrated its business activities into one operating segment effective for the period ended December 31, 2024.

The business is organized as one operating segment

Hydrofarm Holdings Group, Inc.

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(In thousands, except share and per share amounts)

managed on a consolidated basis, and one reportable segment, which is the distribution and manufacture of CEA equipment and supplies.

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires additional disclosures, including an enhanced disclosure of significant segment expenses on an annual and interim basis.

The Company adopted this guidance effective in the period ended December 31, 2024, and included the relevant disclosures herein.

For the purposes of making operating decisions, assessing financial performance and allocating resources, the CODM reviews financial statement metrics on a consolidated basis, including net sales, gross profit, SG&A, and net income (loss) as presented in the consolidated statements of operations.

Net income (loss) is the primary measure of profit or loss reviewed by the CODM.

In addition, the CODM reviews consolidated total assets and significant components such as inventories, cash and other assets for the purposes of evaluating financial performance.

Segment and entity-wide information

Segment information

The business is organized as one operating segment managed on a consolidated basis, and one reportable segment, which is the distribution and manufacture of CEA equipment and supplies.

For the purposes of making operating decisions, assessing financial performance and allocating resources, the CODM reviews financial statement metrics on a consolidated basis, including net sales, gross profit, SG&A, and net loss as presented in the consolidated statements of operations.

Net loss is the primary measure of profit or loss reviewed by the CODM.

In addition, the CODM reviews consolidated total assets and significant components such as inventories, cash and other assets for the purpose of evaluating financial performance.

Significant expense categories regularly reviewed by the CODM are comprised of cost of goods sold and SG&A.

The other components of net income (loss) as disclosed in the statements of operations that are not significant segment expenses are loss on asset disposition, interest expense, other income, net, and income tax expense.

Therefore, the Company is cross referencing to the U.S.

GAAP financial statement measures as presented in the consolidated statement of operations, in connection with adoption of ASU 2023-07.

Since the Company operates as one reportable segment, all required segment financial information is found in the consolidated financial statements and footnotes, and within the entity-wide disclosures presented below.

The other components of net loss as disclosed in the statements of operations that are not significant segment expenses are impairments, loss on asset disposition, interest expense, other income (expense), net, and income tax expense.

Since the Company operates as one reportable segment, all required segment financial information is found in the consolidated financial statements and notes, and within the entity-wide disclosures presented below.

Entity-wide information

Net sales and property, plant and equipment, net and operating lease right-of-use assets, in the United States and Canada, as determined by the location of the subsidiaries, are shown below.

Net sales and property, plant and equipment, net and operating lease right-of-use ("ROU") assets, in the United States and Canada, as determined by the location of the subsidiaries, are shown below.

Other foreign locations, which are immaterial, individually and in the aggregate, are included in the United States below.

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Total consolidated net sales $ 134,252 $ 190,288

Years ended December 31,

United States $ 38,071 $ 50,928

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No customer accounted for more than 10% of revenues in 2025 or 2024.

No customer accounted for more than 10% of accounts

No customer accounted for more than 10% of accounts receivable as of December 31, 2025, or December 31, 2024.

One supplier accounted for more than 10 % of purchases in 2025 and 2024.

Hydrofarm Holdings Group, Inc.

1 unchanged sentence

(In thousands, except share and per share amounts)

receivable as of December 31, 2024, or December 31, 2023.

One supplier accounted for more than 10 % of purchases in 2024 and 2023.

Fair value measurements

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Other receivables represent other current non-trade receivables.

Allowance for doubtful accounts reflects the Company’s estimate of amounts in its existing accounts receivable that may not be collected due to customer claims or customer inability or unwillingness to pay.

Allowance for credit losses reflects the Company’s estimate of amounts in its existing accounts receivable that may not be collected due to customer claims or customer inability or unwillingness to pay.

The allowance is estimated based on a combination of factors, including, but not limited to the age of the account, the credit worthiness of the customer, payment terms, the customer’s historical payment history and general economic conditions.

Management reviews these factors quarterly to determine if any adjustments are needed to the allowance for doubtful accounts.

Management reviews these factors quarterly to determine if any adjustments are needed to the allowance for credit losses.

Accounts receivable are written off when the receivables are deemed uncollectible.

Subsequent collections are recorded in SG&A on the consolidated statement of operations when they are received.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Inventories consist of finished goods, work-in-process, and raw materials used in manufacturing products.

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The estimate for excess and obsolete inventory is based upon assumptions about current and anticipated demand, customer preferences, business strategies, and market conditions.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Management reviews these assumptions periodically to determine if any adjustments are needed to the allowance for excess and obsolete inventory.

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If inventory is sold, any related reserves would be reversed in the period of sale.

During the years ended December 31, 2024, and 2023, the Company estimated inventory markdowns relating to restructuring charges based upon current and anticipated demand, customer preferences, business strategies, and market conditions including management's actions with respect to inventory raw materials and products and brands being removed from the Company's portfolio.

The Company estimates inventory markdowns relating to restructuring charges based upon business strategies, management's actions with respect to inventory of raw materials and products and brands being removed from the Company's portfolio, current and anticipated demand, customer preferences, and market conditions.

Leases are accounted for under Accounting Standard Codification ("ASC") 842 - Leases .

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Leases are then classified as either finance or operating, with classification affecting the location of expense recognition in the consolidated statements of operations.

Right-of-use assets ("ROU") represent the right to use an underlying asset for the lease term while lease liabilities represent the obligation to make lease payments arising from a lease, measured on a discount basis.

All leases greater than 12 months result in the recognition of a ROU and a lease liability at the lease commencement date based on the present value of the lease payments over the lease term.

Right-of-use assets represent the right to use an underlying asset for the lease term while lease liabilities represent the obligation to make lease payments arising from a lease, measured on a discount basis.

All leases greater than 12 months result in the recognition of a ROU asset and a lease liability at the lease commencement date based on the present value of the lease payments over the lease term.

The present value of the lease payments is calculated using the applicable weighted-average discount rate.

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The following table summarizes the estimated useful lives as follows:

Buildings and improvements 10 - 40 years

Building and improvements 10 - 40 years

Machinery and equipment 5 - 15 years

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The useful lives of property, plant and equipment recorded under finance leases are further limited to the term of lease.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Peat bogs and related development costs are depleted using the units of production method over the total expected volume of the peat bogs.

The Company operates peat bogs in Alberta Canada.

Under current provincial laws, the Company is subject to certain asset retirement obligations ("AROs") and the remediation of the peat bog sites are under provincial oversight.

The Company periodically evaluates expected remediation costs associated with the peat bog sites that it operates.

Where the Company concludes that it is probable that a liability has been incurred, a provision is made for management's estimate of the liability.

As of December 31, 2024, and 2023, the Company had AROs of $ 284 and $ 759 , respectively, recorded in accrued expenses and other current liabilities on the consolidated balance sheets.

As of December 31, 2024, and 2023, the Company had AROs of $ 4,232 and $ 4,457 , respectively, recorded in other long-term liabilities on the consolidated balance sheets.

Intangible assets

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The Company has one trade name that is considered to have an indefinite useful life.

Intangible assets are also tested for impairment at least annually and when events or changes in circumstances indicate that, more-likely-than-not, the carrying amount may not be recoverable.

Intangible assets are also tested for impairment

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

at least annually and when events or changes in circumstances indicate that, more-likely-than-not, the carrying amount may not be recoverable.

The Company estimates fair value based on the income approach and market approach.

Under the income approach, the Company estimates the fair value of the asset group on the present value of estimated future cash flows, which the Company considers to be a level 3 unobservable input in the fair value hierarchy.

Significant judgment is required in estimating fair values and performing intangible asset impairment tests.

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The Company follows ASC 606 - Revenue from Contracts with Customers which requires that revenue recognized from contracts with customers be disaggregated into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

The Company has determined that revenue is generated from one category, which is the distribution and manufacture of CEA equipment and supplies.

The Company has determined that revenue is generated from one category, which is the manufacture and distribution of CEA equipment and supplies.

Revenue is recognized as control of promised goods is transferred to customers, which generally occurs upon receipt at customers’ locations determined by the specific terms of the contract.

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The Company's contract liabilities, which consist primarily of customer deposits reported within deferred revenue on the consolidated balance sheets, totaled $ 2,742 and $ 2,611 as of December 31, 2025, and 2024, respectively.

During the year ended December 31, 2025, the Company recorded customer deposits of $ 4,470 , recognized $ 4,155 of deferred revenue, and noted $ 184 of additional decreases primarily due to customer refunds and foreign exchange rate fluctuations.

There are no significant financing components and the majority of revenue is recognized within one year.

Excluded from revenue are any taxes assessed by governmental authorities, including value-added and other sales-related taxes that are imposed on and concurrent with revenue-generating activities.

Warrants issued in connection with financings

The Company generally accounts for warrants issued in connection with debt and equity financings as a component of equity unless the warrants include a conditional obligation to issue a variable number of shares among other conditions or it is possible that the Company may need to settle the warrants in cash.

Stock-based compensation

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The Company accounts for forfeitures when they occur and any compensation expense previously recognized on unvested shares will be reversed when forfeited.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Service-based awards

The Company records stock-based compensation expense for restricted stock units ("RSUs") and service-based stock options on a straight-line basis over the requisite service period.

The fair value of grants of restricted stock is based on the fair value of the common stock underlying the award.

The fair value of the underlying common stock for RSUs prior to the Company’s initial public offering ("IPO") in December 2020, was determined by considering a number of objective, subjective, and highly complex factors including independent third-party valuations of the Company’s common stock, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook among other factors.

For awards granted after the Company's IPO, the fair value of the underlying common stock for RSUs is the closing date price of the Company's common stock at the grant-date.

The fair value of restricted stock awards is measured on the grant date based on the closing price of the Company's common stock.

The fair value of option-based awards is estimated using the Black-Scholes valuation model.

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The expected dividend yield is 0.0 % as the Company has not paid and does not anticipate paying dividends on its common stock.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Performance-based awards

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In the event we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The Company will establish a liability for tax return positions when there is uncertainty as to whether the position will ultimately be sustained.

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Recently issued accounting pronouncements

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment expenses on an annual and interim basis.

This ASU will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company has adopted the aforementioned guidance, and enhanced segment reporting is presented for the years ended December 31, 2024, and 2023.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (ASU 2023-09), which requires greater disaggregation of information in the effective tax rate reconciliation, income taxes paid disaggregated by jurisdiction, and certain other amendments related to income tax disclosures.

This guidance will be effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Improvements to Income Tax Disclosures , which requires greater disaggregation of information in the effective tax rate reconciliation, income taxes paid disaggregated by jurisdiction, and certain other amendments related to income tax disclosures.

This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company has adopted the aforementioned guidance, and updated tax disclosures are presented in Note 14 – Income Taxes .

In November 2024, the FASB issued ASU No.

2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which requires a public entity to disclose additional information about specific expense categories in the notes to financial statements on an annual and interim basis.

The amendments are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted.

The amendments are effective for annual periods beginning after December 15, 2026, and interim

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

periods beginning after December 15, 2027, with early adoption permitted.

A public entity should apply the amendments either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements.

The Company is currently evaluating the impact that adoption of this accounting standard will have on its financial disclosures.

In July 2025, the FASB issued ASU No.

2025-05, Financial Instruments - Credit Losses:

Measurement of Credit Losses for Accounts Receivable and Contract Assets , which provides a practical expedient permitting companies to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets.

This guidance is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption is permitted and is effective on a prospective basis.

The Company is currently evaluating the impact that adoption of this accounting standard will have on its financial 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 , which makes targeted improvements to the accounting for internal-use software by removing references to “development stages.” The update also clarifies the criteria for capitalization, which begins when both of the following occur:

(1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended.

The guidance is effective for annual reporting periods beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted, and can be applied prospectively, retrospectively, or via a modified prospective transition method.

The Company is currently evaluating the impact that adoption of this accounting standard will have on its financial disclosures.

RESTRUCTURING AND ASSET SALES

Restructuring

The Company began a restructuring plan (the "Restructuring Plan") in 2022, and undertook significant actions to streamline operations, reduce costs and improve efficiencies.

The major initiatives of the first phase of the Restructuring Plan included (i) narrowing the Company's product and brand portfolio and (ii) the relocation and consolidation of certain manufacturing and distribution centers, including headcount reductions and reorganization to drive a solution based approach.

The Company's strategic product consolidation entailed removing approximately one-third of all products and one-fifth of all brands relating to the Company's primary product portfolio, which excludes the garden center business in Canada.

During the year ended December 31, 2023 , the Company recorded net pre-tax charges of $ 2,084 for the first phase of the Restructuring Plan, which w ere primarily costs related to the relocation and termination of certain facilities in Canada.

The restructuring charges were primarily recorded within cost of goods sold on the consolidated statements of operations.

Total costs incurred relating to this first phase of the Restructuring Plan were (i) $ 6,398 relating primarily to inventory markdowns, and (ii) $ 3,373 relating primarily to the relocation and termination of certain facilities in Canada.

As a result of the continued adverse market conditions, the Company implemented a second phase of the Restructuring Plan beginning in the third quarter of 2023, including U.S.

2023 Restructuring Plan

Upon completion of a restructuring plan that began in 2022, the Company began the 2023 Restructuring Plan, and undertook significant actions to streamline operations, reduce costs and improve efficiencies.

Restructuring actions in the 2023 Restructuring Plan were primarily U.S.

manufacturing facility consolidations, in particular with respect to production of certain durable equipment products.

The Company is reducing facility space and consolidating manufacturing operations to improve efficiency and reduce costs.

During the year ended December 31, 2023, the Company recorded pre-tax restructuring charges of $ 9,185 for the second phase, relating primarily to non-cash raw material inventory write-downs as the Company liquidated these assets and reduced storage space within certain manufacturing facilities.

These restructuring charges

Restructuring activities included termination and disposal costs associated with inventory, facilities, and headcount reductions, and non-cash charges consisting of fixed asset and inventory write-downs.

During the year ended December 31, 2024, the Company recorded pre-tax restructuring charges of $ 2,223 for the 2023 Restructuring Plan, relating primarily to cash charges associated with the consolidation and closure of U.S.

manufacturing facilities.

Of the $ 2,223 recorded charges, $ 1,946 was recorded within cost of goods sold on the consolidated statement of operations during the year ended December 31, 2024.

The Company recorded $ 277 within SG&A expenses on the consolidated statement of operations during the year ended December 31, 2024.

In the first quarter of 2025, the Company completed the 2023 Restructuring Plan and incurred approximately $ 362 of restructuring charges, which were primarily cash charges and recorded within cost of goods sold on the consolidated statement of operations during the year ended December 31, 2025.

The remaining accrual balance of $ 103 as of December 31, 2024 was settled during the year ended December 31, 2025, and there is no remaining accrual balance.

Total costs incurred relating to the 2023 Restructuring Plan were (i) $ 9,737 of non-cash charges relating primarily to inventory markdowns, and (ii) $ 2,034 of cash charges relating primarily to the consolidation of U.S.

manufacturing facilities.

2025 Restructuring Plan

The Company initiated the 2025 Restructuring Plan in the second quarter of 2025 to reduce its product portfolio and operational footprint to decrease costs and improve efficiency.

The 2025 Restructuring Plan actions entail (i) eliminating a significant portion of the Company's product portfolio, primarily underperforming distributed brands, to improve supply chain and operational focus, (ii) further reductions in the distribution center network and manufacturing footprint including inventory reductions, and (iii) corresponding headcount reductions.

Hydrofarm Holdings Group, Inc.

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(In thousands, except share and per share amounts)

were recorded primarily within cost of goods sold on the consolidated statements of operations, and were subject to significant estimate.

During the year ended December 31, 2024, the Company recorded pre-tax restructuring charges of $ 2,223 for the second phase, relating primarily to cash charges associated with the consolidation and closure of U.S.

manufacturing facilities including termination and disposal costs associated with inventory, facilities, and headcount reductions.

The non-cash charges consist of fixed asset and inventory write-downs.

Total costs incurred relating to this second phase of the Restructuring Plan, from its commencement in 2023 through December 31, 2024, were (i) $ 9,672 of non-cash charges relating primarily to inventory markdowns of durable equipment products, and (ii) $ 1,736 of cash charges relating primarily to the consolidation of U.S.

manufacturing facilities including termination and disposal costs associated with inventory, facilities, and headcount reductions.

Including both phases of the Restructuring Plan, the Company recorded $ 1,946 and $ 10,664 of total restructuring charges within cost of goods sold on the consolidated statements of operations for the years ended December 31, 2024, and 2023, respectively.

The Company recorded total charges for both phases of the Restructuring Plan of $ 277 and $ 605 within SG&A expenses on the consolidated statements of operations for the years ended December 31, 2024, and 2023, respectively.

Of the $ 2,223 and $ 11,269 of total restructuring charges recorded for the years ended December 31, 2024, and 2023, respectively, $ 806 and $ 9,703 were non-cash charges primarily related to inventory write-downs and asset dispositions.

The second phase of our Restructuring Plan is substantially complete as of December 31, 2024.

The following tables presents the activity in accrued expenses and other current liabilities for restructuring costs related to the first and second phases of the Restructuring Plan for the years ended December 31, 2023, and 2024:

Phase 1 Phase 2

Restructuring Accruals as of December 31, 2022 $ 696 $ —

Expense 1,247 272

Cash Payments ( 1,943 ) ( 85 )

Restructuring Accruals as of December 31, 2023 — 187

Expense — 1,416

Cash Payments — ( 1,500 )

Restructuring Accruals as of December 31, 2024 $ — $ 103

On May 10, 2024, in connection with the Company's restructuring of its durable manufacturing operations, the Company entered into an agreement (the “Purchase Agreement”) with CM Fabrication, LLC (the “Buyer”) to sell assets relating to the production of Innovative Growers Equipment ("IGE") durable equipment products for $ 8,660 (the “Asset Sale”) and retain the proprietary brand and customer relationships.

The Asset Sale closed on May 31, 2024, and the Company continues to sell its IGE branded durable products, including horticulture benches, racking and LED lighting systems.

In connection with the transaction, the Company entered into an exclusive supply agreement with the Buyer to provide for contract manufacturing, which is expected to yield a more efficient cost model.

Assets and liabilities that were sold, disposed or terminated in connection with the Asset Sale included $ 11,616 of inventories, $ 3,721 of property, plant and equipment, $ 2,573 of technology intangible assets, and $ 90 of other net liabilities.

The Company incurred the following estimated restructuring costs for the 2025 Restructuring Plan during the year ended December 31, 2025:

Year ended December 31, 2025

Cost of goods sold $ 4,762

Selling, general and administrative 475

Total 2025 Restructuring Plan charges $ 5,237

Non-cash 4,386

Total 2025 Restructuring Plan charges $ 5,237

Non-cash charges were primarily associated with inventory write-downs, which were primarily recorded in cost of goods sold on the consolidated statements of operations during the year ended December 31, 2025.

Cash charges were primarily comprised of costs incurred to relocate and terminate certain facilities.

As of December 31, 2025, the Company had approximately $ 202 of accrued restructuring charges.

The Company anticipates the 2025 Restructuring Plan and related actions may result in additional restructuring charges of up to $ 3,000 , primarily cash related, and is expected be completed during 2026.

The amounts the Company will ultimately expend could differ from these estimates.

On May 10, 2024, in connection with the Company's restructuring of its durable manufacturing operations, the Company entered into the Purchase Agreement with CM Fabrication, LLC to sell assets relating to the production of IGE-branded durable equipment products for $ 8,660 and retain the proprietary brand and customer relationships.

The IGE Asset Sale closed on May 31, 2024, and the Company continues to sell its IGE branded durable products, including horticulture benches, racking and LED lighting systems.

In connection with the transaction, the Company entered into an exclusive supply agreement with the Buyer to provide for contract manufacturing.

Assets and liabilities that were sold, disposed or terminated in connection with the IGE Asset Sale included $ 11,616 of inventories, $ 3,721 of property, plant and equipment, $ 2,573 of technology intangible assets, and $ 90 of other net liabilities.

The Company paid cash to terminate the facility operating lease for $ 1,275 and certain equipment finance leases for $ 668 .

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The Company estimated the amount of cash proceeds associated with the sale of inventories as $ 4,960 and property, plant and equipment as $ 3,700 , and classified the amounts within net cash from operating activities and investing activities, respectively, on the consolidated statements of cash flows for the year ended December 31, 2024.

Pursuant to requirements in the Company's Revolving Credit Facility consent was obtained from JPMorgan Chase Bank, N.A., as administrative agent, to permit the IGE Asset Sale.

The net cash proceeds of approximately $ 6,300 from this transaction were subject to a provision of the Term Loan (as defined below) whereby such net cash proceeds were reinvested into certain investments, such as capital expenditures, with the remainder being prepaid against the Term Loan principal.

Refer to Note 11 – Debt for further details.

During the year ended December 31, 2024, the Company sold approximately 20 acres of the 140 acres of excess owned land at the Goshen, New York location.

The sale price less costs to sell were consistent with the carrying value of the land, and therefore no gain or loss was recorded in the year ended December 31, 2024.

Hydrofarm Holdings Group, Inc.

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(In thousands, except share and per share amounts)

Pursuant to requirements in the Company's Revolving Credit Facility, consent was obtained from JPMorgan Chase Bank, N.A., as administrative agent to permit the Asset Sale.

The Company intends to reinvest the net proceeds from the Asset Sale into certain permitted investments, such as capital expenditures or other permitted acquisitions/ investments, in accordance with provisions of the Term Loan.

The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, included as Exhibit 10.23 to this Annual Report on Form 10-K.

During the year ended December 31, 2024, the Company sold approximately 20 acres of the 140 acres of excess owned land at the Goshen, New York location.

The sale price less costs to sell were consistent with the carrying value of the land, and therefore no gain or loss was recorded in the year ended December 31, 2024.

INTANGIBLE ASSETS, NET

Finite lived intangible assets are tested for impairment at least annually, while all intangibles are tested for impairment when events or changes in circumstances indicate that, more-likely-than-not, the carrying amount may not be recoverable.

During the fourth quarter of fiscal 2025, as a result of industry conditions, primarily attributable to an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation, as well as continued declines in operating cash flows and profitability, the Company assessed long-lived assets for impairment and recorded an impairment charge of $ 232,179 .

Of the impairment charge, $ 228,395 was related to finite-lived intangible assets and $ 3,784 was related to property, plant, and equipment.

The loss was recorded in impairments in the consolidated statement of operations for the year ended December 31, 2025.

The Company estimated fair value based on the income approach and market approach.

Under the income approach, the Company estimated the fair value of the asset group on the present value of estimated future cash flows, which the Company considered to be a level 3 unobservable input in the fair value hierarchy.

There were no other impairment charges for long-lived assets in the years ended December 31, 2025 or 2024.

Intangible assets, net comprised the following:

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Total intangible assets, net $ 2,801 $ — $ 2,801 $ 358,178 $ ( 109,176 ) $ 249,002

The Company did not record any impairment during the years ended December 31, 2024, or 2023.

Amortization expense related to intangible assets was $ 17,794 and $ 23,998 for the years ended December 31, 2025, and 2024, respectively.

In conjunction with the Asset Sale, the Company disposed of technology intangible assets with a net book value of $ 2,573 .

Refer to Note 3 – Restructuring and Asset Sales for further details.

The following are the estimated useful lives and the weighted-average amortization period remaining as of December 31, 2024, for the major classes of finite-lived intangible assets:

Weighted-average amortization period

Computer software 3 to 5 years

Customer relationships 7 to 18 years

Technology, formulations and recipes 8 to 12 years

Trade names and trademarks 15 to 20 years

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The estimated aggregate future amortization expense for intangible assets subject to amortization as of December 31, 2024, is summarized below:

Estimated Future Amortization Expense

Year ending December 31,

2025 $ 23,734

Thereafter 131,293

Total $ 246,201

LOSS PER COMMON SHARE

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Diluted loss per common share represents net loss divided by the weighted-average number of common shares outstanding during the period, including common stock equivalents.

Common stock equivalents consist of shares subject to warrants and share-based awards with exercise prices less than the average market price of the Company’s common stock for the period, to the extent their inclusion would be dilutive.

Regarding RSUs subject to a market condition, before the end of the contingency period, the number of contingently issuable shares (i.e., RSUs) to be included in diluted loss per common share would be based on the number of shares of common stock issuable under the terms of the arrangement if the end of the reporting period was the end of the contingency period, assuming the result would be dilutive.

Those contingently issuable shares would be included in the denominator of diluted loss per common share as of the beginning of the period, or as of the grant date of the share-based payment, if later.

Common stock equivalents consist of shares subject to share-based awards with exercise prices less than the average market price of the Company’s common stock for the period, to the extent their inclusion would be dilutive.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The following table presents basic and diluted loss per common share for the years ended December 31, 2025, and 2024:

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Weighted-average shares of common stock outstanding 4,647,945 4,598,640

Dilutive effect of warrants and share based compensation awards using the treasury stock method — —

Dilutive effect of share based compensation awards using the treasury stock method — —

Diluted weighted-average shares of common stock outstanding 4,647,945 4,598,640

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Diluted loss per common share $ ( 62.35 ) $ ( 14.51 )

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The computation of the weighted-average shares of common stock outstanding for diluted loss per common share excludes the following potential shares of common stock as their inclusion would have an anti-dilutive effect on diluted loss per common share:

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Trade accounts receivable $ 7,706 $ 14,112

Allowance for doubtful accounts ( 706 ) ( 920 )

Allowance for credit losses ( 362 ) ( 706 )

Other receivables 842 1,350

Total accounts receivable, net $ 8,186 $ 14,756

The change in the allowance for doubtful accounts consisted of the following:

The change in the allowance for credit losses consisted of the following:

Years ended December 31,

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Ending balance $ ( 362 ) $ ( 706 )

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Inventories comprised the following:

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Inventories are stated at the lower of cost or net realizable value, and the Company maintains an allowance for excess and obsolete inventory that is based upon assumptions about future demand and market conditions.

The allowance for excess and obsolete inventory is subject to change from period to period based on a number of factors including sales of products, changes in estimates, and disposals.

In conjunction with the Asset Sale, the Company sold $ 11,616 of inventories.

Refer to Note 3 – Restructuring and Asset Sales for further details.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The allowance for excess and obsolete inventory is subject to increase based on changes in estimates and other factors and decrease based on sales of products and disposals.

The Company leases its distribution centers and manufacturing facilities from third parties under various non-cancelable lease agreements expiring at various dates through 2038.

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Certain leases contain escalation provisions and/or renewal options, giving the Company the right to extend the leases by up to 20 years .

However, these options are generally not reflected in the calculation of the right-of-use assets and lease liabilities due to uncertainty surrounding the likelihood of renewal.

However, these options are generally not reflected in the calculation of the ROU assets and lease liabilities due to uncertainty surrounding the likelihood of renewal.

The Company recognizes operating lease costs over the respective lease periods, including short-term and month-to-month leases.

The Company incurred operating lease costs of $ 9,565 and $ 10,195 during the years ended December 31, 2025, and 2024, respectively.

These costs are included primarily within SG&A in the consolidated statements of operations and do not include lease termination costs associated with the Asset Sale.

These costs are included primarily within SG&A in the consolidated statements of operations and do not include lease termination costs associated with the IGE Asset Sale.

Refer to Note 4 – Restructuring and Asset Sales for further details.

The Company has operating subleases which have been accounted for by reference to the underlying asset subject to the lease, primarily as an offset to rent expense within SG&A.

In January 2023, Gotham Properties LLC, an Oregon limited liability company and a subsidiary of the Company (“Seller”), consummated a Purchase and Sale Agreement with J & D Property, LLC, a Nevada limited liability company (“Purchaser”) pursuant to which certain real property located in the City of Eugene, County of Lane, State of Oregon (the “Eugene Property”) was sold to Purchaser for $ 8,598 and then leased back by Seller (the “Sale-Leaseback Transaction”).

The new lease has a term of 15 years with annual rent starting at $ 731 and fixed increases to the final year when annual rent is $ 964 .

The Company accounted for the transaction as a failed sale-leaseback which requires retaining the asset associated with the property and recognizing a corresponding financial liability for the cash received.

The Eugene Property serves as the manufacturing and processing site for certain of the Company’s grow media and nutrient brands.

Refer to Note 10 – Debt for further discussion.

The Company has operating subleases and logistics agreements which have been accounted for by reference to the underlying asset subject to the lease, primarily as an offset to rent expense within SG&A.

Total ROU assets, finance lease assets, and lease liabilities were as follows:

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(1) Operating lease costs are primarily recorded in SG&A.

In addition to the operating lease costs above, short-term and month-to-month lease expense was $ 61 and $ 182 for the years ended December 31, 2024, and 2023, respectively, and other costs associated with operating leases were $ 3,207 and $ 3,132 , respectively, for non-lease components such as common area maintenance and other miscellaneous items.

In addition to the operating lease costs above, short-term and month-to-month lease expense was zero and $ 61 for the years ended December 31, 2025, and 2024, respectively, and other costs associated with operating leases were $ 3,461 and $ 3,207 , respectively, for non-lease components such as common area maintenance and other miscellaneous items.

These costs were included primarily within SG&A in the consolidated statements of operations.

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Depreciation, depletion and amortization expense related to property, plant, and equipment, net was $ 5,348 and $ 6,693 for the years ended December 31, 2025, and 2024, respectively.

As noted in Note 5 – Intangible Assets , the Company recorded impairment charges of $ 3,784 for property, plant, and equipment during the year ended December 31, 2025.

The impairment charges were primarily related to Leasehold improvements, Land, and Building and improvements.

As of December 31, 2025, Land, Building and improvements, Computer equipment, and Machinery and equipment contain finance leases assets, recorded at cost of $ 9,817 , less accumulated depreciation of $ 3,242 .

As of December 31, 2024, Land, Building and improvements, Computer equipment, and Machinery and equipment contain finance leases assets, recorded at cost of $ 9,823 , less accumulated depreciation of $ 2,544 .

In conjunction with the Asset Sale, the Company sold $ 3,721 of property, plant and equipment, net.

Refer to Note 3 – Restructuring and Asset Sales for further details.

The Company operates peat bogs in Alberta, Canada.

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(In thousands, except share and per share amounts)

The following table presents changes in asset retirement obligations for the following periods:

The following table presents changes in AROs for the following periods:

Years ended December 31,

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Total debt $ 111,903 $ 115,953

Current portion of long-term debt $ 1,260 $ 2,989

Long-term debt - net of unamortized discount and deferred financing costs of $ 3,443 and $ 4,259 as of December 31, 2024, and December 31, 2023, respectively

Current portion of long-term debt - net of unamortized discount and deferred financing costs of $ 2,576 as of December 31, 2025

$ 111,853 $ 1,260

Long-term debt - net of unamortized discount and deferred financing costs of $ 3,443 as of December 31, 2024

Total debt $ 111,903 $ 115,953

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On October 25, 2021, the Company and certain of its direct and indirect subsidiaries (the "Obligors") entered into a Credit and Guaranty Agreement with JPMorgan Chase Bank, N.A., as administrative agent for the lenders, pursuant to which the Company borrowed a $ 125,000 senior secured term loan ("Term Loan").

The Term Loan was amended by Amendment No.

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1 have not changed from the credit spreads in the original Term Loan.

Legal fees associated with Amendment No.

1 were not material, and were included in other income, net, on the Consolidated Statements of Operations for the year ended December 31, 2023.

The foregoing description of Amendment No.

1 does not purport to be complete and is qualified in its entirety by reference to the provisions of Amendment No.

1, included as Exhibit 10.9 to this Annual Report on Form 10-K.

Capitalized terms referenced above are defined in the Term Loan.

The Term Loan was subject to a call premium of 1 % if called prior to October 25, 2023, and 0 % thereafter, and matures on October 25, 2028 ("Maturity Date").

The Term Loan matures on October 25, 2028 ("Maturity Date") and is not subject to a call premium.

Deferred financing costs are being amortized to interest expense over the term of the loan.

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For the year ended December 31, 2024, the effective interest rate was 11.70 % and interest expense was $ 14,112 , which included amortization of deferred financing costs and discount of $ 751 .

The principal amounts of the Term Loan are required to be repaid in consecutive quarterly installments in amounts equal to 0.25 % of the original principal amount of the Term Loan, reduced pro rata by any additional payments made, on the last day of each fiscal quarter commencing March 31, 2022, with the balance of the Term Loan payable on the Maturity Date.

The principal amount of the Term Loan is required to be repaid in consecutive quarterly installments in amounts equal to 0.25 % of the original principal amount of the Term Loan, reduced pro rata by any additional payments made, on the last day of each fiscal quarter commencing March 31, 2022, with the balance of the Term Loan payable on the Maturity Date.

The Company is also required to make mandatory prepayments in the event of (i) achieving certain excess cash flow criteria, including the achievement and maintenance of a specific leverage ratio, (ii) certain asset sales that are collateral, or (iii) upon the issuance, offering, or placement of new debt obligations.

As described in Note 3 – Restructuring and Asset Sales and Note 7 – Leases , the Company received net cash proceeds in May 2024 from the Asset Sale and January 2023 from the Sale-Leaseback Transaction and is subject to a provision of the Term Loan whereby such net cash proceeds can be reinvested into certain investments, such as capital expenditures.

As described in Note 4 – Restructuring and Asset Sales , the Company completed the IGE Asset Sale for gross proceeds of $ 8,660 in May 2024.

The net cash proceeds of approximately $ 6,300 from this transaction were subject to a provision of the Term Loan whereby such net cash proceeds can be reinvested into certain investments, such as capital expenditures.

This provision of the Term Loan includes (i) cash investments made within a one-year period from the transaction date, and (ii) investments which are contractually committed within one-year of the transaction date and paid within 180 days after entering into such contractual commitment.

The amount of any net cash proceeds which are not reinvested would require the Company to make an offer to prepay the corresponding amount on the Term Loan.

In accordance with this provision in relation to the Sale-Leaseback, described further in Note 7 – Leases , the Company classified $ 1,665 as current debt as of December 31, 2023, and prepaid the Term Loan in this amount.

In addition, the Company had $ 2,187 of contractual commitments pursuant to this provision as of December 31, 2023.

As of December 31, 2024, the Company has satisfied this provision through a combination of payments made pursuant to the contractual commitments and an additional $ 300 repayment of the Term Loan.

As described in Note 3 – Restructuring and Asset Sales , the Company sold assets for $ 8,660 in May 2024.

The net cash proceeds from the Asset Sale are subject to the same Term Loan reinvestment provision described above, including (i) cash investments made within a one-year period, and (ii) investments which are contractually committed within one-year of the Asset Sale and paid within 180 days after entering into such contractual commitment, however the Company intends to reinvest the net cash proceeds from the Asset Sale into certain permitted investments, such as capital expenditures, and no amounts were classified as current debt as of December 31, 2024, related to this provision.

The amount of any net cash proceeds which are not reinvested required the Company to make an offer to prepay the corresponding amount on the Term Loan in 2025.

In accordance with this provision, we made prepayments of $ 4,602 during of 2025.

The prepayments reduced our required quarterly installment amounts to zero for the remaining term.

As of December 31, 2025, we have satisfied this provision as related to the IGE Asset Sale, through a combination of certain investments and prepayments of the Term Loan.

The foregoing description of the reinvestment provision does not purport to be complete and is qualified in its entirety by reference to the provisions of the Term Loan.

The Term Loan is secured by a first lien on the non-working capital assets of the Company and a second lien on the working capital assets of the Company.

Subsequent Event

The Company and its Board of Directors are exploring strategic alternatives to strengthen the Company’s liquidity and capital structure.

In connection with such process, the Company and its financial advisors have engaged in ongoing discussions with the lenders under the Term Loan.

While these discussions have continued, on February 4, 2026, the Company elected to defer making the interest payment of approximately $ 2.8 million on the Term Loan.

As a result of the Company’s failure to pay the interest within the grace period, an event of default occurred with respect to the Term Loan.

Hydrofarm Holdings Group, Inc.

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The Term Loan requires the Company to maintain certain reporting requirements, affirmative covenants, and negative covenants, and the Company was in compliance with all requirements as of December 31, 2024.

The Term Loan is secured by a first lien on the non-working capital assets of the Company and a second lien on the working capital assets of the Company.

Agreement and related financing documents, but it did not seek to enforce such remedies as of such time.

On February 10, 2026, JPMorgan issued a notice to the Company and Lenders of its resignation as Administrative Agent and Collateral Agent under the Credit and Guaranty Agreement.

Such resignation became effective on March 12, 2026, when FEAC Agent, LLC was appointed as the successor agent for the Lenders in accordance with Section 9 of the Credit and Guaranty Agreement.

Revolving Credit Facility

On March 29, 2021, the Obligors entered into a Senior Secured Revolving Credit Facility (the "Revolving Credit Facility") with JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and swingline lender, and the lenders from time to time party thereto.

The Revolving Credit Facility is due on June 30, 2026, or any earlier date on which the revolving commitments are reduced to zero.

On March 29, 2021, the Obligors entered into a certain Credit Agreement, dated as of March 29, 2021, as amended, by among JPMorgan., as administrative agent, issuing bank and swingline lender, the other loan parties from time to time party thereto and the lenders from time to time party thereto for a revolving line of credit up to $ 50,000 .

The Revolving Credit Facility was due to expire on June 30, 2027, or any earlier date on which the revolving commitments are reduced to zero.

The terms Revolving Credit Facility and Revolving Credit Agreement are used interchangeably.

The Revolving Credit Facility originally had a borrowing limit of $ 50,000 .

1 unchanged sentence

In connection with the First Amendment, the Company's previously acquired subsidiaries became party to the Revolving Credit Facility as either borrowers or as guarantors.

On October 25, 2021, the Company and its subsidiaries entered into a second amendment to the Revolving Credit Facility (the "Second Amendment"), with JPMorgan Chase Bank, N.A., pursuant to which the parties consented to the Term Loan described above, and made certain conforming changes to comport with the Term Loan provisions.

On October 25, 2021, the Company and its subsidiaries entered into a second amendment to the Revolving Credit Facility (the "Second Amendment"), pursuant to which the parties consented to the Term Loan described above, and made certain conforming changes to comport with the Term Loan provisions.

The Revolving Credit Facility was further amended by a third amendment and joinder to the Revolving Credit Facility dated August 23, 2022 (the "Third Amendment"), pursuant to which several previously acquired subsidiaries became parties to the Revolving Credit Facility and granted liens on their assets.

2 unchanged sentences

On November 1, 2024, the Company and certain of its subsidiaries entered into a sixth amendment to the Revolving Credit Facility (the “Sixth Amendment”) which reduced the maximum commitment amount under the Revolving Credit Facility to $ 35,000 .

On May 9, 2025, the Company and certain of its subsidiaries entered into a seventh amendment to the Revolving Credit Facility (the “Seventh Amendment”), pursuant to which the maturity date of the Revolving Credit Facility was extended from June 30, 2026 to June 30, 2027, the maximum commitment amount under the Revolving Credit Facility was reduced from $ 35,000 to $ 22,000 , and certain other changes were made, including the addition of a $ 2,000 availability block, an increase of the cash dominion trigger from less than 10 % of availability to less than 50 % of availability, and an increase of the fixed charge ratio trigger from less than 10 % excess availability to less than 20 % of excess availability.

The foregoing description of the Seventh Amendment does not purport to be complete and is qualified in its entirety by reference to the Seventh Amendment.

The unamortized debt discount and deferred financing costs were $ 209 and $ 237 as of December 31, 2025, and 2024, respectively, and are included in other assets in the consolidated balance sheet.

Debt discount and deferred financing costs are being amortized to interest expense over the term of the Revolving Credit Facility.

The Revolving Credit Facility is an asset-based facility that is secured by a first lien on the working capital assets of the Company and a second lien on the non-working capital assets of the Company (including most of the Company’s subsidiaries).

The borrowing base is based on a detailed monthly calculation of the sum of (a) a percentage of the Eligible Accounts at such time, plus (b) the lesser of (i) a percentage of the Eligible Inventory, at such time, valued at the lower of cost or market value, determined on a first-in-first-out basis, and (ii) the product of a percentage multiplied by the Net Orderly Liquidation Value percentage identified in the most recent inventory appraisal ordered by the Administrative Agent multiplied by the Eligible Inventory, valued at the lower of cost or market value, determined on a first-in-first-out basis, minus (c) Reserves (each of the defined terms above, as defined in the Revolving Credit Facility documents).

The Company is required to maintain certain reporting requirements, affirmative covenants and negative covenants, pursuant to terms outlined in the agreement.

Additionally, if the Company’s Excess Availability (as defined in the Revolving Credit Facility documents) is less than an amount equal to 10 % of the Aggregate Revolving Commitment (currently $ 35,000 ), the Company will be required to maintain a minimum fixed charge coverage ratio of 1.1 x on a rolling twelve-month basis until the Excess Availability is more than 10 % of the Aggregate Revolving Commitment for thirty consecutive days.

In order to consummate permitted acquisitions or to make restricted payments, the Company would be required to comply with a higher fixed charge coverage ratio of 1.15 x, but no such acquisitions or payments are currently contemplated.

As of December 31, 2024, the Company is in compliance with the covenants contained in the Revolving Credit Facility.

The Revolving Credit Facility provides for various interest rate options including the Adjusted Term SOFR Rate, the Adjusted REVSOFR30 Rate, the CB Floating Rate, the Adjusted Daily Simple SOFR, or the CBFR.

The rates that use SOFR as the reference rate (Adjusted Term SOFR Rate, the Adjusted REVSOFR30 Rate, the Adjusted Daily Simple SOFR and the

Debt discount and deferred financing costs were being amortized to interest expense over the term of the Revolving Credit Facility.

The Revolving Credit Facility was an asset-based facility that was secured by a first priority lien on the working capital assets of the Company and a second priority lien on the non-working capital assets of the Company (including most of the Company’s subsidiaries).

The borrowing base was based on a detailed monthly calculation of the sum of (a) a percentage of the Eligible Accounts at such time, plus (b) the lesser of (i) a percentage of the Eligible Inventory, at such time, valued at the lower of cost or market value, determined on a first-in-first-out basis, and (ii) the product of a percentage multiplied by the Net Orderly Liquidation Value percentage identified in the most recent inventory appraisal ordered by the Administrative Agent multiplied by the Eligible Inventory, valued at the lower of cost or market value, determined on a first-in-first-out basis, minus (c) Reserves (each of the defined terms above, as defined in the Revolving Credit Facility documents).

Hydrofarm Holdings Group, Inc.

1 unchanged sentence

(In thousands, except share and per share amounts)

CBFR rate) use the Term SOFR Rate plus 1.95 %.

Each rate has a 0.0 % floor.

A fee of 0.40 % per annum is charged for available but unused borrowings.

The Company was required to maintain certain reporting requirements, affirmative covenants and negative covenants, pursuant to terms outlined in the agreement.

Additionally, if the Company’s Excess Availability was less than an amount equal to 20 % of the Aggregate Revolving Commitment, the Company was required to maintain a minimum fixed charge coverage ratio of 1.1 x on a rolling twelve-month basis until the Excess Availability was more than 20 % of the Aggregate Revolving Commitment for thirty consecutive days (each of the defined terms above, as defined in the Revolving Credit Facility documents).

In order to consummate permitted acquisitions or to make restricted payments, the Company was required to comply with a higher fixed charge coverage ratio of 1.15 x..

The Company received a consent from JPMorgan Chase Bank, N.A., as administrative agent, to permit the cash settlement of fractional shares in connection with the Reverse Stock Split, which is described further in Note 3 – Basis of Presentation and Significant Accounting Policies .

As of December 31, 2025, the Company was in compliance with the covenants contained in the Revolving Credit Facility.

The Revolving Credit Facility provided for various interest rate options including the Adjusted Term SOFR Rate, the Adjusted REVSOFR30 Rate, the CB Floating Rate, the Adjusted Daily Simple SOFR, or the CBFR.

The rates that use SOFR as the reference rate (Adjusted Term SOFR Rate, the Adjusted REVSOFR30 Rate, the Adjusted Daily Simple SOFR and the CBFR rate) use the Term SOFR Rate plus 1.95 %.

Each rate had a 0.0 % floor.

A fee of 0.40 % per annum was charged for available but unused borrowings.

As of December 31, 2025, and 2024, the Company had zero borrowed under the facility.

As of December 31, 2024, the Company would be able to borrow approximately $ 13 million under the Revolving Credit Facility, before the Company would be required to comply with the minimum fixed charge coverage ratio of 1.1 x.

Subsequent Event

On February 17, 2026, the Company entered into the Termination Agreement to terminate the Revolving Credit Agreement.

Other debt of $ 85 and $ 93 as of December 31, 2025, and 2024, respectively, was primarily comprised of a foreign subsidiary's other debt which constitutes an immaterial revolving line of credit and mortgage.

Loss on debt modification

The losses on debt modification of $ 195 and $ 59 for the years ended December 31, 2024 and 2023, respectively, resulting primarily from the financing transactions described above, are presented in other income, net on the consolidated statement of operations.

The losses on debt modification of $ 120 and $ 195 for the years ended December 31, 2025 and 2024, respectively, resulting primarily from the financing transactions described above, are presented in other (expense) income, net on the consolidated statement of operations.

Aggregate future principal payments

As of December 31, 2025, the aggregate estimated future principal payments under long-term debt are as follows:

Year ending December 31,

2028 and thereafter 115,639

Year ending December 31, Debt

2026 $ 114,429

Total $ 114,479

5 unchanged sentences

Subject to corporate regulations and preferences to preferred stock, if any, dividends are at the discretion of the board of directors.

As of December 31, 2024, there were 4,614,279 shares outstanding and 300,000,000 shares authorized, after giving retroactive effect to the February 12, 2025, reverse stock split.

On July 19, 2021, the Company completed the redemption ("Redemption") of certain of its outstanding warrants (the "Investor Warrants") that were issued in connection with a private placement of units (the "private placement"), each consisting of a share of common stock and a warrant to purchase an additional one-half (1/2) shares of common stock.

In connection with the private placement, the Company agreed to engage the placement agent (the "Placement Agent") as the Company's warrant solicitation agent in the event the Investor Warrants were called for Redemption.

The Company agreed to pay a warrant solicitation fee to the Placement Agent equal to five percent of the amount of net cash proceeds solicited by the Placement Agent upon the exercise of certain Investor Warrants following such call for Redemption.

As of December 31, 2024, and 2023, respectively, there were no Investor Warrants outstanding.

In connection with the private placement, the Placement Agent was issued warrants (the “placement agent warrants”) which expired on December 14, 2023.

As of December 31, 2024, and 2023,

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

there were no outstanding placement agent warrants.

As of December 31, 2025, there were 4,667,004 shares outstanding and 300,000,000 shares authorized.

STOCK-BASED COMPENSATION

16 unchanged sentences

The tax benefits recognized in the consolidated statements of operations for stock-based compensation arrangements for the years ended December 31, 2025, and 2024, were not material to the financial statements.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Restricted Stock Unit Activity

3 unchanged sentences

The stock-based compensation expense related to service-based awards is recorded over the requisite service period.

During the first quarter of 2023, the Company granted RSU awards that vested in two equal vesting tranches;

one tranche vested on October 31, 2023, and the second one on October 31, 2024.

During the second quarter of 2023, the Company granted RSU awards to members of the board of directors that are expected to vest on the one year anniversary of the grant date.

During the third quarter of 2023, the Company granted RSU awards that are expected to vest with three equal vesting tranches, annually on the anniversary of the grant date.

During the second quarter of 2024, the Company granted RSU awards to members of the board of directors that are expected to vest on the one year anniversary of the grant date.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

During the year ended December 31, 2025, the Company granted 231,618 RSU awards to certain directors, executives and employees that are expected to vest with either one , two or three equal vesting tranches, annually on the anniversary of the grant date.

The following table summarizes the activity related to the Company's RSUs for the year ended December 31, 2025.

15 unchanged sentences

As of December 31, 2025, there were 156,709 RSUs which had vested, but were not yet issued due to the recipients' elections.

For the year ended December 31, 2024, the Company withheld 11,705 , of the 35,434 , of common stock issued upon vesting of RSUs to meet employees' payroll tax withholding requirements.

For the year ended December 31, 2025, the Company withheld 4,830 , of the 30,323 , shares of common stock issued upon vesting of RSUs to meet employees' payroll tax withholding requirements.

The tax withholding payments of $ 21 were made in 2025.

Subsequent Event - January 1, 2025 Grant

On January 1, 2025, the Company granted 85,000 RSU awards to certain executives that are expected to vest with either two or three equal vesting tranches, annually on the anniversary of the grant date.

Refer to the Current Report on Form 8-K filed with the SEC on October 17, 2024, for additional details.

Performance Stock Unit Activity

During the years ended December 31, 2024, and 2023, the Company granted PSU awards that are subject to a one-year vesting requirement (based on continuous employment) and contain performance conditions based on certain performance metrics.

During the year ended December 31, 2024, the Company granted PSU awards that were subject to a one-year vesting requirement (based on continuous employment) and contained performance conditions based on certain performance metrics.

There were no PSUs granted during the year ended December 31, 2025.

During the year ended December 31, 2025, the PSU forfeitures were due to employee terminations and performance conditions that were not satisfied, while PSU vests were from awards granted in the prior year.

The following table summarizes the activity related to the Company's PSUs for the year ended December 31, 2025:

4 unchanged sentences

125,783 $ 9.89

Granted 137,254 $ 9.89

Vested ( 40,871 ) $ 9.89

1 unchanged sentence

Balance, December 31, 2025

125,783 $ 9.89

During the year ended December 31, 2024, the PSU forfeitures were due to employee terminations and performance conditions that were not satisfied, while PSU vests were from awards granted in prior periods.

The Company anticipates that a majority of the PSUs outstanding as of December 31, 2024 will forfeit in 2025 as a result of not meeting certain performance conditions.

The total vest date fair value of PSUs vested for the years ended December 31, 2025, and 2024, was $ 73 and $ 167 ,

4 unchanged sentences

The Company recognized $ 122 , and $ 357 , of total stock-based compensation expense for PSUs the years ended December 31, 2025, and 2024, respectively.

As of December 31, 2024, total unamortized stock-based compensation cost related to unvested PSUs was $ 128 and the weighted-average period over which the compensation is expected to be recognized is less than one year .

For the year ended December 31, 2024, the Company withheld 6,321 , of the 18,030 , of common stock issued upon vesting of PSUs to meet employees' payroll tax withholding requirements.

As of December 31, 2025, there was no unamortized stock-based compensation cost related to unvested PSUs.

For the year ended December 31, 2025, the Company withheld 13,639 , of the 40,871 , shares of common stock issued upon vesting of PSUs to meet employees' payroll tax withholding requirements.

The tax withholding payments of $ 24 were made in 2025.

8 unchanged sentences

remaining contractual

Outstanding as of December 31, 2023 57,207 $ 94.67 $ 20.20 3.69

Outstanding and exercisable as of December 31, 2024 40,654 $ 96.36 $ 22.76 3.67

Cancelled ( 12,580 ) $ 93.73 $ 18.88

Forfeited ( 137 ) $ 110.60 $ 98.87

Outstanding as of December 31, 2024 40,654 $ 96.36 $ 22.76 3.67

Options exercisable as of December 31, 2024 40,654 $ 96.36 $ 22.76 3.67

Vested and expected to vest as of December 31, 2024 40,654 $ 96.36 $ 22.76 3.67

The following table summarizes the unvested stock option activity for the year ended December 31, 2024:

Number Weighted

average grant

date fair value

Unvested as of December 31, 2023 1,662 $ 121.20

Vested ( 1,525 ) $ 116.59

Forfeited ( 137 ) $ 98.87

Unvested as of December 31, 2024 — $ —

Outstanding and exercisable as of December 31, 2025 28,074 $ 97.54 $ 24.50 3.50

Since stock options represent equity awards of the Company, such awards are fair valued as of the grant date for the purposes of measurement and recognition under U.S.

6 unchanged sentences

The expected dividend yield is 0.0 % as the Company has not paid and does not anticipate paying dividends on its common stock.

For the years ended December 31, 2024, and 2023, respectively, the Company recognized $ 101 and $ 273 , of total stock-based compensation expense for stock options.

For the years ended December 31, 2025, and 2024, respectively, the Company recognized zero and $ 101 , of total stock-based compensation expense for stock options.

As of December 31, 2025, there was no unvested options or unrecognized compensation expense.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Loss before tax was as follows:

3 unchanged sentences

Loss before tax $ ( 290,530 ) $ ( 65,848 )

Significant components of income tax benefit consist of the following:

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Significant components of income tax (benefit) expense consist of the following:

Years ended December 31,

Total current expense (benefit)

Total deferred expense

Total income tax expense (benefit)

Total deferred (benefit) expense

Total income tax (benefit) expense

$ ( 740 ) $ 869

1 unchanged sentence

federal statutory tax rates of 21% to income tax benefit consists of the following:

Years ended December 31,

Year ended December 31,

Effective rate reconciliation

federal tax benefit at statutory rate $ ( 61,011 ) 21.0 %

$ ( 13,828 ) $ ( 13,656 )

State income taxes, net 68 — %

Permanent items

Foreign rate differential

( 261 ) 0.1 %

162(m) officers compensation

Share-based compensation

Deferred adjustments

( 827 ) 1,035

Impact of foreign operations

Foreign rate differential ( 424 ) 0.1 %

Valuation allowance 2,393 ( 0.8 ) %

14,222 16,767

Total income tax expense (benefit) $ 869 $ ( 213 )

Other ( 634 ) 0.2 %

Other, net ( 1,251 ) 0.4 %

Valuation allowance 60,344 ( 20.8 ) %

Total income tax benefit $ ( 740 ) 0.3 %

Hydrofarm Holdings Group, Inc.

1 unchanged sentence

(In thousands, except share and per share amounts)

Year ended December 31,

Effective rate reconciliation

federal tax benefit at statutory rate

State income taxes, net

Permanent items

Foreign rate differential

Share-based compensation

Deferred adjustments

Valuation allowance

Total income tax expense $ 869

State income taxes, net is primarily attributable to Oregon, which represents more than 50% of total state income tax expense for the years ended December 31, 2025, and 2024.

Deferred income tax assets and liabilities consist of the following:

8 unchanged sentences

Interest expense

15,580 12,658

Deferred tax assets

16 unchanged sentences

Net deferred tax liability $ ( 2,130 ) $ ( 3,047 )

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Income taxes paid (refunded), net exceeding 5 percent of total income taxes paid in the following jurisdictions for 2025 were as follows:

Year ended December 31, 2025

Canada ( 171 )

Total taxes paid $ 44

As of December 31, 2025, the Company had federal and state NOL carryforwards of approximately $ 238,106 and $ 208,702 , respectively.

10 unchanged sentences

An ownership change is generally defined as a greater than 50% increase in equity ownership by 5% stockholders in any three-year period.

The Company experienced an aggregate ownership change which exceeded the 50% threshold in connection with the Company's IPO, and future changes in stock ownership may occur.

The Company experienced an aggregate ownership change which exceeded the 50% threshold in connection with the Company's initial public offering ("IPO"), and future changes in stock ownership may occur.

To the extent that the Company earns net taxable income, the Company's ability to use NOLs to offset such taxable income may be subject to limitations.

The annual limitation resulting from the IPO ownership change is not expected to result in the expiration of the NOL carry forwards before utilization.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

In 2025 and 2024, the Company did not record any liabilities related to uncertain tax positions.

10 unchanged sentences

Based on available information, management does not expect that the outcome of any matters, individually or in the aggregate, would have a material adverse effect on the consolidated financial position, results of operations, cash flows or future earnings of the Company.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

FAIR VALUE MEASUREMENTS

Recurring and Nonrecurring

As described in Note 3 – Restructuring and Asset Sales, during the second quarter of 2024, the Company entered into an agreement to sell approximately 20 acres of the 140 acres of owned land at its Goshen, New York location.

As described in Note 4 – Restructuring and Asset Sales, during 2024, the Company sold approximately 20 acres of the 140 acres of excess owned land at its Goshen, New York location.

The Company measured the held-for-sale land asset at estimated fair value based on the agreement, which was considered a Level 2 fair value measurement.

The land had a carrying value of $ 470 , which was consistent with the estimated sale price less costs to sell, and therefore no estimated gain or loss was recorded in the year ended December 31, 2024.

The $ 470 carrying value of the land has been reclassified from property, plant and equipment, net, to assets held for sale on the Company's condensed consolidated balance sheets at June 30, 2024 and September 30, 2024.

The transaction closed in the fourth quarter of 2024, and the Company has no assets held for sale as of December 31, 2024.

The land had a carrying value of $ 470 , which was consistent with the estimated sale price less costs to sell, and therefore no estimated gain or loss was recorded during 2024.

The transaction closed in the fourth quarter of 2024, and the Company had no assets held for sale as of December 31, 2024 or 2025.

As described in Note 5 – Intangible Assets , during the fourth quarter of fiscal 2025, as a result of industry conditions, primarily attributable to an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation, as well as continued declines in operating cash flows and profitability, the Company assessed long-lived assets for impairment and recorded an impairment charge of $ 232,179 .

Of the impairment charge, $ 228,395 was related to finite-lived intangible assets and $ 3,784 was related to property, plant, and equipment.

The Company estimated fair value based on the income approach and market approach.

Other Fair Value Measurements

13 unchanged sentences

The fair values of other current assets and liabilities including accounts receivable, accounts payable, accrued expenses and other current liabilities approximated their carrying value due to their short-term maturities.

Hydrofarm Holdings Group, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The estimated fair value of finance leases, which were considered Level 3 fair value measurements, were calculated as the present value of the required future cash outflows discounted at an estimated borrowing rate.

Finance leases primarily relate to the Sale-Leaseback transaction that was entered into in the first quarter of 2023.

The fair value of the Term Loan was estimated based on Level 2 fair value measurements and was based on bank quotes.

The carrying amount of the Term Loan reported above excludes unamortized debt discount and deferred financing costs.

Refer to Note 7 – Leases and Note 10 – Debt , for further discussion of the Company's finance leases and Term Loan, respectively.

Refer to Note 8 – Leases and Note 11 – Debt , for further details of the Company's finance leases and Term Loan, respectively.

The Company did not have any transfers between Levels within the fair value hierarchy during the periods presented.

1 unchanged sentence

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