HYDROFARM HOLDINGS GROUP, INC.

1. DESCRIPTION OF THE BUSINESS

Description of the business

Hydrofarm Holdings Group, Inc. (collectively with its subsidiaries, the "Company") was formed in* May 2017under the laws of the state of Delaware to acquire and continue the business originally founded in1977.* The Company is a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture ("CEA"), including grow lights, climate control solutions, grow media and nutrients, as well as a broad portfolio of innovative, proprietary branded products. 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, CO2, light intensity and color, nutrient concentration and pH.

2. LIQUIDITY AND GOING CONCERN

Going concern

The accompanying condensed 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 has 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 ofone year from the date that these financial statements are issued. As of* June 30, 2026,the Company had $6,613 in cash, cash equivalents and restricted cash and a working capital deficit of $108,123. The Company has incurred recurring operating losses, negative cash flows from operations, significant debt obligations due within the nexttwelve* months due to an event of default on the Company's outstanding Term Loan (as defined below) and isnot currently in compliance with certain Nasdaq listing requirements, including the minimum stockholders' equity and minimum bid price requirements. 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, focusing on our proprietary brand offerings and expanding and optimizing our logistics business. To improve liquidity the Company is negotiating with lenders and key vendors, and is pursuing additional financing or strategic alternatives including through an offering of equity securities, the sale of assets or businesses, including the sale of Aurora Peat Products ULC ("APP"). Refer to Note17 –Subsequent Events for further details. Excluding the sale of APP, these plans arenot within the Company’s control, and therefore cannot be deemed probable. As a result, the Company has concluded that management’s plans donot alleviate substantial doubt about the Company’s ability to continue as a going concern.

These condensed consolidated financial statements donot 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.

Nasdaq listing compliance

On* April 1, 2026,the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notified the Company that it wasnot* in compliance with the*$2.5* million minimum stockholders' equity requirement under Nasdaq Listing Rule5550(b)(1). Although Nasdaq subsequently granted the Company an extension to regain compliance, on* July 2, 2026Nasdaq determined that the Company hadnot* satisfied the terms of that extension. The Company timely requested a hearing before the Nasdaq Hearing Panel on* July 9, 2026,which stayed any further action by Nasdaq pending completion of the hearing process. The Company is evaluating available options to regain compliance; however, there can beno* assurance that it will do so or that any additional extension will be granted.

In addition, on* July 6, 2026,Nasdaq notified the Company that it wasnot* in compliance with the minimum bid price requirement under Nasdaq Listing Rule5550(a)(2) because its common stock hadnot maintained a closing bid price of at least*$1.00* per share for30 consecutive business days. The Company has a180-day compliance period to regain compliance and is evaluating available alternatives.

3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the requirements of the SEC for interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as the Company's annual consolidated financial statements and, in the opinion of management, reflect all normal and recurring adjustments which are necessary for the fair statement of the Company’s financial information. These interim results arenot necessarily indicative of the results to be expected for the fiscal year ending* December 31, 2026*, or for any other interim period or for any other future year. All intercompany balances and transactions have been eliminated in consolidation.

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The condensed consolidated balance sheet as of* December 31, 2025*, has been derived from the audited consolidated financial statements of the Company, which is included in the2025 Annual Report. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the2025 Annual Report.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. 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 ("AROs"), 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 business is organized asone operating segment managed on a consolidated basis, andone 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 loss as disclosed in the statements of operations that arenot significant segment expenses are impairments, loss on asset disposition, interest expense, other income (expense), net, and income tax benefit. Since the Company operates asone reportable segment, all required segment financial information is found in the condensed 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 ("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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All of the products sold by the Company are similar and classified as CEA equipment and supplies.

Fair value measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has applied the framework for measuring fair value which requires a fair value hierarchy to be applied to all fair value measurements. All financial instruments recognized at fair value are classified intoone ofthree levels in the fair value hierarchy as follows:

Level1 — Valuation based on quoted prices (unadjusted) observed in active markets for identical assets or liabilities.

Level2 — Valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted prices for identical or similar instruments in markets that arenot in active markets; inputs other than quoted prices used in a valuation model that are observable for that instrument; and inputs that are derived from or, corroborated by, observable market data by correlation or other means.

Level3 — Valuation techniques with significant unobservable market inputs.

The Company measures certain non-financial assets and liabilities, including long-lived assets and intangible assets at fair value on a nonrecurring basis.

Inventories

Inventories consist of finished goods, work-in-process, and raw materials used in manufacturing products. Inventories are stated at the lower of cost or net realizable value, principally determined by thefirst in,first out method of accounting. The Company maintains an allowance for excess and obsolete inventory. The estimate for excess and obsolete inventory is based upon assumptions about current and anticipated demand, customer preferences, business strategies, and market conditions. Management reviews these assumptions periodically to determine if any adjustments are needed to the allowance for excess and obsolete inventory. The establishment of an allowance for excess and obsolete inventory establishes a new cost basis in the inventory. Such allowance isnot reduced until the product is sold or otherwise disposed. If inventory is sold, any related reserves would be reversed in the period of sale. 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.

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Revenue recognition

The Company follows ASC606 -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 fromone 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. Arrangements generally have a single performance obligation and revenue is reported net of variable consideration which includes applicable volume rebates, cash discounts and sales returns and allowances. Variable consideration is estimated and recorded at the time of sale.

The amount billed to customers for shipping and handling costs included in net sales was $1,103 and $2,029 during thethree andsix months ended* June 30, 2026*, respectively, and $1,179 and $2,582 during thethree andsix months ended* June 30, 2025*. Shipping and handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs included in cost of goods sold. The Company doesnot receive noncash consideration for the sale of goods. Contract consideration received from a customer prior to revenue recognition is recorded as a contract liability and is recognized as revenue when the Company satisfies the related performance obligation under the terms of the contract. The Company's contract liabilities, which consist primarily of customer deposits reported within deferred revenue on the condensed consolidated balance sheets, totaled $888 and $2,742 as of* June 30, 2026*, and* December 31, 2025*, respectively. During thethree months ended* June 30, 2026*, the Company recorded customer deposits of $212, recognized $829 of deferred revenue, and noted $250 of additional decreases primarily due to foreign exchange rate fluctuations. During thesix months ended* June 30, 2026*, the Company recorded customer deposits of $730, recognized $2,446 of deferred revenue, and noted $138 of additional decreases primarily due to foreign exchange rate fluctuations. There areno significant financing components and the majority of revenue is recognized withinone 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.

Income taxes

The income tax provision is calculated for an interim period by distinguishing between elements recognized in the income tax provision through applying an estimated annual effective tax rate (the “ETR”) to a measure of year-to-date operating results referred to as “ordinary income (or loss),” and discretely recognizing specific events referred to as “discrete items” as they occur. The income tax provision or benefit for each interim period is the difference between the year-to-date amount for the current period and the year-to-date amount for the prior period. Under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")740-270-30-36, entities subject to income taxes in multiple jurisdictions should applyone overall ETR instead of separate ETRs for each jurisdiction when calculating the interim-period income tax or benefit related to consolidated ordinary income (or loss) for the year-to-date interim period, except in certain circumstances.

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Recent accounting pronouncements

In* November 2024,the FASB issued Accounting Standards Update ("ASU")No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220-40): 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. 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 ASUNo.* 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 elected to apply this practical expedient upon adoption of ASUNo.* 2025-05, which hadno impact on the condensed consolidated financial statements for the period ended* June 30, 2026*.

In* September 2025,the FASB issued ASUNo.* 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic350*-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.

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4. RESTRUCTURING AND ASSET SALES

Restructuring

2023 Restructuring Plan

In thefirst quarter of2025, the Company completed the2023 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* December31,* 2025. The remaining accrual balance of $103 as of* December31,* 2024 was settled during thethree months ended* March**31,* 2025, and there isno remaining accrual balance. Total costs incurred relating to the2023 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. Restructuring actions in the2023 Restructuring Plan were primarily U.S. manufacturing facility consolidations, in particular with respect to production of certain durable equipment products. 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.

2025 Restructuring Plan

In thesecond quarter of2025, the Company initiated a restructuring plan (the*"2025* Restructuring Plan") to reduce its product portfolio and operational footprint to decrease costs and improve efficiency. The2025 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.

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The Company incurred the following estimated restructuring costs for the2025 Restructuring Plan during thethree andsix months ended* June 30, 2026*:

Non-cash charges for thethree andsix months ended* June 30, 2026* were primarily associated with the write-down of certain ROU assets which were primarily recorded in SG&A and inventory write-downs which were primarily recorded in cost of goods sold on the condensed consolidated statements of operations. Cash charges were primarily comprised of costs incurred to relocate and terminate certain facilities.

Total costs relating to the2025 Restructuring Plan incurred since its inception through* June 30, 2026* were (i) $7,535 of non-cash charges comprised primarily of inventory markdowns and the write-down of certain ROU assets, and (ii) $3,564 of cash charges comprised primarily of costs incurred to relocate and terminate certain facilities.

The following tables present the activity in accrued expenses and other current liabilities for restructuring costs related to the2025 Restructuring Plan for thethree andsix months ended* June 30, 2026*:

The Company doesnot anticipate the2025 Restructuring Plan and related actions will result in material additional restructuring charges. The amounts the Company will ultimately expend could differ from these estimates.

Asset Sales

Goshen:

During thethree months ended* June 30, 2026*, the Company sold approximately 38 acres of the 120 acres of excess owned land at the Goshen, New York location. The sale price less costs to sell, in the amount of $1,415, was less than the net carrying value of the property, plant and equipment, and the Company recorded a $77 loss in SG&A during thethree andsix months ended* June 30, 2026*.

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5. 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* maynot* be recoverable. During thefourth quarter of fiscal2025, 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* December31,* 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 level3 unobservable input in the fair value hierarchy. Amortization expense related to intangible assets was $5,931 and $11,864 for thethree andsix months ended* June 30, 2025*, respectively.

The carrying value of intangible assets, net, consisting of an indefinite-lived tradename was $2,801 as of each of* June 30, 2026* and* December 31, 2025.*

6. LOSS PER COMMON SHARE

Basic loss per common share is computed using net loss divided by the weighted-average number of common shares outstanding during each period, excluding unvested restricted stock units (“RSUs”) and performance stock units ("PSUs").

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 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.

The following table presents basic and diluted loss per common share for thethree andsix months ended* June 30, 2026and2025*:

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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:

7. ACCOUNTS RECEIVABLE, NET, AND INVENTORIES

Accounts receivable, net comprised the following:

The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that willnot be collected. To estimate the allowance for credit losses the Company applied the loss-rate method using relevant available information including historical write-off activity and current conditions. The allowance for credit losses is measured on a pooled basis when similar risk characteristics exist. When assessing whether to measure certain financial assets on a pooled basis, the Company considered various risk characteristics, including industry and risk characteristics of the customer. When a specific customer exhibits unique risk characteristics, such as significant deterioration in financial condition or other indicators that itno longer shares similar risk characteristics with the collective pool, that receivable is evaluated individually. Expected credit losses for individually evaluated receivables are measured based on expected cash recoveries, and any resulting specific reserves are included in the allowance for credit losses. Write-offs of accounts receivable are recorded to the allowance for credit losses. Any subsequent recoveries of previously written off balances are recorded as a reduction to credit loss expense.

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

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 increase based on changes in estimates and other factors and decrease based on sales of products and disposals.

8. LEASES

The Company leases its distribution centers and manufacturing facilities fromthird parties under various non-cancelable lease agreements expiring at various dates through2038. Also, the Company leases some property, plant and equipment under finance leases. Certain leases contain escalation provisions and/or renewal options, giving the Company the right to extend the leases by up to20 years. However, these options are generallynot 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 $2,184 and $4,428 during thethree andsix months ended* June 30, 2026*, respectively. The Company incurred operating lease costs of $2,415 and $4,799 during thethree andsix months ended* June 30, 2025*, respectively. These costs are included primarily within SG&A in the condensed consolidated statements of operations.

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, primarily within SG&A. For thethree andsix months ended* June 30, 2026*, the Company recorded sublease and logistics income of $1,704 and $3,051, respectively. For thethree andsix months ended* June 30, 2025*, the Company recorded sublease and logistics income of $1,110 and $2,298, respectively.

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

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The aggregate future minimum lease payments under long-term non-cancelable operating and finance leases with remaining terms greater thanone year as of* June 30, 2026* are as follows:

9. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net comprised the following:

Depreciation, depletion and amortization expense related to property, plant and equipment, net was $988 and $2,019 for thethree andsix months ended* June 30, 2026*, respectively. Depreciation, depletion and amortization expense related to property, plant and equipment, net was $1,481 and $2,857 for thethree andsix months ended* June 30, 2025*, respectively. As noted in Note5 –Intangible Assets, Net, the Company recorded impairment charges of $3,784 for property, plant, and equipment during thefourth quarter of fiscal2025. The impairment charges were primarily related to Leasehold improvements, Land, and Building and improvements.

As of* June 30, 2026*, Land, Building and improvements and Computer equipment, contain finance leases assets, recorded at cost of $9,623, less accumulated depreciation of $3,385. 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.

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The Company operates peat bogs in Alberta, Canada. Under current provincial laws the Company is subject to certain 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. When 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* June 30, 2026*, and* December 31, 2025*, the Company had AROs of $156 and $170, respectively, recorded in Accrued expenses and other current liabilities on the condensed consolidated balance sheets. As of* June 30, 2026*, and* December 31, 2025*, the Company had AROs of $4,584 and $4,668, respectively, recorded in other long-term liabilities on the condensed consolidated balance sheets.

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

The Company notes that peat bogs and corresponding AROs were sold in conjunction with the Aurora Peat Products business. Refer to Note17 –Subsequent Events for further details.

10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities comprised the following:

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11. DEBT

Debt is comprised of the following:

Term Loan

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 (the “Lenders”), pursuant to which the Company borrowed a $125,000 senior secured term loan (the “Term Loan”). The Term Loan was amended by AmendmentNo.* 1 to the Credit and Guaranty Agreement (“AmendmentNo. 1”) effective on* June 27, 2023,to replace the London Interbank Offered Rate ("LIBOR") referenced rates with Secured Overnight Financing Rate ("SOFR") referenced rates. Pursuant to AmendmentNo.* 1, any Term Loan that constitutes a Eurodollar Rate Loan that is outstanding as of the AmendmentNo. 1 closing date shall continue until the end of the applicable interest period for such Eurodollar Rate Loan and the provisions of the Term Loan applicable thereto shall continue and remain in effect (notwithstanding the occurrence of the AmendmentNo. 1 closing date) until the end of the applicable interest period for such Eurodollar Rate Loan, after which such provisions shall haveno further force or effect. Such Eurodollar Rate Loan shall subsequently either be an ABR Loan or a Term Benchmark Loan. The ABR Loans shall bear interest at the Alternate Base Rate (with a 2.0% floor) plus 4.50%, and Term Benchmark Loans shall bear interest at the Adjusted Term SOFR Rate (with a 1.0% floor), plus 5.50%. The ABR Loan and Term Benchmark Loan credit spreads of 4.50% and 5.50%, respectively, within the AmendmentNo. 1 havenot changed from the credit spreads in the original Term Loan. 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 (“FEAC”) was appointed as the successor agent for the Lenders in accordance with Section9* of the Credit and Guaranty Agreement. On* April 8, 2026,the Company, the Lenders and the Agents entered into AmendmentNo.* 2 to the Credit and Guaranty Agreement (“AmendmentNo. 2”). AmendmentNo. 2 amends the Credit Agreement to, among other things, (i) replace JPMorgan with FEAC as the Agents; and (ii) require each Credit Party to covenant and agree to (A) regularly provide certain liquidity reports and cash flow forecasts, (B) regularly provide certain aging reports and inventory reports, and (C) maintain a minimum liquidity of*$1* million.

The Term Loan matures on* October 25, 2028 ("Maturity Date") and isnot* subject to a call premium. Deferred financing costs are being amortized to interest expense over the term of the loan. For thethree months ended* June 30, 2026*, the effective interest rate was 11.74% and interest expense was $3,348. For thesix months ended* June 30, 2026*, the effective interest rate was 15.98% and interest expense was $9,067, which includes amortization of deferred financing costs and discount of $2,576 triggered by the Specified Event of Default (as defined below).

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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. In accordance with this provision, the Company made prepayments of $4.6 million during of2025* for an asset sale completed in2024. The prepayments reduced our required quarterly installment amounts tozero for the remaining term.

The Term Loan is secured by afirst lien on the non-working capital assets of the Company and asecond lien on the working capital assets of the Company.

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 (the “Specified Event of Default”) and informed the Company that the Administrative Agent or the Collateral Agent mayexercise any rights and remedies provided under the Credit and Guaranty Agreement and related financing documents, but it didnot* seek to enforce such remedies as of such time. As a result of the Specified 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* April 8, 2026 (the “Forbearance Effective Date”), the Company entered into that certain Forbearance Agreement (the “Forbearance Agreement”) with the other Obligors, the Lenders, and FEAC, in connection with the Term Loan. Pursuant to the Forbearance Agreement, from the Forbearance Effective Date to the earliest to occur of (the occurrence of clause (i) or (ii), a “Forbearance Termination Event”): (i) April 30, 2026 (the “Forbearance Outside Date”) provided that the Forbearance Outside Date maybe extended from time to time infifteen* (15) day increments (or longer) upon written confirmation by the Administrative Agent (including by email); and (ii) the delivery of notice from the Administrative Agent to the Company terminating the Forbearance Period (as defined below), which notice* maybe delivered at any time upon or after (A) the occurrence of any Event of Default (as defined in the Credit Agreement) (other than the Specified Event of Default, under the Credit Agreement or any other Credit Document (as defined in the Credit Agreement)) and (B) the failure of (x) the Company or any other Obligor to comply with any of the Forbearance Period Requirements set forth in Section7* of the Forbearance Agreement; (y) any representation or warranty made by the Company or any other Obligor under or in connection with the forbearance to be true and complete as of the date when made or any other breach of any of such representation or warranty; or (z) the repudiation and/or assertion of any defense by any Obligor with respect to the forbearance or any other Credit Document or the pursuit of any claim by any Obligor against the Agents or any Lender (collectively, the “Forbearance Period”), solely with respect to the Specified Event of Default, neither the Administrative Agent nor any Lender shall, upon the terms and conditions expressly specified therein, take any action, commence any proceedings against any Obligor or any other person with respect to the enforcement of any of its or their rights or remedies under the Credit Documents or applicable law, other than as expressly described in the Forbearance Agreement. The Company, the Lenders, and FEAC agreed to extend the Forbearance Period under the Forbearance Agreement through and including* August 31, 2026.*

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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, 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 Revolving Credit Facility originally had a borrowing limit of $50,000. On* August 31, 2021,the Obligors entered into an amendment to the Revolving Credit Facility (the "First Amendment") to increase their original borrowing limit to $100,000. 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 asecond* 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 athird 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. On December 22, 2022,the Company entered into afourth* amendment to the Revolving Credit Facility (the "Fourth Amendment") pursuant to which a sale-leaseback transaction was permitted, and certain other changes were made, including a reduction of the maximum commitment amount under the Revolving Credit Facility from $100,000 to $75,000 and transitioning the LIBOR based rates to SOFR based rates. On* March 31, 2023,the Company and certain of its subsidiaries entered into afifth* amendment to the Revolving Credit Facility (the “Fifth Amendment”) pursuant to which the maturity date was extended to* June 30, 2026,the maximum commitment amount under the Revolving Credit Facility was reduced to $55,000, and the interest rate on borrowings was revised to various spreads, based on the Company's fixed charge coverage ratio. On November 1, 2024,the Company and certain of its subsidiaries entered into asixth* 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 aseventh* 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 doesnot* purport to be complete and is qualified in its entirety by reference to the Seventh Amendment.

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The unamortized debt discount and deferred financing costs were $209 as of* December 31, 2025*, and are included in other assets in the condensed consolidated balance sheets. 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 afirst priority lien on the working capital assets of the Company and asecond 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 afirst-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 afirst-in-first-out basis, minus (c) Reserves (each of the defined terms above, as defined in the Revolving Credit Facility documents).

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 1.1x on a rollingtwelve-month basis until the Excess Availability was more than 20% of the Aggregate Revolving Commitment forthirty 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 1.15x.

The Revolving Credit Facility provided for various interest rate options including the Adjusted Term SOFR Rate, the AdjustedREVSOFR30 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 AdjustedREVSOFR30 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*, the Company hadzero borrowed under the 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.

Other Debt

Other debt of $65 and $85 as of* June 30, 2026*, and* December 31, 2025*, respectively, was primarily comprised of a foreign subsidiary's other debt which constitutes an immaterial revolving line of credit and mortgage.

Loss on debt extinguishment

The loss on debt extinguishment of $191 for thesix months ended* June 30, 2026*, resulting primarily from the write-off of the Revolving Credit Facility's unamortized debt discount and deferred financing costs at the time of the Termination Agreement, are presented in other (expense) income, net on the condensed consolidated statement of operations.

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Aggregate future principal payments

As of* June 30, 2026*, the aggregate future principal payments under long-term debt are as follows:

12. STOCKHOLDERS’** EQUITY**

Common stock

Each holder of common stock is entitled toone vote for each share of common stock. Common stockholders haveno pre-emptive rights to acquire additional shares of common stock or other securities. The common stock isnot subject to redemption rights and carriesno subscription or conversion rights. In the event of liquidation, the stockholders are entitled to share in corporate assets on a pro rata basis after the Company satisfies all liabilities and after provision is made for any class of capital stock having preference over the common stock. Subject to corporate regulations and preferences to preferred stock, if any, dividends are at the discretion of the board of directors. As of* June 30, 2026*, there were 4,814,612 shares outstanding and 300,000,000 shares authorized.

13. STOCK-BASED COMPENSATION

Stock-based compensation plan overview

The Company maintainsthree equity incentive plans: the2018 Equity Incentive Plan (“2018 Plan”), the2019 Employee, Director and Consultant Equity Incentive Plan (“2019 Plan”) and the2020 Employee, Director, and Consultant Equity Incentive Plan (“2020 Plan” and collectively, “Incentive Plans”). The2020 Plan serves as the successor to the2019 Plan and2018 Plan and provides for the issuance of incentive stock options ("ISOs"), nonqualified stock options, stock grants and stock-based awards to employees, directors, and consultants of the Company.No further awards will be issued under the2018 Plan and2019 Plan. As of* June 30, 2026*, a total of 191,044 shares were available for grant under the2020 Plan.

The Incentive Plans are administered by the Company's board of directors. Notwithstanding the foregoing, the board of directors* maydelegate concurrent responsibility for administering each plan, including with respect to designated classes of persons eligible to receive an award under each plan, to a committee or committees (which term shall include subcommittees) consisting ofone* or more members of the board of directors (collectively, the “Plan Administrator”), subject to such limitations as the board of directors deem appropriate.

In* November 2020,the board of directors and stockholders approved the2020* Plan and reserved an aggregate of 228,405 shares of common stock for issuance under the2020 Plan. Pursuant to the2020 Plan, the number of shares available for issuance under the2020 Plan* maybe increased on January 1of each year, beginning on January 1, 2021,and ending on January 2, 2030,in an amount equal to the lesser of (i)4% of the outstanding shares of the Company’s common stock on such date or (ii) such number of shares determined by the Plan Administrator. The Plan Administrator determinednot* to increase the number of shares available for issuance under the2020 Plan for the2026 year.

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The2020 Plan provides for the grant of ISOs, nonqualified stock options, stock grants, and stock-based awards that are based in whole or in part by reference to the Company’s common stock.

The tax benefits recognized in the condensed consolidated statements of operations for stock-based compensation arrangements for thethree andsix months ended* June 30, 2026and2025*, werenot material to the financial statements.

Restricted Stock Unit Activity

RSUs granted to certain executives, employees and members of the board of directors expire 10 years after the grant date. The awards generally have a time-based vesting requirement (based on continuous employment). Upon vesting, the RSUs convert into shares of the Company's common stock. The stock-based compensation expense related to service-based awards is recorded over the requisite service period. During thesix months ended* June 30, 2026*, the Company granted 120,000 RSU awards to directors that are expected to vest on theone-year anniversary of the grant date.

The following table summarizes the activity related to the Company's RSUs for thesix months ended* June 30, 2026*. For purposes of this table, vested RSUs represent the shares for which the service condition had been fulfilled during thesix months ended* June 30, 2026*:

As of* June 30, 2026*, total unamortized stock-based compensation cost related to unvested RSUs was $242 and the weighted-average period over which the compensation is expected to be recognized is less thanone year. For thethree andsix months ended* June 30, 2026*, the Company recognized $145 and $312, respectively, of total stock-based compensation expense for RSUs. During thesix months ended* June 30, 2026*,60,000 RSUs that vested werenot issued due to the recipients' elections to defer the conversion into common stock, and the Company settled 79,249 previously deferred RSUs. As of* June 30, 2026*, there were 137,460 RSUs which had vested, but werenot yet issued due to the recipients' elections.

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Performance Stock Unit Activity

During thesix months ended* June 30, 2026*, the Company didnot grant, vest, or transact in any PSUs. PSUs were granted in2024, which vested in thesecond quarter of2025, less forfeitures due to employee terminations and performance conditions that werenot satisfied. There wereno PSUs outstanding as of* June 30, 2026* or* December 31, 2025*.

Stock Options

There wereno stock options granted or exercised during thesix months ended* June 30, 2026*. The following table summarizes the stock option activity for thesix months ended* June 30, 2026*:

As of each of* June 30, 2026* and* December 31, 2025*, there wereno unvested stock awards, andno compensation cost related to optionsnot yet recognized. To the extent there are unvested stock option awards, the vesting of stock options is subject to certain change in control provisions as provided in the incentive plan agreements and stock options* may*be exercised up to 10 years from the date of issuance.

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14. INCOME TAXES

The Company recorded income tax benefits of $225 and $333 for thethree andsix months ended* June 30, 2026*, representing effective tax rates of 2.1% and 1.3%, respectively. The Company’s effective tax rates for thethree andsix months ended* June 30, 2026*, differ from the federal statutory rate of 21% primarily due to U.S. and foreign jurisdictions in full valuation allowance. The income tax benefit for thethree andsix months ended* June 30, 2026*, was primarily due to certain benefits in Canadian jurisdictions, partially offset by foreign taxes in Spain and U.S. state taxes.

The Company recorded income tax benefits of $98 and $16 for thethree andsix months ended* June30,* 2025, respectively, representing effective tax rates of 0.6% and 0.1%, respectively. The Company’s effective tax rates for thethree andsix months ended* June30,* 2025, differ from the federal statutory rate of 21% primarily due to U.S. and foreign jurisdictions in full valuation allowance. The income tax benefit for thethree andsix months ended* June**30,* 2025, was primarily due to certain benefits in Canadian jurisdictions, partially offset by foreign taxes in Spain and U.S. state taxes.

15. COMMITMENTS AND CONTINGENCIES

Purchase commitments

From time to time in the normal course of business, the Company will enter into agreements with suppliers which provide favorable pricing in return for a commitment to purchase minimum amounts of inventory over a defined time period.

Contingencies

In the normal course of business, certain claims have been brought against the Company and, where applicable, its suppliers. While there is inherent difficulty in predicting the outcome of such matters, management has vigorously contested the validity of these claims. Based on available information, management doesnot expect that the outcome of any matters, individually or in the aggregate, would have a material adverse effect on the condensed consolidated financial position, results of operations, cash flows or future earnings of the Company.

In* April 2020,Aurora Innovations LLC (“Aurora Innovations”), obtained a loan in the principal aggregate amount of approximately $782 pursuant to thePaycheck* Protection Program under the CARES Act (the “Aurora PPP Loan”), which was forgiven in full, by the Small Business Administration (the "SBA"), in* June 2021.In July 2021,the Company acquired Aurora Innovations pursuant to the terms of that certain Securities Purchase Agreement, dated as of June 17, 2021,by and among the Company, Gotham Properties LLC, Aurora Innovations Inc., Aurora International, Inc., and certain equity holders party thereto. In April 2020,Innovative Growers Equipment, Inc., Innovative AG Installation, Inc., and Innovative Racking Systems, Inc. (collectively, the “IGE Entities”), obtained loans in the principal aggregate amount of approximately $444 pursuant to thePaycheck* Protection Program under the CARES Act (the “IGE PPP Loans” together with the Aurora PPP Loan, the “PPP Loans”), which were forgiven in full, by the SBA, in* May 2021.In November 2021,the Company acquired the IGE Entities pursuant to the terms of that certain Stock Purchase and Contribution Agreement, dated as of October 25, 2021,by and among the Company, Christopher Mayer, and Bruce Zierk. The Company received Civil Investigative Demands dated July 15, 2025,pursuant to the False Claims Act,31 U.S.C3729*-3733, regarding an investigation to determine whether the original entities were eligible for the aforementioned PPP Loans if their products were in fact used to support the use, growth, enhancement or development of cannabis. At this stage, the Civil Investigative Demands are only requests for information which the Company has provided. The False Claims Act allows for the Department of Justice to recoup any PPP loans as well as potential treble damages for any violation. At this time, the Company cannot assess the likely outcome of the investigations. The Company is continuing to cooperate with the inquiries, and at this time, there has beenno formal demand for return of the PPP Loan proceeds, andno formal claim or lawsuit has been initiated against the Company.

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16. FAIR VALUE MEASUREMENTS

Recurring and Nonrecurring

As described in Note4 –Restructuring and Asset Sales,* during May 2026,subsequent to the end of the fiscal quarter ended March 31, 2026,the Company sold approximately 38 acres of the 120 acres of excess owned land at the Goshen, New York location. The sale price less costs to sell, in the amount of $1,415, was less than the net carrying value of the property, plant and equipment, and the Company recorded a $77 loss in SG&A during thethree* andsix months ended* June 30, 2026*.

As described in Note5 –Intangible Assets, Net, during thefourth quarter of fiscal2025, 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. 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 level3 unobservable input in the fair value hierarchy.

The Company didnot have any other assets or liabilities that were remeasured to fair value on a recurring or nonrecurring basis during the periods presented.

Other Fair Value Measurements

The following table summarizes the fair value of the Company’s assets and liabilities as of* June 30, 2026* and* December 31, 2025*, which are provided for disclosure purposes:

Cash and cash equivalents included funds deposited in banks, and the fair values approximated carrying values due to their short-term maturities. 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.

The estimated fair value of finance leases, which were considered Level3 fair value measurements, were calculated as the present value of the required future cash outflows discounted at an estimated borrowing rate.

The carrying amount of the Term Loan reported above excludes unamortized debt discount and deferred financing costs ofzero and $2,576 as of* June 30, 2026and December 31, 2025,respectively. The fair value of the Term Loan as of December 31, 2025was estimated based on Level2* fair value measurements and was based on bank quotes. As of* June 30, 2026*, due to the Specified Event of Default, the Term Loan doesnot have readily available quoted market prices that the Company believes are indicative of fair value. Accordingly, the Company hasnot estimated the fair value of its Term Loan as of* June 30, 2026*, as such estimates wouldnot be meaningful or practicable.

Refer to Note8 –* Leases* and Note11 –Debt, for further details of the Company's finance leases and Term Loan, respectively.

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The Company didnot have any transfers between Levels within the fair value hierarchy during the periods presented.

17. SUBSEQUENT EVENTS

On July 31, 2026 (the “Closing Date”), the Company, through its wholly owned subsidiaries Aurora International, LLC, an Oregon limited liability company (the “Seller”) and Aurora Peat Products ULC, an Alberta unlimited liability corporation, entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with 2817049 Alberta Ltd., an Alberta corporation (the “Buyer”). Pursuant to the terms of the Share Purchase Agreement, Seller sold to Buyer and Buyer purchased from Seller all the issued and outstanding shares of APP for $16 million, subject to adjustments set forth in the Share Purchase Agreement (the “Transaction”). The net proceeds from the Transaction will be applied to reduce outstanding debt, including outstanding interest, under the Term Loan. The Share Purchase Agreement contains customary representations and warranties of the parties, covenants and indemnification provisions. The representations, warranties and covenants contained in the Share Purchase Agreement were made solely for the benefit of the parties to the Share Purchase Agreement and may be subject to limitations agreed upon by the contracting parties. Cash obligations in connection with the close of the Transaction are estimated to be up to $3.1 million.

In connection with the Share Purchase Agreement, the Seller and Buyer entered into a secured promissory note on the Closing Date, pursuant to which the Buyer issued, in favor of the Seller, a promissory note in the principal amount of $5 million (the “Principal Amount”), representing a deferred portion of the purchase price payable to the Seller under the Share Purchase Agreement. The secured promissory note was assigned to the lenders of the Company's Term Loan.

In connection with the Share Purchase Agreement, Hydrofarm, LLC and APP entered into a supply agreement on the Closing Date, pursuant to which each of Hydrofarm, LLC and APP will produce and supply certain goods for the other party, subject to the terms and conditions therein.