UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________.

Commission File Number: 001-39933

URBAN-GRO, INC.

(Exact name of registrant as specified in its charter)

Delaware		46-5158469
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1751 Panorama Point, Unit G Lafayette, CO		80026		(720) 390-3880
(Address of principal executive offices)		(Zip Code)		(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value		UGRO		NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s only class of common stock outstanding as of ~~January~~February 276, 2026 was 1718,~~470~~790,~~729~~550 shares, or 751,622 shares after giving effect to a 1-for-25 reverse stock split that was effective on February 9, 2026.

TABLE OF CONTENTS

Item No.		Page No.
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Unaudited Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Unaudited Condensed Consolidated Statements of Stockholders’ Deficit	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2425
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2526
Item 4.	Controls and Procedures	2627
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	2728
Item 1A.	Risk Factors	2930
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2930
Item 3.	Defaults Upon Senior Securities	2930
Item 4.	Mine Safety Disclosures	2930
Item 5.	Other Information	2930
Item 6.	Exhibits	3031
	Signatures	3132

CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements related to future events, challenges we may face, business strategy, future performance, future operations, backlog, financial position, estimated or projected revenues and losses, projected costs, prospects, plans and objectives of management. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek,” “anticipate,” “plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “potential,” “intend,” “could,” “should,” “believe,” and variations of such words or their negative and similar expressions. Forward-looking statements should not be read as a guarantee of future performance or results and may not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on management’s belief, based on currently available information, as to the outcome and timing of future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed in such forward-looking statements. When evaluating forward-looking statements, you should consider the risk factors and other cautionary statements described in this Quarterly Report on Form 10-Q and under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. We believe the expectations reflected in the forward-looking statements contained in this report are reasonable, but no assurance can be given that these expectations will prove to be correct. Forward-looking statements should not be unduly relied upon. Important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to:

●

risks related to our operating strategy;

●

competition for projects in our markets;

●

our ability to predict and respond to new laws and governmental regulatory actions affecting our business, including foreign laws and governmental regulation;

●

risks related to delays in the grant of necessary licenses to clients and delays in passage of legislation expected to benefit our clients, which could delay the funding and start of projects

●

our ability to successfully develop new and/or enhancements to our product offerings and develop a product mix to meet demand;

●

our ability to meet or exceed market expectations from analysts;

●

unfavorable economic conditions, increases in interest rates and restrictive financing markets that may cause customers to cancel contracts reflected in our backlog or cause sales to decrease;

●

our ability to successfully identify, manage and integrate acquisitions;

●

our ability to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us;

●

climate change and related laws and regulations;

●

our ability to manage our supply chain in a manner that ensures that we are able to obtain adequate raw materials, equipment and essential supplies in a timely manner and at favorable prices;

●

our ability to attract and retain key personnel;

●

risks associated with concentration of a large portion of our business from a relatively small number of key clients/customers and the effect a loss of a key client/customer could have on our business;

●

risks associated with customers or suppliers not fulfilling contracts;

●

risks associated with reliance on key suppliers and risks such suppliers could change incentive programs that negatively affect our returns;

●

the impact of inflation on costs of labor, raw materials and other items that are critical to our business;

●

property damage and other claims and insurance coverage issues;

These factors are not necessarily all of the important factors that could cause actual results or events to differ materially from those expressed in the forward-looking statements. Other unknown or unpredictable factors could also cause actual results or events to differ materially from those expressed in the forward-looking statements. Our future results will depend upon various other risks and uncertainties, including those described in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements after the date on which any such statement is made, whether as a result of new information, future events or otherwise, except as required by law. You are advised, however, to consult any future disclosures we make on related subjects in future reports to the Securities and Exchange Commission (SEC).

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

URBAN-GRO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of
	June 30,			December 31,
	March 31, 2025 (unaudited)			December 31, 2024 (audited)
	2025			2024
	(Unaudited)			(Audited)
ASSETS
Current Assets
Current assets:
Cash	$	~~696~~721,~~996~~249		$	819,050
Accounts receivable, net		53,~~551~~059,~~866~~193			8,369,116
Contract receivables		3,694,630			4,132,817
Contract Receivables		1,691,483			4,132,817
Prepaid expenses and other current assets		31,~~478~~936,~~135~~219			2,486,865
Total current assets	$	137,~~421~~408,~~627~~144			15,807,848
Non-current assets
Non-current assets:
Property and equipment, net	$	~~837~~762,~~524~~651			921,957
Operating lease assets		622,133			1,534,560
Operating lease right-of-use assets		569,428			1,534,560
Goodwill		1,080,638			1,080,638
Intangible assets, net		~~123~~98,~~830~~880			148,780
Total non-current assets		2,~~664~~511,~~125~~597			3,685,935
Total assets	$	169,~~085~~919,~~752~~741		$	19,493,783
LIABILITIES
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Current liabilities:
Accounts payable	$	1618,~~863~~842,~~418~~196		$	14,724,589
Contract liabilities		1211,~~546~~550,~~624~~346			14,094,176
Accrued expenses		4,~~587~~523,~~973~~586			4,277,545
Customer deposits		4,~~942~~236,~~145~~913			2,682,099
Notes payable		4,183,660			5,968,145
Notes payable, current		4,089,203			5,968,145
Operating lease liabilities		357,641			552,933
Operating lease liabilities, current		368,755			552,933
Total current liabilities		43,~~481~~610,~~461~~999			42,299,487
Non-current liabilities
Notes payable, long-term		~~559~~323,~~521~~510			795,531
Deferred tax liability		-			14,608
Operating lease liabilities - LT		287,529			1,026,699
Operating lease liabilities, long-term		221,942			1,026,699
Total non-current liabilities		~~847~~545,~~050~~452			1,836,838
Total liabilities	$	44,~~328~~156,~~511~~451		$	44,136,325
Commitments and contingencies (Note 11)
Commitments and contingencies
SHAREHOLDERS’ DEFICIT
Stockholders’ deficit:
Preferred stock, $0.10 par value; 3,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024	$	-		$	-
Preferred stock, $0.10 par value; 3,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2025 and December 31, 2024		-			-
Common stock, $0.001 par value 30,000,000 shares authorized; 14,560,366 issued and 13,110,533 outstanding as of March 31, 2025, and 14,071,390 issued and 12,621,557 outstanding as of December 31, 2024		14,560			14,071
Common stock, $0.001 par value 200,000,000 shares authorized; 587,278 issued and 529,285 outstanding as of June 30, 2025, and 562,855 issued and 504,862 outstanding as of December 31, 2024		588			563
Additional paid in capital		90,590,343			90,157,137
Additional paid-in capital		90,814,508			90,170,645
Treasury shares, cost basis: 1,449,833 shares as of March 31, 2025 and December 31, 2024		(12,045,542	)		(12,045,542	)
Treasury shares, cost basis: 57,993 shares as of June 30, 2025 and December 31, 2024		(12,045,542	)		(12,045,542	)
Accumulated deficit		(~~106~~113,~~802~~006,~~120~~264	)		(102,768,208	)
Total shareholders’ deficit		(28,242,759	)		(24,642,542	)
Total stockholders’ deficit		(34,236,710	)		(24,642,542	)
Total liabilities and shareholders’ deficit	$	16,085,752		$	19,493,783
Total liabilities and stockholders’ deficit	$	9,919,741		$	19,493,783

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements

URBAN-GRO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)

	Three Months Ended
	Three Months Ended June 30,						Six Months Ended June 30,
	March 31,
	2025			2024			2025			2024
	2025			2024
Revenues
Revenues:
Equipment	$	3,128,746		$	3,398,696		$	7,827,323		$	5,904,345
Equipment systems	$	4,698,577		$	2,508,287
Services		1,099,378			2,357,806			2,748,476			5,491,598
Services		1,649,098			3,133,793
Construction design-build		3,512,650			12,059,096			6,634,948			21,742,909
Construction design-build		3,122,298			9,683,814
Other		25,328			129,651			69,430			207,434
Other		44,102			75,141
Total revenues		7,766,102			17,945,249			17,280,177			33,346,286
Total revenues and other income		9,514,075			15,401,035
Cost of revenue
Cost of revenues:
Equipment		2,995,183			2,753,497			7,339,790			4,923,608
Equipment systems		4,344,607			2,172,450
Services		1,060,162			1,513,715			2,111,308			3,022,163
Services		1,051,146			1,508,449
Construction design-build		3,646,334			11,181,017			7,120,721			19,856,346
Construction design-build		3,474,387			8,675,280
Other		19,680			86,704			53,593			142,393
Other		33,913			53,399
Total cost of revenue		7,721,359			15,534,933			16,625,412			27,944,510
Total cost of revenues		8,904,053			12,409,578
Gross profit		44,743			2,410,316			654,765			5,401,776
Gross profit		610,022			2,991,457
Operating expenses:
Operating expenses:
General and administrative		5,805,180			4,668,954			10,322,683			9,746,820
General and administrative		4,517,503			5,077,864
Depreciation and amortization		147,587			395,696			315,281			785,947
Depreciation and Amortization		167,694			390,250
Business development		47,950			25,000			47,950			25,000
Total operating expenses		46,~~685~~000,~~197~~717			5,~~468~~089,~~114~~650			10,685,914			10,557,767
Loss from operations		(45,~~075~~955,~~175~~974	)		(2,~~476~~679,~~657~~334	)		(10,031,149	)		(5,155,991	)
Non-operating income (expense):
Interest expense		(~~454~~260,~~624~~590	)		(99311,~~306~~706	)		(715,214	)		(411,010	)
Interest income		~~268~~201			81155			469			236
Other income (expense)		481,011			(33,064	)
Gain on extinguishment of debt		7,476			-			7,476			-
Total non-operating income (expense)		26,655			(132,289	)
Other income (expense)		4,743			(22,226	)		485,754			(55,291	)
Loss before income taxes		(4,048,520	)		(2,608,946	)
Total non-operating income (expense)		(248,170	)		(333,777	)		(221,515	)		(466,065	)
Income tax benefit		14,608			48,383
Loss before income taxes		(6,204,144	)		(3,013,111	)		(10,252,664	)		(5,622,056	)
Net loss	$	(4,033,912	)	$	(2,560,563	)
Income tax benefit		-			48,383			14,608			96,765
Comprehensive loss	$	(4,033,912	)	$	(2,560,563	)
Net loss	$	(6,204,144	)	$	(2,964,728	)	$	(10,238,056	)	$	(5,525,291	)
Net loss per share - basic and diluted	$	(0.31	)	$	(0.21	)
Comprehensive loss	$	6,204,144		$	(2,964,728	)	$	(10,238,056	)	$	(5,525,291	)
Weighted average shares - basic and diluted		12,964,226			12,075,619
Net loss per common share - basic and diluted	$	(10.64	)	$	(5.99	)	$	(17.65	)	$	(11.19	)
Weighted average common shares outstanding - basic and diluted		583,352			494,820			579,962			493,580

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements

URBAN-GRO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ ~~EQUITY~~DEFICIT (unaudited)

	Common Stock				Additional Paid-in			Accumulated			Treasury			Total Shareholders’
					Additional									Total Stockholders’
	Shares		Amount		Capital			Deficit			Stock			Equity
	Common Stock				Paid-in			Accumulated			Treasury			Equity
Balance, December 31, 2024		14,071,390	$	14,071	$	90,157,147		$	(102,768,208	)	$	(12,045,542	)	$	(24,642,542	)
	Shares		Amount		Capital			Deficit			Stock			(Deficit)
Stock-based compensation		75,000		75		324,196			—			—			324,271
Balance at December 31, 2023		540,906	$	541	$	88,402,738		$	(66,272,382	)	$	(12,045,542	)	$	10,085,355
Stock grant program vesting		263,976		264		(264	)		—			—			—
Stock-based compensation		-		-		656,576			-			-			656,576
Issuance of common stock for loan modification		150,000		150		109,274									109,424
Stock grant program vesting		9,837		10		(10	)		-			-			-
Net loss		—-		—-		-			(42,~~033~~560,~~912~~563	)		—-			(42,~~033~~560,~~912~~563	)
Balance, March 31, 2025		14,560,366	$	14,560	$	90,590,343		$	(106,802,120	)	$	(12,045,542	)	$	(28,242,759	)
Balances at March 31, 2024		550,743		551		89,059,304			(68,832,945	)		(12,045,542	)		8,181,368
Stock-based compensation		-		-		460,785			-			-			460,785
Stock grant program vesting		6,902		7		(7	)		-			-			-
Stock issued for contingent consideration		2,848		3		129,132			-			-			129,135
Net loss		-		-		-			(2,964,728	)		-			(2,964,728	)
Balances at June 30, 2024		560,493	$	561		89,649,214		$	(71,797,673	)	$	(12,045,542	)	$	5,806,560
Balance at December 31, 2024		562,855	$	563	$	90,170,645		$	(102,768,208	)	$	(12,045,542	)	$	(24,642,542	)
Stock-based compensation		3,000		3		324,268			-			-			324,271
Stock grant program vesting		10,559		11		(11	)		-			-			-
Issuance of common stock for loan modification		6,000		6		109,418			-			-			109,424
Net loss		-		-		-			(4,033,912	)		-			(4,033,912	)
Balances at March 31, 2025		582,414		583		90,604,320			(106,802,120	)		(12,045,542	)		(28,242,759	)
Stock-based compensation						210,193			-			-			210,193
Stock grant program vesting		4,864		5		(5	)
Net loss		-		-		-			(6,204,144	)		-			(6,204,144	)
Balances at June 30, 2025		587,278	$	588		90,814,508		$	(113,006,264	)	$	(12,045,542	)	$	(34,236,710	)

	Common Stock				Additional Paid-in			Accumulated			Treasury			Total Shareholders’
	Shares		Amount		Capital			Deficit			Stock			Equity
Balance, December 31, 2023		13,522,669	$	13,523	$	88,389,756		$	(66,272,382	)	$	(12,045,542	)	$	10,085,355
Stock-based compensation		—		—		656,576			—			—			656,576
Stock grant program vesting		245,925		246		(246	)		—			—			—
Net loss		—		—		—			(2,560,563	)		—			(2,560,563	)
Balance, March 31, 2024		13,768,594	$	13,769	$	89,046,086		$	(68,832,945	)	$	(12,045,542	)	$	8,181,368

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements

URBAN-GRO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

	Three Months Ended
	Six Months Ended
	March 31,
	June 30,
	2025			2024
Cash flows from operating activities:
Net loss	$	(410,~~033~~238,~~912~~056	)	$	(25,~~560~~525,~~563~~291	)
Adjustments to reconcile net loss to net cash (used in) / provided by operating activities:
Adjustments to reconcile net loss to net cash provided by (used) in operating activities:
Depreciation and amortization		~~167~~315,~~694~~281			~~390~~785,~~250~~947
Amortization of right-of-use assets		~~136~~182,~~582~~736			~~134~~263,~~054~~775
Amortization of debt discount		38,990			-
Stock-based compensation expense		534,464			1,117,361
Stock-based compensation expense		324,271			656,576
Amortization of debt discounts		78,093			-
Common stock issued for debt modification		109,424			-
Gain on disposal of assets		(64,114	)		-
Gain on disposition of assets		(120,591	)		-
Changes in operating assets and liabilities:
Accounts receivable and contract receivables		37,~~255~~770,~~437~~403			3(6,~~680~~134,~~141~~794	)
Prepaid expenses and other assets and property and equipment		(708,950	)		(497,749	)
Prepaid expenses and other assets		832,966			(696,442	)
Accounts payable, contract liabilities, customer deposits, and accrued expenses		3,161,755			(996,596	)
Accounts payable, contract liabilities, customer deposits and accrued expenses		3,381,098			8,741,425
Operating lease liability		(~~158~~203,~~616~~308	)		(~~129~~216,~~181~~203	)
Deferred tax liability		(14,608	)		(4896,~~383~~765	)
Net cash provided by operating activities		2,213,953			628,549
Net cash provided by (used in) operating activities		2,627,902			(1,760,987	)
Cash flows from investing activities:
Purchase of property and equipment		(63,836	)		-
Proceeds from the sale of property and equipment		123,100			-
Proceeds from disposal of property and equipment		77,600			8,486
Purchase of property and equipment		(113,219	)		(45,999	)
Net cash provided by investing activities		13,764			8,486
Net cash (used in) provided by investing activities		9,881			(45,999	)
Cash flows from financing activities:
Additions to notes payable		-			2,000,000
Proceeds from promissory notes		1,197,000			4,500,000
Repayment of finance lease liability		(7,963	)		(43,180	)
Repayments of notes payable		(3,914,840	)		(3,300,350	)
Repayment of notes payable		(2,341,808	)		(3,020,100	)
Repayment of finance lease liability		(17,744	)		(82,710	)
Net cash used in financing activities		(2,349,771	)		(1,063,280	)
Net cash (used in) provided by financing activities		(2,735,584	)		1,116,940
Net change in cash		(~~122~~97,~~054~~801	)		(~~426~~690,~~245~~046	)
Cash at beginning of period		819,050			1,074,842
Cash at end of period	$	~~696~~721,~~996~~249		$	~~648~~384,~~597~~796
Supplemental cash flow information:
Supplemental disclosure of cash flow information:
Cash paid for interest	$	~~270~~361,~~846~~554		$	~~159~~399,~~366~~218
Net cash paid for income taxes	$	4,611		$	-
Cash paid for income taxes	$	-		$	24,785
Supplemental disclosure of non-cash investing and financing activities:
Termination of operating lease	$	767,884		$	-
Prepaid expenses financed by notes payable	$	~~268~~282,~~411~~320		$	-
Debt discount	$	50,000		$	-

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements

URBAN-GRO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION, ACQUISITIONS, AND LIQUIDITY

Basis of Presentation

These consolidated financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). On February 9, 2026, we effected a 1-for-25 reverse stock split with respect to our common stock. All share and per share information in these consolidated financial statements give effect to this reverse stock split, including restating prior period reported amounts.

Organization

urban-gro, Inc. (together with its wholly owned subsidiaries, collectively “urban-gro,” “we,” “us,” or “the Company”) was originally formed on March 20, 2014, as a Colorado limited liability company. On March 10, 2017, we converted to a Colorado corporation and exchanged shares of our common stock for every member’s interest issued and outstanding on the date of conversion. On October 29, 2020, we reincorporated as a Delaware corporation. On February 12, 2021, we completed an uplisting to the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol “UGRO”.

In 2024, urban-gro, Inc. was an integrated professional services and design-build firm. We offered value-added architectural, engineering, and construction management solutions to the Controlled Environment Agriculture (“CEA”), industrial, healthcare, and other commercial sectors. Innovation, collaboration, and a commitment to sustainability drove our team to provide exceptional customer experiences. To serve our horticulture clients, we engineered, designed and managed the construction of indoor CEA facilities and then integrate complex environmental equipment systems into those facilities. Through this work, we created high-performance indoor cultivation facilities for our clients to grow specialty crops, including leafy greens, vegetables, herbs, and plant-based medicines. Our custom-tailored approach to design, construction, procurement, and equipment integration provided a single point of accountability across all aspects of indoor growing operations. We also helped our clients achieve operational efficiency and economic advantages through a full spectrum of professional services and programs focused on facility optimization and environmental health which established facilities that allowed clients to manage, operate and perform at the highest level throughout their entire cultivation lifecycle once they are up and running. Further, we served a broad range of commercial and governmental entities, providing them with planning, consulting, architectural, engineering and construction design-build services for their facilities. We aimed to work with our clients from the inception of their project in a way that provided value throughout the life of their facility. We are a trusted partner and advisor to our clients and offer a complete set of engineering and managed services complemented by a vetted suite of select cultivation equipment systems.

Liquidity and Going Concern

The Company has produced multiple consecutive years of net losses and negative cash flows from operations. The financial results described in these financial statements and our financial position as of ~~March~~June 3130, 2025 raise substantial doubt about our ability to continue as a going concern. However, the Company has recently taken actions to strengthen its liquidity, including decreasing headcount and operating expenses to expedite the Company’s path to cash flow positive results. If necessary, the Company will seek to raise capital by issuing additional equity shares either through a private placement or on the open market. The Company may also seek to obtain additional debt financing for which there can be no guarantee. Management has concluded that these recent positive steps alleviate any substantial doubt about the Company’s ability to continue its operations, and meet its financial obligations, for twelve months from the date these consolidated financial statements are issued.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Condensed Consolidated Financial Statements

The Company has prepared the accompanying condensed consolidated financial statements pursuant to the rules and regulations of the SEC for condensed financial reporting. The condensed consolidated financial statements are unaudited and, in the Company’s opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of the Company’s condensed consolidated balance sheets, condensed consolidated statements of operations and comprehensive loss, condensed consolidated statements of stockholders’ equity and condensed consolidated statements of cash flows for the periods presented. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted in accordance with regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Significant Accounting Policies

For a detailed discussion about the Company’s significant accounting policies, refer to Note 2 - “Summary of Significant Accounting Policies,” in the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K the year ended December 31, 2024. During the ~~three~~six months ended ~~March~~June 3130, 2025, there were no material changes made to the Company’s significant accounting policies.

Use of Estimates

In preparing condensed consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the condensed consolidated financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated revenues earned under construction design-build contracts; estimated useful lives and potential impairment of long-lived assets, intangibles and goodwill; inventory write-offs; allowance for deferred tax assets; and allowance for bad debt.

Balance Sheet Classifications

The Company includes in current assets and liabilities the following amounts that are in connection with construction contracts that may extend beyond one year: contract assets and contract liabilities (including retainage invoiced to customers contingent upon anything other than the passage of time), capitalized costs to fulfill contracts, retainage payable to sub-contractors and accrued losses on uncompleted contracts. A one-year time period is used to classify all other current assets and liabilities when not otherwise prescribed by the applicable accounting principles.

Contract Assets and Liabilities

The timing between when the Company invoices for its construction design-build customers can create a contract asset or contract liability. Refer to Note 3 - Revenue from Contracts with Customers for further discussion of the Company’s contract assets and liabilities.

Recently Issued Accounting Standards

From time to time, the Financial Accounting Standards Board (the “FASB”) or other standards setting bodies issue new accounting pronouncements. The FASB issues updates to new accounting pronouncements through the issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, the Company believes that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on the Company’s financial statements upon adoption.

Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on the Company’s financial condition or the results of our operations.

NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company recognizes revenue predominantly from the sale of equipment systems, services, construction design-build, and from other various immaterial contracts with customers from its CEA and Commercial sectors. The table below presents the revenue by source for the ~~three months~~six months ended ~~March~~June 3130, 2025 and 2024:

	For the three months ended March 31, 2025
	Three months ended June 30,
	CEA			~~Commercial~~			~~Total~~Commercial			~~Relative Percentage~~			Total
Equipment systems	$	4,685,825		$	12,752		$	4,698,577			49	%
	2025			2024			2025			2024			2025			2024
Services		682,714			966,384			1,649,098			17	%
Equipment systems	$	448,018		$	3,398,696		$	2,680,728		$	-		$	3,128,746		$	3,398,696
Construction design-build		2,836,453			285,845			3,122,298			33	%
Services		-			1,009,450			1,099,378			1,348,356			1,099,378			2,357,806
Other		43,298			804			44,102			1	%
Construction design-build		3,462,134			9,982,914			50,516			2,076,182			3,512,650			12,059,096
Total revenues and other income	$	8,248,290		$	1,265,786		$	9,514,075			100	%
Other		-			129,651			25,328			-			25,328			129,651
Relative percentage		87	%		13	%		100	%
Total revenues and other income	$	3,910,152		$	14,520,711		$	3,855,950		$	3,424,538		$	7,766,102		$	17,945,249
Relative percentage		50	%		81	%		50	%		19	%		100	%		100	%

	For the three months ended March 31, 2024
	Six months ended June 30
	CEA			~~Commercial~~			~~Total~~Commercial			~~Relative Percentage~~			Total
Equipment systems	$	2,508,287		$	—		$	2,508,287			16	%
	2025			2024			2025			2024			2025			2024
Services		867,907			2,265,886			3,133,793			20	%
Equipment systems	$	5,133,843		$	5,904,345		$	2,693,480		$	-		$	7,827,323		$	5,904,345
Construction design-build		957,623			8,726,191			9,683,814			63	%
Services		682,714			1,877,357			2,065,762			3,614,241			2,748,476			5,491,598
Other		75,141			—			75,141			—	%
Construction design-build		6,298,586			10,798,893			336,362			10,944,016			6,634,948			21,742,909
Total revenues and other income	$	4,408,958		$	10,992,077		$	15,401,035			100	%
Other		43,298			207,434			26,132			-			69,430			207,434
Relative percentage		29	%		71	%		100
Total revenues and other income	$	12,158,441		$	18,788,029		$	5,121,736		$	14,558,257		$	17,280,177		$	33,346,286
Relative percentage		70	%		56	%		30	%		44	%		100	%		100	%

Under ASC Topic 606, Revenue from Contracts with Customers, a performance obligation is a promise in a contract with a customer, to transfer a distinct good or service to the customer. Equipment systems contracts are lump sum contracts, which require the performance of some, or all, of the obligations under the contract for a specified amount. Service revenue contracts, which include both architectural and engineering designs, generally contain multiple performance obligations which can span across multiple phases of a project and are generally set forth in the contract as distinct milestones. The majority of construction design-build contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (design and construction).

The transaction price for service contracts and construction design-build contracts is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. When there are multiple performance obligations under the same service contract, the Company allocates the transaction price to each performance obligation based on the standalone selling price. In general, payment is fixed at the time of the contract and are not subject to discounts, incentives, payment bonuses, credits, and penalties, unless negotiated in an amendment.

When establishing the selling price to the customer, the Company uses various observable inputs. For equipment systems, the stand-alone selling price is determined by forecasting the expected costs of the products, and then adding in the appropriate margins established by the contract. For service revenues and construction design-build revenues, the Company estimates the selling price by reference to certain physical characteristics of the project, which include the facility size, the complexity of the design, and the mechanical systems involved, which are indicative of the scope and complexity for those services. Significant judgments are typically not required with respect to the determination of the transaction price based on the nature of the selling prices of the products and services delivered and the collectability of those amounts. Accordingly, the Company does not consider estimates of variable consideration to be constrained.

The Company recognizes equipment systems, services, and construction design-build revenues when the performance obligation with the customer is satisfied. For satisfaction of equipment system revenues, the Company recognizes revenue when control of the promised good transfers to the customer, which predominately occurs at the time of shipment. For service revenues, satisfaction occurs as the services related to the distinct performance obligations are rendered or completed in exchange for consideration in an amount for which the Company is entitled. The time period between recognition and satisfaction of performance obligations is generally within the same reporting period; thus, there are no material unsatisfied or partially unsatisfied performance obligations for product or service revenues at the end of the reporting period.

Construction design-build revenues are recognized as the Company’s obligations are satisfied over time, using the ratio of project costs incurred to estimated total costs for each contract because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and, therefore, the customer controls the asset as it is being constructed. This continuous transfer of control to the customer is further supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay the Company for costs incurred plus a reasonable profit and take control of any work in process. This cost-to-cost measure is used for our construction design-build contracts because management considers it to be the best available measure of progress on these contracts.

Contract modifications through change orders, claims and incentives are routine in the performance of the Company’s construction design-build contracts to account for changes in the contract specifications or requirements. In most instances, contract modifications are not distinct from the existing contract due to the significant integration of services provided in the contract and are accounted for as a modification of the existing contract and performance obligation. Either the Company or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders that are unapproved as to both price and scope are evaluated as claims. The Company considers claims to be amounts in excess of approved contract prices that the Company seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.

The timing of when the Company bills customers on long-term construction design-build contracts is generally dependent upon agreed-upon contractual terms, which may include milestone billings based on the completion of certain phases of the work, or when services are provided. When as a result of contingencies, billings cannot occur until after the related revenue has been recognized; the result is unbilled revenue, which is included in contract assets. Additionally, the Company may receive advances or deposits from customers before revenue is recognized; the result is deferred revenue, which is included in contract liabilities. Retainage subject to conditions other than the passage of time are included in contract assets and contract liabilities.

Contract assets represent revenues recognized in excess of amounts paid or payable (contract receivables) to the Company on uncompleted contracts. Contract liabilities represent the Company’s obligation to perform on uncompleted contracts with customers for which the Company has received payment or for which contract receivables are outstanding.

The following table provides information about contract assets and contract liabilities from contracts with customers:

	March 31, 2025		December 31, 2024
	June 30,		December 31,
	2025		2024
Contract assets
Revenue recognized in excess of amounts paid or payable (contract receivables) to the Company on uncompleted contracts (contract asset), excluding retainage	$	2748,~~751,391~~244	$	3,757,641
Retainage included in contract assets due to being conditional on something other than solely passage of time		943,239		375,176
Total contract assets	$	31,~~694~~691,~~630~~483	$	4,132,~~871~~817
Contract liabilities
Payments received or receivable (contract receivables) in excess of revenue recognized on uncompleted contracts (contract liability), excluding retainage	$	11,446,965	$	13,930,251
Retainage included in contract liabilities due to being conditional on something other than solely passage of time		103,381		163,925
Total contract liabilities	$	11,550,346	$	14,094,176

	March 31, 2025		December 31, 2024
Contract liabilities
Payments received or receivable (contract receivables) in excess of revenue recognized on uncompleted contracts (contract liability), excluding retainage	$	12,443,243	$	13,930,251
Retainage included in contract liabilities due to being conditional on something other than solely passage of time		103,381		163,925
Total contract liabilities	$	12,546,624	$	14,094,176

For equipment systems contracts, the Company’s predominant policy is to collect deposits from customers at the beginning of the contract and the balance of the contract payment prior to shipping. The Company does, in some cases, collect deposits or retainers as down payments on service contracts. Consumable products orders may be paid for in advance of shipment or for recurring customers with credit, payment terms of 30 days or less may be extended by the Company. Customer payments that have been collected prior to the performance obligation being recognized are recorded as customer deposit liabilities on the balance sheet. When the performance obligation is satisfied and all the criteria for revenue recognition are met, revenue is recognized. In certain situations when the customer has paid the deposit and services have been performed but the customer chooses not to proceed with the contract, the Company is entitled to keep the deposit and recognize revenue.

NOTE 4 – RELATED PARTY TRANSACTIONS

A director of the Company is an owner of Cloud 9 Support, LLC (“Cloud 9”) and Potco LLC (“Potco”). Cloud 9 purchases materials from the Company for use with its customers and Potco purchases equipment from the Company for use in its cultivation facility. Another director of the Company is working on a vertical farming innovation model with a group of CEA experts (the “CEA Consortium”). The CEA Consortium contracts services from the Company related to their business model.

There were no material revenues from related party entities for the ~~three~~six months ended ~~March~~June 3130, 2025, and 2024.

NOTE 5 – PREPAID EXPENSES AND OTHER ASSETS

Prepayments and other assets are comprised of prepayments paid to vendors to initiate orders, prepaid services and fees, inventories, and other assets. These amounts are summarized as follows:

	March 31, 2025		December 31, 2024
	June 30,		December 31,
Vendor prepayments	$	2,401,088	$	1,355,929
	2025		2024
Prepaid services and fees		830,644		885,072
Vendor Prepayments	$	1,240,987	$	1,355,929
Inventories		223,120		222,582
Prepaid Services and Fees		478,565		885,072
Other assets		23,283		23,283
Inventories		183,384		222,581
Total Prepaid expenses and other assets	$	3,478,135	$	2,486,865
Other current assets		33,283		23,283
Total Prepaid expenses and other assets	$	1,936,219	$	2,486,865

NOTE 6 – PROPERTY AND EQUIPMENT, NET

Property and equipment balances are summarized as follows:

	March 31, 2025			December 31, 2024
	June 30,			December 31,
	2025			2024
Computers and technology equipment	$	360,191		$	360,191
Furniture and fixtures		325,485			325,485
Leasehold improvements		228,760			228,760
Vehicles		~~201~~33,~~190~~788			417,644
Software		1,~~215~~259,~~134~~016			1,151,298
R&D Assets		87,425			~~87,425~~-
Other equipment		58,525			145,~~950~~951
Accumulated depreciation		(1,~~639~~590,~~187~~539	)		(1,707,372	)
Total Property and equipment, net	$	~~837~~762,~~524~~651		$	921,957

Depreciation expense for the three months ended ~~March 31~~June 30, 2025, and 2024 totaled $34116,~~082~~087 and $200,708, respectively and totaled $~~195~~250,~~262~~870 and $395,972 for the six months June 30, 2025 and 2024 ended respectively.

NOTE 7 – GOODWILL & INTANGIBLE ASSETS

Goodwill

The Company has recorded goodwill in conjunction with the acquisitions it has completed. The goodwill balance as of ~~March~~June 3130, 2025 and December 31, 2024 was $1,080,638 for both periods. ~~Goodwill is not amortized.~~ The Company did not record any impairment charges related to goodwill for the ~~three~~six months ended June ~~March 31~~30, 2025 and 2024.

Intangible Assets Other Than Goodwill

Intangible assets as of ~~March~~June 3130, 2025 and December 31, 2024 consisted of the following:

	March 31, 2025
	June 30, 2025
			Accumulated			Net Book
	Cost		Accumulated Amortization			Net Book Value
	Cost		Amortization			Value
Finite-lived intangible assets:
Trademarks and trade names	$	499,000	$	(~~375~~400,~~170~~120	)	$	~~123~~98,~~830~~880
Backlog		429,400		(429,400	)		-
Backlog and other		429,400		(429,400	)		-
Licenses		16,437		(16,437	)		-
Total finite-lived intangible assets:		944,837		(821,007	)		123,830
	$	944,837	$	(845,957	)	$	98,880

	As of December 31, 2024
	December 31, 2024
	Cost		Accumulated Amortization			Net Book Value
Finite-lived intangible assets:
Trademarks and trade names	$	499,000	$	(350,220	)	$	148,780
Backlog and other		429,400		(429,400	)		-
Licenses		16,437		(16,437	)		-
Total finite-lived intangible assets:		944,837		(796,057	)		148,780
	$	944,837	$	(796,057	)	$	148,780

Amortization expense for intangible assets subject to amortization for the three months ended ~~March 31~~June 30, 2025 and 2024 was $24,950 and $194,988, respectively and totaled $49,900 and $389,975 for the six months ended June 30, 2025 and 2024, respectively. The estimated future amortization expense for intangible assets subject to amortization as of June 30, 2025 is summarized below:

	Estimated Future
	Amortization Expense
Remainder of 2025	$	49,900
2026		48,980
Total	$	98,880

NOTE 98 – ACCRUED EXPENSES

Accrued expenses are summarized as follows:

	March 31,		December 31,
	June 30,		December 31,
	2025		2024
Accrued operating expenses	$	~~107~~33,~~485~~156	$	441,031
Accrued wages and related expenses		1545,~~093,432~~051		799,969
Accrued interest expense		32,228		68,115
Business development accrual		47,062		-
Accrued 401(k)		17,138		17,138
Accrued interest expense		122,190		68,115
Accrued sales tax payable		3,337,690		2,951,292
Accrued 401(k)		16,981		17,138
Total accrued expenses	$	4,587,973	$	4,277,545
Accrued sales tax payable		3,759,146		2,951,292
	$	4,523,586	$	4,277,545

Accrued sales tax payable is comprised of amounts due to various states and Canadian provinces for 2017 through 2023.

NOTE 10 9 – NOTES PAYABLE

The table below shows outstanding notes payable amounts as of ~~March~~June 3130, 2025 and December 31, 2024.

	As of
	June 30,			December 31,
	March 31, 2025			December 31, 2024
	2025			2024
Line of credit	$	2,842,151		$	4,405,402
Gemini line of credit	$	1,672,401		$	4,405,402
DVO note		-			135
Grow Hill Note, net		1,428,563			1,652,071
Grow hill note, net		1,292,552			1,652,071
Other financing agreements		472,467			706,068
Agile capital		1,000,114			-
Total	$	4,743,181		$	6,763,676
Truist line of credit		197,500			-
Less current portion		(4,183,660	)		(5,968,145	)
Other financing agreements		250,146			706,068
Long Term	$	559,521		$	795,531
Total		4,412,713			6,763,676
Less current portion		(4,089,203	)		(5,968,145	)
Notes payable, long-term	$	323,510		$	795,531

On December 13, 2023, UG Construction, a wholly owned subsidiary of the Company, entered into an interest only asset based revolving Loan Agreement (the “Line of Credit”) with Gemini Finance Corp. (“Lender”) pursuant to which Lender extended to UG Construction a secured line of credit in an amount not to exceed $10,000,000, to be used to assist UG Construction and the Company with cash management. Lender will consider requests for advances under the Line of Credit, which Lender may accept or reject in its discretion, until September 12, 2024 (the “Initial Term”), subject to an automatic extension for an additional nine-month term until May 12, 2025, provided that UG Construction is in compliance with all the terms of the applicable loan documents and Lender has not sent a written notice of non-renewal at least 60 days prior to expiration of the Initial Term. The Line of Credit contains standard events of default and representations and warranties by UG Construction and the Lender and the Company have entered into a Continuing Guaranty pursuant to which the Company will guarantee repayment of the loans associated with the Line of Credit (the “Guaranty Agreement”).

Loans made under the Line of Credit shall be evidenced by a Secured Promissory Note - Revolving issued by UG Construction to the Lender (the “Promissory Note”), and each draw on the Promissory Note shall be due and payable on or before 180 days after such draw is funded to UG Construction; provided that, such draw is also subject to a mandatory prepayment upon UG Construction’s receipt of payment for any invoice previously submitted and approved for financing by Lender. Lender will receive a security interest in UG Construction’s Collateral (as defined in the “Security Agreement” entered into as part of the Line of Credit). The Promissory Note earns interest at a monthly rate of one and seventy-five hundredths percent (1.75%).

In connection with entering in the Line of Credit, the Company agreed to issue to Bancroft Capital, LLC (the “Placement Agent”) cash and warrant compensation in two separate tranches, the first being earned upon closing of the Line of Credit and the remainder of which would be due if and when UG Construction draws more than $4,500,000 from the Line of Credit. Both instances are detailed as follows:

At closing of the Line of Credit, the Placement Agent earned a cash fee of $200,000. In addition to the cash fee, the Company issued to the Placement Agent or its designees, $200,000 worth of warrants (the “Placement Agent’s Warrants”) to purchase the Company’s common stock at a price per share equal to 110% of the daily volume weighted average closing price of the Company’s common stock on the Nasdaq exchange for a period consisting of ten (10) consecutive trading days ending on and inclusive of the trading day of the Closing. The Placement Agent’s Warrants are exercisable at any time and from time to time, in whole or in part, during the four and a half-year period commencing six (6) months from the date of issuance. The Placement Agent’s Warrants provide for registration rights (including a one-time demand registration right and unlimited piggyback rights), cashless exercise and customary anti-dilution provisions (for stock dividends and splits) and anti-dilution protection (adjustment in the number and price of such warrants and the shares underlying such warrants) resulting from corporate events (which would include dividends, reorganizations, mergers, etc.).

If and when Emerald draws more than $4,500,000 from the Line of Credit, the Placement Agent will earn an additional cash fee of $200,000, and an additional $200,000 worth of Placement Agent’s Warrants to purchase the Company’s common stock at a price per share equal to 110% of the daily volume weighted average closing price of the Company’s common stock on the Nasdaq exchange for a period consisting of ten (10) consecutive trading days ending on and inclusive of the trading day of the date that the draws exceeding $4,500,000 were to take place.

Line of Credit Amendment – On March 18, 2025, UG Construction entered into an agreement with the “Lender”) to amend the terms of the original Loan Agreement and Promissory Note and waiver (the “Amendment”) between UG Construction and the Lender. Pursuant to the Amendment, the Lender waived any potential or perceived events of default arising under certain circumstances, which events did not constitute specified events of default under the Promissory Note or the Loan Agreement. Pursuant to the Amendment, the Promissory Note was amended to provide that (i) the term during which the Lender may consider advances under the Loan Agreement has been extended to January 1, 2026, and (ii) the interest applied on the outstanding principal amount of the Promissory Note will accrue interest at a monthly rate of 1.75%, and all accrued by unpaid interest shall be paid to the Lender on the first business day of each month for the prior month. The Amendment also amended the Loan Agreement to require monthly reporting of certain accounts receivable and to include a covenant that such accounts receivable equal or exceed 125% of the sum of the total amount drawn down under the Promissory Note, plus outstanding interest, as of the applicable measurement date. In connection with the execution of the Amendment, the Company issued to the Lender, as an amendment fee, ~~one~~150,000 ~~hundred~~share ~~and~~of ~~fifty~~the ~~thousand~~Company’s ~~(150~~common stock, par value $0.001 per share, or 6,000) shares after giving effect to a 1-for-25 reverse stock split (the “Fee Shares”) of the Company’s common stock, par value $0.001 per share. This resulted in an expense of $109,~~499~~424, which is included in interest expense on the condensed consolidated statement of operations.

On October 1, 2024, the Company, entered into a loan with Grow Hill, LLC, a Washington limited liability company (“Grow Hill”). The terms are as follows:

Loan Details

●

Principal Amount: $2,000,000.

●

Interest Rate: 15% per annum, applied to the outstanding principal amount.

●

Origination Fee: $100,000 (5% of the loan amount), considered as debt issuance costs under GAAP and amortized over the loan term.

●

Repayment Terms: Monthly payments of interest and principal as per the Promissory Note. Ther term of the loan is 2 years.

●

Optional Prepayment: Allowed if the Grow Hill has received $150,000 or more in interest payments. If less, the Company must pay the difference to reach $150,000. Prepayment requires at least one Business Day’s notice.

●

Mandatory Prepayment: Required if the Company fails to meet the Receivable Ratio negative covenants or events of default.

Collateral and Security

●

Collateral: Defined in the Security Agreement.

●

Security Agreement: The Company grants a perfected security interest in the Collateral to the Grow Hill.

3. The loan became effective on October 1, 2024, when the Company issued Warrants to the Grow Hill for 160,000 shares of Borrower’s common stock at $2.50/share, or 6,400 shares after giving effect to a 1-for-25 reverse stock split, exercisable immediately and valid for five years.

Covenants:

●

Affirmative Covenants:

§▪ Provide regular financial reports, compliance certificates, and notices of defaults or legal actions.

§▪ Comply with all applicable laws and regulations, including tax payments.

§▪ Cooperate with audits of accounts receivable (the Company pays audit fees unless an Event of Default occurs).

●

Negative Covenants:

§▪ Restrictions on creating liens, incurring additional debt, or guaranteeing third-party obligations without Grow Hill’s consent.

§▪ Maintain a Receivable Ratio of at least 2.00:1.00, calculated monthly.

Events of Default

●

Include failure to pay principal or interest, breach of covenants, misrepresentation, insolvency, or legal challenges to the validity of the Loan Documents.

●

Consequences: Grow Hill may accelerate repayment, enforce security interests, or exercise other remedies.

The other financing agreements relate to short-term financing of the Company’s insurance policies and are at an average interest rate of 13.6%.

~~NOTE~~Business 11Loan –and ~~COMMITMENTS~~Security ~~AND~~Agreement ~~CONTINGENCIES~~with Agile Entities

On June 26, 2025, the Company entered into a business loan and security agreement (the “Loan Agreement”) with an effective date of June 24, 2025(the “Effective Date”) by and among, Agile Capital Funding, LLC, Agile Lending , LLC, a Virginia limited liability company and each assignee that becomes a party pursuant to Section 12.1 of the Loan Agreement (the “Lenders”), the Company and 2WR Of Colorado Inc., UG Construction, Inc., 2WR of Georgia, Inc., urban-gro Canada Technologies Inc., urban-gro Engineering, Inc. and urban-gro Architect Holdings, LLC, each a wholly owned subsidiary of the Company (individually, collectively, jointly and severally, the “Guarantors”).

Pursuant to the Loan Agreement, the Lenders extended to the Company a term loan of $1,050,000 (the “Term Loan”) to be used to fund the Company’s general business requirements. The Loan Agreement is for a term of twenty-eight weeks from the Effective Date (the “Maturity Date”) and includes an administrative agent fee of $50,000 to be remitted to Agile Capital Funding, LLC which was added to the amount of the loan. The Company may make a full prepayment or partial prepayment of the Term Loan, however, upon the prepayment of any principal amount, the Company shall be obligated to pay a premium payment of such principal so paid, which shall be equal to the aggregate and actual amount of interest that would be paid through the Maturity Date (the “Prepayment Fee”); provided however that, if the Company made a prepayment within 60 calendar days after the Effective Date, the Company would receive the discounted Prepayment Fee that is included in Exhibit E to the Loan Agreement.

The Loan contains standard events of default and representations and warranties by the Company and the Lenders including a mandatory prepayment, and an additional five (5%) percent interest rate following the occurrence of an event of default. The term loan is evidenced by a secured promissory note issued by the Company to the Lenders (the “Promissory Note”). Pursuant to the Loan Agreement, upon an event of default, the Lenders will receive a security interest in certain of the Company’s assets, subject to certain exceptions.

Truist Line of Credit

2WR of Georgia, Inc. (“2WR GA”), a subsidiary of the Company, maintained a line of credit with Truist Bank (the “Truist Line of Credit”) that was established prior to the Company’s acquisition of the architectural firm on July 30, 2021.

In May 2025, the Company became aware of the Truist line of credit and subsequently borrowed $197,500 under the facility. The proceeds were deposited into a Truist Bank account and subsequently transferred to another Company account for general corporate purposes.

As of June 30, 2025, the outstanding balance under the Truist line of credit was $197,500, which was classified as current debt.

In the third quarter of 2025, in connection with the sale of 2WR GA to CM Capital for $2.0 million, the Truist line of credit was repaid in full using a portion of the transaction proceeds.

Other

The other financing agreements relate to short-term financing of the Company’s insurance policies and are at an average interest rate of 13.6%.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. Other than below, there are no other legal proceedings for which management believes the ultimate outcome would have a material adverse effect on the Company’s results of operations and cash flows.

Gemini Loan Agreement Amendment and Default

On December 13, 2023, our wholly-owned subsidiary UG Construction, Inc. d/b/a Emerald Construction Management, Inc. (“UG Construction”) entered into (i) an interest only asset based revolving loan agreement (the “Loan Agreement”) with Gemini Finance Corp. (“Gemini”) pursuant to which Gemini extended to UG Construction a secured line of credit in an amount not to exceed $10,000,000, to be used to assist UG Construction and us with cash management, and (ii) a Secured Promissory Note - Revolving issued by UG Construction to Gemini (the “Promissory Note”). Pursuant to the Promissory Note, each draw was due and payable on or before 180 days after such draw is funded to UG Construction, subject to a mandatory pre-payment upon UG Construction’s receipt of payment for any invoice previously submitted and approved for financing by Gemini.

On March 18, 2025, UG Construction entered into an amendment to the Loan Agreement and Promissory Note and waiver with Gemini (the “Amendment”). Pursuant to the Amendment, Gemini waived any potential or perceived events of default arising under certain circumstances, which events did not constitute specified events of default under the Promissory Note or the Loan Agreement.

Pursuant to the Amendment, the Promissory Note was amended to provide that (i) the term during which Gemini may consider advances under the Loan Agreement has been extended to January 1, 2026, and (ii) the interest applied on the outstanding principal amount of the Promissory Note will accrue interest at an annual rate of 12%, and all accrued and unpaid interest shall be paid to Gemini on the first business day of each month for the prior month. The Amendment also amended the Loan Agreement to require monthly reporting of certain accounts receivable and to include a covenant that such accounts receivable equal or exceed 125% of the sum of the total amount drawn down under the Promissory Note, plus outstanding interest, as of the applicable measurement date. In connection with the execution of the Amendment, we issued to Gemini, as an amendment fee, 150,000 shares of our common stock, or 6,000 shares after giving effect to a 1-for-25 reverse stock split.

On July 31, 2025, Gemini issued a notice of default to UG Construction claiming that UG Construction was in default under the line of credit due to a failure to submit receivables calculations and failing to maintain sufficient eligible accounts and to forward accounts receivable. The notice indicated that the remaining outstanding amount due under the line of credit of approximately $1.76 million was immediately due and payable with default of 1% per week accruing from the June 16, 2025 date of default claimed by Gemini, and that Gemini intended to pursue legal action if full payment was not received by August 8, 2025.

On August 21, 2025, we received a notification from Gemini stating that Gemini would proceed with a foreclosure and private sale of substantially all of the assets of UG Construction in an Article 9 sale process, pursuant to Section 9601 et seq. of the California Commercial Code (the “Asset Sale”). The Asset Sale occurred on September 4, 2025, at which Gemini acquired the assets constituting the collateral under the line of credit for $450,000.

On August 29, 2025, Gemini commenced a lawsuit captioned Gemini Finance Corp. v. UG Construction, Inc. et al., case number 25CV2259 W SBC, in the U.S. District Court for the Southern District of California, which lawsuit (the “Lawsuit”) included us and certain of our officers as defendants and pursuant to which Gemini claimed it was owed $1,486,189 (the “Claim Amount”).

On September 26, 2025, we entered into a Settlement and Mutual General Release (the “Gemini Settlement Agreement”) with Gemini. Pursuant to the terms of the Gemini Settlement Agreement, among other things, we agreed to file a joint motion requesting an expedited fairness hearing under Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), which motion was filed on September 30, 2025. Following such fairness hearing, and subject to the satisfaction of all applicable conditions and requirements of Section 3(a)(10) of the Securities Act, we agreed to issue to Gemini shares of our common stock that, upon sale by Gemini, would result in net proceeds to Gemini equal to the Claim Amount, provided that Gemini shall at no time be issued shares if it would beneficially own more than 4.99% of our common stock, and the aggregate number of shares issued to Gemini may not exceed 19.99% of our outstanding common stock as of immediately prior to the signing of the Gemini Settlement Agreement to the extent required by Nasdaq Listing Rule 5635. Additionally, Gemini agreed to use its best efforts to not sell common stock exceeding 10% of our daily volume on any given trading day. Upon the issuance of the last tranche of shares under the Gemini Settlement Agreement, Gemini will dismiss the Lawsuit with prejudice. The Gemini Settlement Agreement also included a customary mutual release of claims by the parties. The fairness hearing occurred on October 14, 2025.

Grow Hill Default

On October 1, 2024, we entered into an asset-based term Loan Agreement with Grow Hill, LLC (“Grow Hill”) pursuant to which Grow Hill extended to us a secured loan of $2,100,000 with an origination fee of $100,000, which was added to the amount of the loan. The loan is evidenced by a Secured Promissory Note issued by us to Grow Hill. Grow Hill received a security interest in certain of our assets pursuant to a security agreement between us and Grow Hill (the “Security Agreement”), which does not include any assets of our subsidiaries.

On October 14, 2025, we received service of process for a lawsuit filed by Grow Hill against us in the District Court for the City and County of Denver, Colorado (Case No. 2025CV33546) alleging breach of contract and fraud. Pursuant the complaint, Grow Hill stated that we were in default under the Secured Promissory Note due to a failure to timely make payments, and elected to accelerate all amounts due under the Secured Promissory Note, including a default fee equal to 1% of the outstanding principal amount. We are currently investigating available options to resolve the complaint and intends to vigorously defend the allegation of fraud.

J Brrothers Settlement

On August 8, 2025, we entered into a Settlement and Release Agreement (the “Settlement Agreement”) with J Brrothers LLC (“J Brrothers”) and Herb-a-More LLC relating to a dispute arising from amounts due for certain heating, ventilation and air conditioning equipment. Pursuant to the terms of the Settlement Agreement, among other things, we issued a promissory note to J Brrothers with an original principal amount of $395,556 and issued 150,000 unregistered shares of our common stock, or 6,000 shares after giving effect to a 1-for-25 reverse stock split to J Brrothers. The note accrues simple interest at an annual rate of 12% and has a maturity date of March 18, 2026. The note must be repaid in monthly installments over a period of eight months, with the first seven payments being $50,000 per month and the final monthly payment being $64,047. Any remaining principal and accrued but unpaid interest will become due and payable on the maturity date, and the note may be prepaid without penalty. The note includes customary representations and warranties, customary events of default and a 17% default interest rate.

2WR of Georgia Sale

On August 27, 2025, certain of our subsidiaries entered into a Stock and Asset Purchase Agreement (the “2WR Purchase Agreement”) with 2WR Holdco, LLC (the “Buyer”). Pursuant to the 2WR Purchase Agreement, the Buyer acquired all of the outstanding shares of stock of 2WR of Georgia, Inc. and certain assets of our other subsidiaries relating to those entities’ business of providing commercial, industrial and municipal architectural and construction administration services for projects not involving CEA. The purchase price paid by the Buyer consisted of $2.0 million in cash, offset by a previous deposit of $500,000 and by any assumed indebtedness.

MJ’s Market, Inc

MJ’s Market, Inc. v. Urban-Gro, Inc. et al, pending in the Suffolk County Superior Court in Massachusetts as Civil Action No. 2384-cv-02794. The original complaint, filed by MJ’s Market, Inc, alleged that the Corporation prepared deign drawings for the plaintiff and subsequently sold those drawings to a competitor. The original complaint asserted claims for Breach of Contract; violation of M.G.L. c. 93A; Breach of the Covenant of Good Faith and Fair Dealing; Trademark Infringement; and Interference with Contractual Relations against the Corporation. An amended complaint has been filed which names 2WR of Colorado, Inc., which is characterized as a subsidiary or affiliate of the Corporation, in place of the Corporation. The lawsuit is ongoing.

16RK Mechanical- complaint filed

~~NOTE~~On 12June –27, ~~RISKS~~2025, ~~AND~~RK ~~UNCERTAINTIES~~Mechanical LLC (“RK”) filed a complaint against UG Construction and certain other defendants, with SVC Manufacturing Inc. as cross-claimant and UG Construction as cross-defendant, in the Superior Court of Arizona for Maricopa County (Case No. CV2025-022680). The complaint alleged that UG Construction served as general contractor for the construction of the construction of a PepsiCo plant in Tolleson, Arizona, and that as a result of work completed by RK, UG Construction owed $1,522,716 to RK as a result of alleged breach of contract, breach of implied covenant of good faith and fair dealing, violation of the Arizona Prompt Payment Act, and lien foreclosure. On or about October 2025, a default judgment was entered against UG Construction for $1,511,716, plus prejudgment interest of $288,346 and post-judgment interest at 8.25% plus $10,057 in attorney fees.

Action Equipment- complaint filed

On April 21, 2025, Action Equip. & Scaffold Co. (“Action”) filed a complaint against UG Construction in the Superior Court of Arizona for Maricopa County (Case No. CV2025-014165). The complaint alleged that UG Construction owed Action $380,932 plus interest and attorneys’ fees in connection with a contract pursuant to which Action leased equipment to UG Construction, and alleged breach of contract, breach of covenant of good faith and fair dealing, and unjust enrichment. A default judgment was

NOTE 11 – RISKS AND UNCERTAINTIES

Concentration Risk

The table below shows customers who account for 10% or more of the Company’s total revenues and 10% or more of the Company’s accounts receivable for the periods presented:

Customers exceeding 10% of revenue

	Three Months Ended						Six Months Ended
	March 31,
	June 30,						June 30,
Company Customer Number	2025			2024			2025			2024
C000002187		10*	%		42*	%		*			24	%
C000002596		-			13	%
C000002552		10	%		65	%		11	%		36	%
C000002463		-			11	%
C000001462		*			*			12	%		*
C000002722		26	%		-
C000002607		*			*			13	%		*
C000001462		17	%		-
C000002722		10	%		*			25	%		*
C000002607		13	%		-
C000002655		12	%		-

*	Amounts less than 10%

Customers exceeding 10% of accounts receivable

	As of			As of
	June 30,			December 31,
	March 31,			December 31,
Company Customer Number	2025			2024
C000002187		*			14	%
C000002596		25	%		*
C000002463		56	%		*
C000002195		11	%		*
C000002722		34	%		*
C000002607		1120	%		*
C000002596		18	%		*
C000002195		13	%		*
C000001999		10	%		*

*	Amounts less than 10%

The table below shows vendors who account for 10% or more of the Company’s total purchases and 10% or more of the Company’s accounts payable for the periods presented:

Vendors exceeding 10% of purchases

	Three Months Ended						Six Months Ended
	March 31,
	June 30,						June 30,
Company Vendor Number	2025			2024			2025			2024
V000001029		20	%		*
V000002275		*			*			*			*
V000002503		*			14	%
V000002198		*			15	%		*			16	%
V000002589		-			14	%
V000002503		*			23	%		*			25	%
V000001029		17	%		*			18	%		*
V000001153		11	%		*			10	%		*

*	Amounts less than 10%

~~There were no vendors exceeding 10% of accounts payable.~~18

Vendors exceeding 10% of accounts payable

	June 30,	December 31,
Company Vendor Number	2025	2024
V000002275	*	*

*	Amounts less than 10%

Foreign Exchange Risk

Although our revenues and expenses are expected to be predominantly denominated in United States dollars, we may be exposed to currency exchange fluctuations. Recent events in the global financial markets have been coupled with increased volatility in the currency markets. Fluctuations in the exchange rate between the U.S. dollar, the Canadian dollar, the Euro, and the currency of other regions in which we may operate may have a material adverse effect on our business, financial condition and operating results. We may, in the future, establish a program to hedge a portion of our foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements. However, even if we develop a hedging program, it may not mitigate currency risks.

17NOTE 12 – STOCK-BASED COMPENSATION

~~NOTE~~Based 13on –the ~~STOCK~~vesting schedule of the grants of restricted stock units (“RSU” or “RSUs”) and options, stock-~~BASED~~based ~~COMPENSATION~~compensation expense for the three months ended June 30, 2025 and 2024 totaled $210,193 and $460,785, respectively, and totaled $534,464 and $1,117,361 for the six months ended June 30, 2025, and 2024, respectively.

Based on the vesting schedule of the grants of restricted stock units (“RSU” or “RSUs”) and options, stock-based compensation expense for the three months ended March 31, 2025 and 2024 totaled $324,271 and $656,576, respectively.

The Company has adopted the 2021 Omnibus Stock Incentive Plan, as amended (the “Omnibus Incentive Plan”), which provides for the issuance of incentive stock options, grants of RSUs, and stock-based awards to employees, directors, and consultants of the Company to reward and attract employees and compensate the Company’s Board of Directors (the “Board”) and vendors when applicable. The Omnibus Incentive Plan is administered by the Company’s Board. Grants of RSUs under the Omnibus Incentive Plan are valued at no less than the market price of the stock on the date of grant. The fair value of the options is calculated using the Black-Scholes pricing model based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the options, risk-free interest rate and expected volatility of the price of the underlying common stock of 100%. There is a moderate degree of subjectivity involved when estimating the value of stock options with the Black-Scholes option pricing model as the assumptions used are moderately judgmental. Grant of RSUs and stock options are sometimes offered as part of an employment offer package, to ensure continuity of service or as a reward for performance. Grants of RSUs and stock options typically require a 1 to 3 year period of continued employment or service performance before the grant of RSUs or stock options vest. No cash flow effects are anticipated for grants of RSUs or stock options.

As of ~~March~~June 3130, 2025, total unrecognized compensation expense was $1840,~~050,543~~350 of which $1839,~~049,405~~212 was attributable to unvested RSUs and $1,138 was attributable to unvested stock options.

NOTE 14 13 – STOCKHOLDERS’ EQUITY

Common Stock

The Company is authorized to issue 30200,000,000 shares of common stock at $0.001 par value. The holders of the Company’s common stock are entitled to one vote for each share held.

Preferred stock

The Company is authorized to issue 3,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s Board of Directors. The preferred stock has a par value of $0.10.

Treasury Stock

As of ~~March~~June 3130, 2025 and December 31, 2024, there were 157,~~449,833~~993 shares of treasury stock outstanding, after giving effect to the 1-for-25 reverse stock split that was effective on February 9, 2026.

1819

NOTE 15 14 – SEGMENTS

An operating segment is defined as a component of a reporting entity that engages in business activities from which it recognizes revenues and incurs expenses with discrete financial information available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) of the operating segment. The CODM utilizes this financial information to decide how to allocate resources to, and in assessing performance of, the operating segment. Management evaluates segment performance primarily based on operating segment gross profit.

The Company has identified the following operating segments related as of ~~March~~June 3130, 2025 and 2024:

●

Equipment systems - Operating segment that acts as an experienced vendor providing value-added reselling to clients when selling vetted best-in-call commercial horticulture lighting solutions, rolling and automated container benching systems, specialty fans, fertigation/irrigation systems, environmental control systems, and microbial mitigation and odor reduction systems.

●

Services - Operating segment that generates revenue by providing clients with design-build service offerings that include architectural, interior, and engineering design, construction management, as well as services for the operational stages of the facility. The Company’s in-house architectural, interior design, engineering, construction and cultivation design services integrate design with pre-construction services and thereby reduce project schedule and capital investments.

●

Construction design-build - Operating segment that engages as a general contractor to provide all the additional necessary parts to deliver clients’ projects, from the initial estimate and bid process, to subcontractor selection, and management of all construction details.

In addition to the operating segments identified above, the Company recognizes other revenues and incurs costs at the corporate level where it develops and oversees the implementation of company-wide strategic initiatives and provides support to our operating segments by centralizing certain administrative functions. Corporate management is responsible for, among other things: evaluating and selecting the geographic markets in which we operate, consistent with our overall business strategy; making major personnel decisions related to employee compensation and benefits; and monitoring the financial and operational performance of the Company’s operating segments. Corporate costs include general and administrative expenses related to operating our corporate headquarters.

The Company’s operating segments follow the same accounting policies used for our consolidated financial statements as described in Note 1 – Summary of Significant Accounting Policies. The results of each operating segment are not necessarily indicative of the results that would have occurred had the operating segment been an independent, stand-alone entity during the periods presented, nor are they indicative of the results to be expected in future periods.

1920

The following tables present financial information relating to our operating segments for the ~~periods~~period ended ~~March~~June 3130, 2025 and 2024:

	Period Ended March 31, 2025
	Three months ended June 30, 2025
	Equipment			Services			Construction			Corporate/ ~~Other~~other			Total
Revenues	$	43,~~698~~128,~~577~~746		$	1,~~649~~099,~~098~~378		$	3,~~122~~512,~~298~~650		$	4425,~~102~~328		$	97,~~514~~766,~~075~~102
Cost of revenues		42,~~344~~995,~~607~~183			1,~~051~~060,~~146~~162			3,~~474~~646,~~387~~334			3319,~~913~~680			87,~~904~~721,~~053~~359
Gross profit	$	~~353~~133,~~970~~563		$	~~597~~39,~~952~~216		$	(~~352~~133,~~089~~684	)	$	105,~~189~~648		$	~~610~~44,~~022~~743
Gross profit %		84	%		364	%		~~(11~~-4	)%		2322	%		61	%
Intangible asset amortization	$	—-		$	24,950		$	—-		$	—-		$	~~24,950~~-
Income (Loss) before income taxes	$	(31,~~081~~657,~~440~~337	)	$	~~169~~(653,~~070~~270	)	$	(13,~~105~~876,~~719~~031	)	$	(3017,~~432~~506	)	$	(46,~~048~~204,~~520~~144	)
Total assets	$	63,~~008~~759,~~887~~153		$	32,~~469~~557,~~532~~623		$	63,~~549~~569,~~377~~552		$	5733,~~956~~413		$	169,~~085~~919,~~752~~741

	Period Ended March 31, 2024
	Six months ended June 30, 2025
	Equipment			Services			Construction			Corporate/ ~~Other~~other			Total
Revenues	$	27,~~508~~827,~~287~~323		$	32,~~133~~748,~~793~~476		$	96,~~683~~634,~~814~~948		$	7569,~~141~~430		$	1517,~~401~~280,~~035~~177
Cost of revenues		27,~~172~~339,~~450~~790			12,~~508~~111,~~449~~308			87,~~675~~120,~~280~~721			53,~~399~~593		$	1216,~~409~~625,~~578~~412
Gross profit	$	~~335~~487,~~837~~533		$	1637,~~625,344~~168		$	1(485,~~008,534~~773	)	$	2115,~~742~~837		$	2654,~~991,457~~765
Gross profit %		136	%		5223	%		10-7	%		2923	%		194	%
Intangible asset amortization	$	—-		$	5649,~~194~~900		$	~~138,793~~-		$	—-		$	~~194~~49,~~987~~900
Income (Loss) before income taxes	$	(~~587~~4,~~408~~415,569	)	$	~~491~~(480,~~265~~552	)	$	(25,~~507~~210,~~867~~808	)	$	(445,~~937~~735	)	$	(210,~~608~~252,~~946~~664	)
Total assets	$	73,~~984~~759,~~497~~153		$	192,~~801~~557,~~413~~623		$	283,~~344~~569,~~394~~552		$	—33,413		$	569,~~130~~919,~~304~~741

NOTE 16 – SUBSEQUENT EVENTS

	Three months ended June 30, 2024
	Equipment			Services			Construction			Corporate/other			Total
Revenues	$	3,398,696		$	2,357,806		$	12,059,096		$	129,651			17,945,249
Cost of revenues		2,753,497			1,513,715			11,181,017			86,704			15,534,933
Gross profit	$	645,199		$	844,091		$	878,079		$	42,947		$	2,410,316
Gross profit %		19	%		36	%		7	%		33	%		13	%

Intangible asset amortization	$	-		$	194,988		$	-		$	-		$	-

Income (Loss) before income taxes	$	(570,661	)	$	(395,889	)	$	(2,024,792	)	$	(21,769	)	$	(3,013,111	)

Total assets	$	9,739,724		$	9,058,862		$	35,866,793		$	342,180		$	55,007,559

	Six months ended June 30, 2024
	Equipment			Services			Construction			Corporate/other			Total
Revenues	$	5,904,345		$	5,491,598		$	21,742,909		$	207,434			33,346,286
Cost of revenues		4,923,608			3,022,163			19,856,346			142,393			27,944,510
Gross profit	$	980,737		$	2,469,435		$	1,886,563		$	65,041		$	5,401,776
Gross profit %		17	%		45	%		9	%		31	%		16	%

Intangible asset amortization	$	-		$	389,975		$	-		$	-		$	-

Income (Loss) before income taxes	$	(995,450	)	$	(925,862	)	$	(3,665,771	)	$	(34,973	)	$	(5,622,056	)

Total assets	$	9,739,724		$	9,058,862		$	35,866,793		$	342,180		$	55,007,559

NOTE 15 – SUBSEQUENT EVENTS

Nasdaq Deficiencies

The Company has received the following communications from The Nasdaq Stock Market LLC (“Nasdaq”) and, where required, responded as indicated:

● April 16, 2025 – Nasdaq sent the Company a notice (the “April 16 Notice”) stating that because the Company had not yet filed its Annual Report on Form 10-K for the fiscal quarter ended December 31, 2024 (the “Form 10-K”), the Company was no longer in compliance with Nasdaq Listing Rule 5250(c)(1). Nasdaq Listing Rule 5250(c)(1) requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission. The April 16 Notice stated that the Company had 60 calendar days from April 16, 2025, or until June 16, 2025, to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing Rules. The Company intended to file the Form 10-K as soon as practicable and, if necessary, to submit a plan with Nasdaq to regain compliance. If Nasdaq accepted the Company’s plan, then Nasdaq may, at its discretion, grant the Company up to 180 days from the prescribed due date for filing the Form 10-K, or until October 13, 2025, to regain compliance. If Nasdaq did not accept the Company’s plan, then the Company had an opportunity to appeal that decision to a Nasdaq Hearings Panel. The April 16 Notice had no immediate effect on the listing of the Company’s common stock on The Nasdaq Capital Market.

● May 21, 2025 – Nasdaq sent the Company a notice (the “May 21 Notice”) stating that because the Company had not yet filed its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025 (the “March 31 Form 10-Q”) or its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Form 10-K”), the Company continues to be out of compliance with Nasdaq Listing Rule 5250(c)(1). Nasdaq Listing Rule 5250(c)(1) requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission. The May 21 Notice stated that the Company had 60 calendar days from April 16, 2025, or until June 16, 2025, to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing Rules. The Company intended to file the Form 10-K as soon as practicable and, if necessary, to submit a plan with Nasdaq to regain compliance. If Nasdaq accepted the Company’s plan, then Nasdaq may, at its discretion, grant the Company up to 180 days from the prescribed due date for filing the Form 10-K, or until October 13, 2025, to regain compliance. If Nasdaq did not accept the Company’s plan, then the Company had the opportunity to appeal that decision to a Nasdaq Hearings Panel. The May 21 Notice had no immediate effect on the listing of the Company’s common stock on The Nasdaq Capital Market.

●

August 18, 2025 – Nasdaq sent the Company a determination letter (the “August 18 Determination”) stating that Nasdaq had determined that the Company did not file the Form 10-K and the March 31 Form 10-Q by August 15, 2025, the date required for the delinquent filings by an exception previously received from Nasdaq staff. The August 18 Determination stated that, as a result, unless that Company timely requests an appeal, the trading of the Company’s common stock (the “Common Stock”) would be suspended at the opening of business on August 27, 2025 and (iii) a Form 25-NSE will be filed with the SEC, which would remove the Company’s securities from listing and registration on Nasdaq. The August 18 Determination also stated that the Company was not in compliance (i) with Listing Rule 5250(c)(1) due to the Company’s delay in filing its Quarterly Report on Form 10-Q for the period ended June 30, 2025, and (ii) with Listing Rule 5550(b)(1), which requires the Company to maintain minimum stockholders’ equity of $2.5 million. As previously reported, on February 24, 2025, Nasdaq notified the Company that it was not in compliance with Listing Rule 5550(b)(1) due to having stockholders’ equity of less than $2.5 million. The Determination informed the Company that it may appeal the decision to a Hearings Panel (the “Panel”). If the Company chose to appeal, the request must be received by Nasdaq no later than 4:00 p.m. Eastern Time on August 25, 2025. The Company requested a hearing before the Panel and a preliminary date of October 7, 2025 was set for the hearing. On October 7, 2025, the Company announced that the hearing was postponed to October 14, 2025. This request stayed the suspension of the Company’s Common Stock for a period of 15 days from the date of the request. In connection with this request, the Company also requested a stay of the suspension pending the hearing (the “Additional Stay”).

●

August 28, 2025 – Nasdaq sent the Company a determination letter (the “August 28 Determination”) stating that Nasdaq had determined that the Company did not regain compliance with the Minimum Bid Requirement by August 25, 2025. The August 28 Determination stated that the failure to comply with the Minimum Bid Requirement during the compliance period would serve as an additional basis for delisting the Company’s securities from the Nasdaq Capital Market and would be considered by a Hearings Panel (the “Panel”), in addition to the Company’s failure to comply with (i) Nasdaq Listing Rule 5250(c)(1) due to the Company’s delay in filing its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and its Quarterly Reports on Form 10-Q for the periods ended March 31, June 30, 2025 (the “Timely Filing Requirement”), and (ii) Nasdaq Listing Rule 5550(b)(1), which requires the Company to maintain minimum stockholders’ equity of $2.5 million (the “Stockholders’ Equity Requirement”).

●

October 14, 2025 – The Company presented to the Panel.

●

October 30, 2025 – Nasdaq sent the Company a notice notifying the Company that the Panel had determined to grant the Company’s request to continue its listing on The Nasdaq Capital Market, subject to certain conditions. Specifically, the Panel conditioned the Company’s continued listing on the Company regaining compliance with the Timely Filing Requirement and the Stockholders’ Equity Requirement on or before December 31, 2025 and regaining compliance with the Bid Price Rule on or before January 28, 2026. During the exception period, the Company is required to provide prompt notification to the Panel of any significant event that may affect the Company’s compliance with Nasdaq requirements. Any documentation evidencing the Company’s compliance will be subject to review by the Panel, which may, in its discretion, request additional information before determining whether the Company has regained compliance.

●

November 18, 2025 – Nasdaq sent the Company a notice (the “November 18 Notice”) stating that because the Company had not yet filed its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2025 (the “September 30 Form 10-Q”) or its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Form 10-K”), the Company continues to be out of compliance with Nasdaq Listing Rule 5250(c)(1). Nasdaq Listing Rule 5250(c)(1) requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission.

2122

●

On January 6, 2026, the Company received a determination letter (the “January 6, 2026 Determination”) from Nasdaq stating that because the Company did not hold an annual meeting of stockholders within twelve months from the Company’s prior fiscal year end as required by Nasdaq Listing Rule 5620(a), the resulting non-compliance would be an additional basis for delisting the Company’s securities. The January 6, 2026 Determination notified the Company that the Panel would consider the matter in their decision regarding the Company’s continued listing on the Nasdaq Capital Market, and requested that the Company present its views with respect to the additional deficiency in writing by January 9, 2026. The Company intends to make a submission to the Panel by the requested date, and has requested an additional extension to comply with the Bid Price Rule, the Stockholders’ Equity Requirement and the Timely Filing Requirement.

●

On January 13, 2026, the Panel notified the Company that it had granted a further extension to regain compliance with the Stockholders’ Equity Requirement, the Annual Meeting Requirement and the Timely Filing Requirement on or before February 17, 2026 and with the Bid Price Rule on or before February 24, 2026.

Business Loan and Security Agreement with Agile Entities

On June 26, 2025, the Company entered into a business loan and security agreement (the “Loan Agreement”) with an effective date of June 24, 2025 (the “Effective Date”) by and among, Agile Capital Funding, LLC, Agile Lending , LLC, a Virginia limited liability company and each assignee that becomes a party pursuant to Section 12.1 of the Loan Agreement (the “Lenders”), the Company and 2WR Of Colorado Inc., UG Construction, Inc., 2WR of Georgia, Inc., urban-gro Canada Technologies Inc., urban-gro Engineering, Inc. and urban-gro Architect Holdings, LLC, each a wholly owned subsidiary of the Company (individually, collectively, jointly and severally, the “Guarantors”).

RK Mechanical- complaint filed

On June 27, 2025, RK Mechanical LLC (“RK”) filed a complaint against UG Construction and certain other defendants, with SVC Manufacturing Inc. as cross-claimant and UG Construction as cross-defendant, in the Superior Court of Arizona for Maricopa County (Case No. CV2025-022680). The complaint alleged that UG Construction served as general contractor for the construction of the construction of a PepsiCo plant in Tolleson, Arizona, and that as a result of work completed by RK, UG Construction owed $1,522,716 to RK as a result of alleged breach of contract, breach of implied covenant of good faith and fair dealing, violation of the Arizona Prompt Payment Act, and lien foreclosure. On or about October 2025, a default judgment was entered against UG Construction for $1,511,716, plus prejudgment interest of $288,346 and post-judgment interest at 8.25% plus $10,057 in attorney fees.

Action Equipment- complaint filed

Settlement with Vendor

On August 8, 2025, the Company entered into a Settlement and Release Agreement (the “Settlement Agreement”) with J Brrothers LLC (“J Brrothers”) and Herb-a-More LLC relating to a dispute arising from amounts due for certain heating, ventilation and air conditioning equipment. Pursuant to the terms of the Settlement Agreement, among other things, the Company issued a promissory note to J Brrothers with an original principal amount of $395,556 (the “Note”) and issued 150,000 unregistered shares of the Company’s common stock, or 6,000 shares after giving effect to a 1-for-25 reverse stock split, to J Brrothers (the “Shares”). The Note will accrue simple interest at an annual rate of 12% and has a maturity date of March 18, 2026. The Note will be repaid in monthly installments over a period of eight months, with the first seven payments being $50,000 per month and the final monthly payment being $64,~~046~~047.~~95.~~ Any remaining principal and accrued but unpaid interest will become due and payable on the maturity date, and the Note may be prepaid without penalty. The Note includes customary representations and warranties, customary events of default and a 17% default interest rate.

The Company is currently in a payment default under the terms of the Note.

Services – Sale of 2WR Georgia, Inc.; Sale of Customer Lists: Remaining Services

On August 27, 2025, the Company announced that certain subsidiaries (the “Seller Parties”) of the Company entered into a Stock and Asset Purchase Agreement (the “August 27 Purchase Agreement”) with 2WR Holdco, LLC (the “Buyer”). Pursuant to the August 27 Purchase Agreement, the Buyer acquired (the “Acquisition”) all of the outstanding shares of stock of 2WR of Georgia, Inc. (“2WRGA”) and certain assets of other subsidiaries of the Company relating to those entities’ business of providing commercial, industrial and municipal architectural and construction administration services for projects not involving CEA, with such CEA business being retained by the Company.

The purchase price paid by the Buyer for the Acquisition consisted of $2.0 million in cash and by any assumed indebtedness. The August 27 Purchase Agreement includes non-competition and non-solicitation restrictions applicable to the Seller Parties and customary representations and warranties and covenants of the parties. Subject to certain limitations, (i) the Seller Parties will indemnify the Buyer and its affiliates and representatives against certain losses related to, among other things, breaches of the Seller Parties’ representations, warranties or covenants, any liabilities other than those assumed by the Buyer under the August 27 Purchase Agreement, assets excluded from the Acquisition, pre-closing taxes, operation of the CEA business and pre-closing employment matters, and (ii) the Buyer will indemnify the Seller Parties and their respective affiliates and representatives against certain losses related to breaches of the Buyer’s representations, warranties or covenants, and any losses related to any asset acquired by the Buyer or any liability assumed by the Buyer under the August 27 Purchase Agreement.

On November 5, 2025, the Seller Parties entered into a Bill of Sale, Assignment and Assumption, and Purchase Agreement (the “November 5 Purchase Agreement”) with 2WRGA. Pursuant to the November 5 Purchase Agreement, 2WRGA acquired (the “Follow On Acquisition”) certain customer lists of the Seller Parties.

The purchase price paid by 2WRGA for the Follow On Acquisition consisted of $143,000 in cash. Additionally, pursuant to the November 5 Purchase Agreement, the parties agreed to waive and terminate the non-solicitation provision applicable to 2WRGA that was contained in the August 27 Purchase Agreement among the Seller Parties, the Company and the other parties thereto.

During the fourth quarter of 2025, the Company began winding down the remaining services businesses and furloughed those employees.

Binding Letter of Intent with Flash Sports & Media, Inc.

On October 14, 2025, the Company entered into a binding letter of intent (the “LOI”) with Flash Sports & Media, Inc. (“Flash”) regarding a proposed transaction pursuant to which the parties intend to merge Flash with and into a newly formed wholly-owned subsidiary of the Company, which would then merge with and into a second wholly-owned subsidiary of the Company (collectively, the “Merger”).

Pursuant to the LOI, the parties have agreed, subject to satisfaction of certain conditions, to negotiate and execute a definitive merger agreement in accordance with the terms set forth in the LOI. The LOI provides that Flash would pay to the Company a cash deposit of $200,000 within fifteen days of its execution. In connection with the Merger, the stockholders of Flash would receive (i) unregistered shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) equal to 19.99% of the outstanding shares of Common Stock as of immediately prior to the Merger, and (ii) unregistered shares of a newly-created series of non-voting preferred stock that would be economically equivalent to Common Stock (the “Preferred Stock”) and would automatically convert into Common Stock upon receipt of approval by the Company’s stockholders.

The LOI contemplates that the former stockholders of Flash would own approximately 90% of the Company following the Merger, assuming full conversion of the Preferred Stock. Upon closing of the Merger, the Company would change its name to Flash Sports & Media Holdings, Inc. or a similar name. The Company would be required to obtain approval of its stockholders for conversion of the Preferred Stock as soon as reasonably practicable following the Merger.

The LOI provides that following the Merger, the board of directors (the “Board”) of the Company would be reconstituted such that four members of the Board would be designated by the Board prior to the Merger and one member of the Board would be designated by the former stockholders of Flash. Upon approval of the Company’s stockholders for the conversion of the Preferred Stock, the Board would be further reconstituted such that one member of the Board would be designated by the Board prior to the Merger and four members of the Board would be designated by the former stockholders of Flash.

The LOI provides for an exclusivity period of 90 days following the execution of the LOI. During that period, the Company agreed that neither it nor its affiliates will, among other things, solicit, provide any information or enter into any agreement with any other party concerning a transaction similar to the Merger.

~~Equity~~Shareholder ~~Issuances~~Approvals ~~After~~at ~~March~~the ~~31,~~Annual ~~2025~~Shareholder Meeting

~~Subsequent~~On January ~~to March 31~~30, ~~2025~~2026, ~~inclusive~~the ofshareholders ~~RSU vesting, an additional 4,267,660 shares~~ of ~~common~~the ~~stock~~Company ~~were~~approved ~~issued.~~the following:

23● An amendment to the Company’s 2021 Omnibus Stock Incentive Plan to increase the number of shares authorized for issuance under the plan by 5,000,000 shares (prior to any reverse stock split) and to increase the individual annual award limit to 500,000 shares (prior to any reverse stock split) or 20,000 shares after giving effect to a 1-for-25 reverse stock split.

●

An amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse stock split of the shares of the Company’s common stock at a ratio of not less than 1-for-2 and not greater than 1-for-25, with the exact ratio of, effective time of and decision to implement the reverse stock split to be determined by the Board of Directors.

●

An amendment of the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock to 200,000,000. The number of shares of authorized common stock would not be affected by any reverse stock split.

Private Placement of Common Stock

On January 19, 2026, the Company entered into a private placement transaction pursuant to a Purchase and Subscription Agreement. Under the agreement, the Company agreed to issue 1,000,000 shares of its common stock at a purchase price of $0.10 per share for total gross proceeds of $100,000, on a pre–reverse stock split basis. After giving effect to the 1-for-25 reverse stock split, this is equivalent to 40,000 shares of common stock at an adjusted price of $2.50 per share.

The transaction was entered into with One Eyed Jack Enterprises LLC, an accredited investor, in a private offering exempt from registration under applicable securities laws.

Reverse Stock Split

On February 4, 2026, the Board of Directors approved a 1-for-25 reverse stock split of the Company’s common stock to take effect on February 9, 2026.

Other Stock Transactions

Subsequent to June 30, 2025, 84,000 shares of common stock were issued pursuant to a debt settlement and 63,057 shares were issued for services.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included herein. See also “~~Forward~~CAUTIONARY ~~Looking~~INFORMATION ~~Statements~~REGARDING FORWARD-LOOKING STATEMENTS ” on ~~pages~~page ii of this Report. When applicable, all share and per share amounts presented herein have been restated to reflect the implementation of the 1-for-25 reverse stock split as if it had occurred at the beginning of the earliest period presented.

OVERVIEW AND HISTORY

In 2025, urban-gro, Inc. was an integrated professional services and design-build firm. We offered value-added architectural, engineering, and construction management solutions to the Controlled Environment Agriculture (“CEA”), industrial, healthcare, and other commercial sectors. Innovation, collaboration, and a commitment to sustainability drove our team to provide exceptional customer experiences. To serve our horticulture clients, we engineered, designed and managed the construction of indoor CEA facilities and then integrate complex environmental equipment systems into those facilities. Through this work, we created high-performance indoor cultivation facilities for our clients to grow specialty crops, including leafy greens, vegetables, herbs, and plant-based medicines. Our custom-tailored approach to design, construction, procurement, and equipment integration provided a single point of accountability across all aspects of indoor growing operations. We also helped our clients achieve operational efficiency and economic advantages through a full spectrum of professional services and programs focused on facility optimization and environmental health which established facilities that allowed clients to manage, operate and perform at the highest level throughout their entire cultivation lifecycle once they are up and running. Further, we served a broad range of commercial and governmental entities, providing them with planning, consulting, architectural, engineering and construction design-build services for their facilities. We aimed to work with our clients from the inception of their project in a way that provided value throughout the life of their facility. We are a trusted partner and advisor to our clients and offer a complete set of engineering and managed services complemented by a vetted suite of select cultivation equipment systems.

RESULTS OF OPERATIONS

Comparison of Results of Operations for the three months ended ~~March~~June 3130, 2025 and 2024

During the three months ended ~~March~~June 3130, 2025, we generated revenues of $97.576 million compared to revenues of $1517.49 million during the three months ended ~~March~~June 3130, 2024, a decrease of $510.91 million, or approximately 3857%. This decrease in revenues is the result of the following changes in individual revenue components:

● Equipment systems revenue ~~increased~~decreased $20.226 million.

● Services revenue decreased $1.52 million due to continued negative market conditions in the CEA sector.

● Construction design-build revenue decreased $68.65 million due to decreases in our construction design-build revenue contracts, and:

● Other revenues ~~were~~decreased ~~relatively~~$0.1 ~~flat~~million.

During the three months ended ~~March~~June 3130, 2025, cost of revenues was $87.97 million compared to $1215.45 million during the three months ended ~~March 31~~June 30, 2024, a decrease of $37.58 million, or approximately 2850%. Gross profit was $0.604 million (approximately 60.01% of revenues) during the three months ended ~~March~~June 3130, 2025, compared to $32.04 million (approximately 19 13% of revenue) during the three months ended ~~March~~June 3130, 2024. This decrease in gross profit as a percentage of revenues, was primarily due to the 3857% decrease in total revenues, compared to a ~~much~~ lesser 28 50% decrease in total cost of revenues..

Operating expenses ~~decreased~~increased by $0.89 million, or approximately 1418%, to $46.70 million for the three months ended ~~March~~June 3130, 2025, compared to $5.5 1 million for the three months ended ~~March~~June 3130, 2024. This overall ~~decrease~~increase in operating expenses was the result of a $01.61 million ~~decrease~~ increase in general and administrative operating expenses due to ~~decreases~~increases in ~~salary~~bad ~~and~~debt ~~personnel~~expenses ~~related~~and ~~costs, as well as~~ a $0.2 million ~~decrease~~ decrease in depreciation and amortization.

Non-operating expense was relatively flat for the three months ended ~~March~~June 3130, 2025, compared to the three months ended ~~March~~June 3130, 2024.

24Comparison of Results of Operations for the six months ended June 30, 2025 and 2024

During the six months ended June 30, 2025, we generated revenues of $17.3 million compared to revenues of $33.3 million during the six months ended June 30, 2024, a decrease of $16 million, or approximately 48%. This decrease in revenues is the result of the following changes in individual revenue components:

●

Equipment systems revenue increased $1.9 million.

●

Services revenue decreased $2.7 million due to continued negative market conditions in the CEA sector.

●

Construction design-build revenue decreased $15.1 million due to decreases in our construction design-build revenue contracts, and:

●

Other revenues decreased $0.1 million.

During the six months ended June 30, 2025, cost of revenues was $16.6 million compared to $27.9 million during the six months ended June 30, 2024, a decrease of $11.3 million, or approximately 41%. Gross profit was $0.6 million (approximately 4% of revenues) during the six months ended June 30, 2025, compared to $5.4 million (approximately 16% of revenue) during the six months ended June 30, 2024. This decrease in gross profit as a percentage of revenues, was primarily due to the 48% decrease in total revenues, compared to a lesser 41% decrease in total cost of revenues.

Operating expenses increased by $0.1 million, or approximately 1%, to $10.7 million for the six months ended June 30, 2025, compared to $10.6 million for the six months ended June 30, 2024. This overall increase in operating expenses was the result of a $0.6 million increase in general and administrative operating expenses due to increases in bad debt expenses and a $0.5 million decrease in depreciation and amortization.

Non-operating expense was relatively flat for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.

LIQUIDITY AND CAPITAL RESOURCES

As of ~~March~~June 3130, 2025, we had negative working capital of $3036.12 million, compared to negative working capital of $26.5 million as of December 31, 2024, a decrease of $39.67 million. This decrease in working capital was primarily due to a decrease in accounts receivable of $25.83 million, as well as increases in accounts payable and customer deposits of $45.46 million.

As of ~~March~~June 3130, 2025, we had cash of $0.7 million, which represented a decrease of $0.1 million from December 31, 2024 due to the following changes during the ~~three~~six months ended ~~March~~June 3130, 2025:

● Net cash provided by operating activities was $2.26 million. This source of cash is the net effect of the net loss of $410.02 million, offset by non-cash expenses of $01.71 million, and aan ~~reduction~~increase in net operating assets and liabilities of $511.58 million. See the condensed consolidated statements of cash flows for further details on the non-cash expenses and net changes in operating assets and liabilities;

● Net cash provided by investing activities was $0.101 million. We have no material commitments for capital expenditures as of ~~March~~June 3130, 2025.

● Net cash used in financing activities was $2.37 million. Cash used from financing activities primarily relates to payments made on the Line of Credit and other financing agreements.

CRITICAL ACCOUNTING ESTIMATES

Critical Accounting Estimates

The Company’s Unaudited Condensed Consolidated Financial Statements are prepared in conformity with U.S. GAAP. In preparing the Company’s Unaudited Condensed Consolidated Financial Statements, management makes assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We regularly reevaluate our assumptions, judgments and estimates. The Company’s significant accounting policies are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Critical accounting estimates (“CAE”) are those estimates that involve a significant level of estimation uncertainty and could have a material impact on our financial condition or results of operations.

There have been no material changes in CAE in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide this information.

2526

ITEM 4. CONTROLS AND PROCEDURES.

DISCLOSURE CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO to allow timely decisions regarding required disclosure.

Based on such evaluation, our CEO and CFO concluded, that our disclosure controls and procedures were not effective as of ~~March~~June 3130, 2025 because of the material weaknesses resulting from lack of a formalized internal control framework in accordance with COSO, as described in Item 9A of our Annual Report on Form 10-K as of December 31, 2024.

In light of these material weaknesses, management performed additional analyses, reconciliations, and other post-closing procedures to determine that the Company’s unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP. Based on this review, management concluded that the unaudited condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended ~~March~~June 3130, 2025, which were identified in in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Plan to Remediate the Material Weaknesses

As it relates to the material weaknesses that existed as of ~~March~~June 3130, 2025, we are in the process of designing and implementing remediation plans and taking steps to address the root cause of the material weaknesses as described in Annual Report on Form 10-K as of December 31, 2024. There have been no changes to the remediation plan since December 31, 2024.

2627

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Gemini Loan Agreement Amendment and Default

2728

Grow Hill Default

2829

J Brrothers Settlement

On August 8, 2025, we entered into a Settlement and Release Agreement (the “Settlement Agreement”) with J Brrothers LLC (“J Brrothers”) and Herb-a-More LLC relating to a dispute arising from amounts due for certain heating, ventilation and air conditioning equipment. Pursuant to the terms of the Settlement Agreement, among other things, we issued a promissory note to J Brrothers with an original principal amount of $395,556 and issued 150,000 unregistered shares of our common stock, or 6,000 shares after giving effect to a 1-for-25 reverse stock split, to J Brrothers. The note accrues simple interest at an annual rate of 12% and has a maturity date of March 18, 2026. The note must be repaid in monthly installments over a period of eight months, with the first seven payments being $50,000 per month and the final monthly payment being $64,047. Any remaining principal and accrued but unpaid interest will become due and payable on the maturity date, and the note may be prepaid without penalty. The note includes customary representations and warranties, customary events of default and a 17% default interest rate.

2WR of Georgia Sale

MJ’s Market, Inc

ITEM 1A. RISK FACTORS

As of the date of this Quarterly Report on Form 10-Q, there have been no additional material changes to the risk factors disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2024. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Shares Issued in Connection with Acquisitions

The foregoing issuances of restricted shares of common stock were issued under Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. The Company believes the issuances of the foregoing restricted shares were exempt from registration as each was a privately negotiated, isolated, non-recurring transaction not involving a public solicitation. No commissions were paid regarding the share issuances, and the share certificates were issued with a Rule 144 restrictive legend.

Repurchase of Equity Securities

We did not repurchase any of our registered equity securities during the period covered by this Quarterly Report on Form 10-Q.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit No.		Exhibit Description
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Schema Document
101.CAL		Inline XBRL Calculation Linkbase Document
101.DEF		Inline XBRL Definition Linkbase Document
101.LAB		Inline XBRL Label Linkbase Document
101.PRE		Inline XBRL Presentation Linkbase Document
104		Cover Page Interactive Data File (Embedded within the Inline XBRL document)
104		Cover Page Interactive Data File (Embedded within the Inline XBRL

3031

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 310, 2026.

	URBAN-GRO, INC.

	By:	/s/ Bradley Nattrass
		Bradley Nattrass
		Chairperson of the Board of Directors and
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Richard Akright
		Richard A. Akright
		Chief Financial Officer
		(Principal Financial Officer)
		(Principal Accounting Officer)

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