UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from _________ to _________.
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code; Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange | ||
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 ☐
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).
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.
| Large accelerated filer ☐ | 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
As of May 20, 2026, the registrant had
TABLE OF CONTENTS
i
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”). 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.
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. 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:
| ● | our recent merger with Flash Sports & Media, Inc. and our pivot from controlled environment agriculture to the sports, media, and experiential marketing industry; |
| ● | our ability to integrate the operations of Flash and IPG FZ, LLC, including the Lanka Premier League Event Rights; |
| ● | our ability to obtain stockholder approval of the conversion of our Series B Non-Voting Convertible Preferred Stock and related corporate matters; |
| ● | substantial doubt about our ability to continue as a going concern; |
| ● | our recurring losses and need for additional capital; |
| ● | our ability to comply with the continued listing standards of the Nasdaq Capital Market; |
| ● | our reliance on dilutive equity and convertible debt financing; |
| ● | the contingent earn-out payable in connection with the IPG acquisition; |
| ● | the seasonality and concentration of revenue from the Lanka Premier League; |
| ● | the regulatory environment for sports rights and broadcasting in Sri Lanka and other markets in which we operate; |
| ● | foreign exchange and other risks associated with operations in the United Arab Emirates, Sri Lanka, and other international jurisdictions; |
| ● | legal proceedings, regulatory inquiries, and tax controversies; and |
| ● | the other factors identified under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. |
Forward-looking statements should not be unduly relied upon. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.
ii
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
urban-gro, Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Operating lease right-of-use assets | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Due to seller | ||||||||
| Contingent consideration | ||||||||
| Derivative liability | ||||||||
| Due to related party | ||||||||
| Notes payable, current | ||||||||
| Operating lease liabilities, current | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Operating lease liabilities, long-term | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Treasury shares, cost basis: | ( | ) | ( | ) | ||||
| Non-controlling interests | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ||||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
urban-gro, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenues | ||||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Amortization of acquired intangibles | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Non-operating income (expense): | ||||||||
| Interest expense | ( | ) | ||||||
| Loss on issuance of derivatives | ( | ) | ||||||
| Change in fair value of derivative liabilities (loss) | ||||||||
| Total non-operating income (expense) | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax benefit | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Net income loss from discontinued operations, net of tax | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Less: Net loss from continuing operations attributable to non-controlling interest | $ | ( | ) | $ | ||||
| Net loss attributable to Urban-gro, Inc. common stockholders | $ | ( | ) | $ | ( | ) | ||
| Net loss per share attributable common stockholders: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Net loss from discontinued operations, net of taxes | $ | ( | ) | $ | ( | ) | ||
| Net loss per share | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding - basic and diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
urban-gro, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
| Total | ||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Treasury | Non-controlling | Stockholders’ Equity | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Interest | (Deficit) | ||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||||||||||
| Stock grant program vesting | - | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of common stock for loan modification | - | |||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for loan settlement | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for cash | - | |||||||||||||||||||||||||||||||||||
| Issuance of preferred stock and common stock for Merger | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
urban-gro, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation expense | ||||||||
| Amortization of the right-of-use | ||||||||
| Loss on issuance of derivatives | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable and contract receivables | ||||||||
| Prepaid expenses and other assets | ||||||||
| Accounts payable, contract liabilities, and accrued expenses | ||||||||
| Operating lease liability, net | ( | ) | ||||||
| Net cash provided by (used in) operating activities of continuing operations | ( | ) | ||||||
| Net cash (used in) provided by operating activities of discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Cash paid for acquisition | ( | ) | ||||||
| Cash acquired in merger and acquisition | ||||||||
| Net cash used in investing activities of continuing operations | ( | ) | ||||||
| Net cash provided by investing activities of discontinued operations | ||||||||
| Net cash provided by in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from promissory notes | ||||||||
| Proceeds from sale of common stock | ( | ) | ||||||
| Net cash (used in) provided by financing activities of continuing operations | ( | ) | ||||||
| Net cash used in financing activities of discontinued operations | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ||||||
| Cash at beginning of year | ||||||||
| Cash at end of year | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Termination of operating lease | $ | $ | ||||||
| Prepaid expenses financed by notes payable | $ | $ | ||||||
| Assets acquired pursuant to business combination | $ | |||||||
| Liabilities assumed pursuant to business combination | $ | |||||||
| Common stock issued for debt settlement | $ | $ | ||||||
| Non-controlling interest recognized on acquisition | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
4
urban-gro, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Description of Business
Description of Business
urban-gro, Inc. (the “Company” or “UGRO”)
is a Delaware corporation listed on the Nasdaq Capital Market under the ticker symbol UGRO. On February 17, 2026, the Company completed
its merger (the “Merger”) with Flash Sports & Media, Inc. (“Flash”), pursuant to the Agreement and Plan of Merger
dated February 17, 2026. As a result of the Merger, Flash became a wholly-owned subsidiary of the Company. Concurrently, Flash holds a
Following the Merger, the Company’s continuing operations consist of the sports, media, and experiential marketing activities of Flash and IPG, including the production and commercialization of the Lanka Premier League (“LPL”), a T20 cricket franchise league. IPG is the exclusive Event Rights Partner for the LPL pursuant to a Master Event Rights Agreement with Sri Lanka Cricket dated October 14, 2020.
The Company’s legacy-controlled environment agriculture (“CEA”) operations have been classified as discontinued operations as of the Merger closing date. See Note 5 — Discontinued Operations.
Concentration of Risk
The Company’s continuing operations are concentrated in the production and commercialization of cricket leagues, principally the Lanka Premier League. IPG’s exclusive Event Rights for the LPL are pursuant to the Master Event Rights Agreement with Sri Lanka Cricket dated October 14, 2020. Sri Lanka Cricket is the Company’s most significant commercial counterparty for the post-Merger business. Loss of these rights, non-renewal of the agreement, or any disruption in the LPL season would have a material adverse effect on our business and financial condition.
IPG operates in the United Arab Emirates and conducts business principally in Sri Lanka and other South Asian and emerging markets. The Company is exposed to foreign currency risk principally in the UAE Dirham (which is pegged to the U.S. Dollar) and the Sri Lankan Rupee. The Company does not currently hedge foreign currency exposure.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the Company’s financial position, results of operations, and cash flows for the periods presented.
5
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2026 or any future period.
Principles of Consolidation
The unaudited condensed consolidated financial
statements include the accounts of the Company, its wholly-owned subsidiary Flash, and Flash’s
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the fair values of assets acquired and liabilities assumed in the Merger, the fair value of contingent consideration, the fair values of derivative liabilities, useful lives of intangible assets, and the assessment of going concern. Actual results may differ materially from these estimates.
Foreign Currency
The functional currency of IPG is the UAE Dirham.
Assets and liabilities of IPG are translated to U.S. Dollars at the exchange rate in effect at the balance sheet date, and revenue and
expenses are translated at average exchange rates during the period. Translation gains and losses are recorded in other comprehensive
income (loss) within stockholders’ equity. Transaction gains and losses are recorded in the consolidated statements of operations. The
UAE Dirham is currently pegged to the U.S. Dollar at a rate of
Reverse Stock Split
On February 9, 2026, the Company effected a
Cash
The Company considers all highly liquid short-term cash investments with an original maturity of three months or less to be cash equivalents. As of March 31, 2026, the Company did not maintain any cash equivalents. The Company maintains cash with financial institutions that may from time to time exceed federally-insured limits.
Impairment of Long-Lived Assets
The Company evaluates potential impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. An impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.
6
Fair Value of Financial Instruments
The Company measures fair value in accordance with ASC 820, Fair Value Measurement. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value:
| Level | 1 — Quoted prices in active markets for identical assets or liabilities. |
| Level | 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. |
| Level | 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The carrying amounts of cash, accounts receivable, accounts payable, and other current assets and liabilities approximate fair value due to the short-term nature of these instruments. Derivative liabilities are measured at fair value on a recurring basis using Level 3 inputs (see Note 8 — Derivative Liabilities). Contingent consideration arising from the Merger is also measured at fair value on a recurring basis using Level 3 inputs (see Note 4 — Business Combination).
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, by applying the following five-step framework: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) a performance obligation is satisfied.
Following the Merger, the Company’s revenue is principally derived from IPG’s cricket commercialization operations, including media rights, sponsorships, franchise fees, and event management services for the Lanka Premier League and other cricket-related properties. Revenue from media rights and sponsorship contracts is recognized over the contract term as the related performance obligations are satisfied. Franchise fees are recognized in accordance with the terms of the applicable franchise agreements. Event management revenue is recognized as services are provided.
Business Combinations
The Company accounts for business combinations using the acquisition method in accordance with ASC 805, Business Combinations. Under this method, the purchase price is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over the fair value of net identifiable assets acquired is recorded as goodwill. Acquisition-related costs are expensed as incurred. Results of operations of an acquired business are included in the consolidated financial statements from the date of acquisition.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net identifiable assets acquired in a business combination. Goodwill is not amortized but is tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. The Company performs its annual goodwill impairment test as of the last day of its fiscal year.
The impairment test consists of comparing the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company has a single reporting unit for goodwill impairment testing purposes.
7
Intangible Assets
Finite-lived intangible assets, including customer relationships, trademarks and trade names, and media content rights acquired in business combinations, are recorded at their estimated fair values at the date of acquisition and amortized on a straight-line basis over their estimated useful lives. The Company evaluates finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in accordance with ASC 360, Property, Plant, and Equipment.
Derivative Financial Instruments
The Company evaluates its financial instruments, including warrants and conversion features associated with debt instruments, to determine whether they meet the definition of a derivative under ASC 815, Derivatives and Hedging. Instruments that do not qualify for the scope exception under ASC 815-10-15 are classified as derivative liabilities and measured at fair value at each reporting date, with changes in fair value recognized in the consolidated statements of operations.
Warrants and conversion features that contain variable-price provisions (such as price-reset or ratchet features) fail to meet the fixed-for-fixed criteria under ASC 815-40-15 and are classified as derivative liabilities. Warrants that are indexed to the Company’s own stock and meet the criteria for equity classification under ASC 815-40 are recorded within stockholders’ equity and are not subsequently remeasured. The Company reassesses the classification of its warrants at each reporting date.
Noncontrolling Interests
Noncontrolling interests represent the portion
of equity in a consolidated subsidiary not attributable to the parent company. Following the Merger, the Company consolidates IPG, in
which it holds a
Stock-Based Compensation
The Company accounts for stock-based compensation awards in accordance with ASC 718, Compensation — Stock Compensation. Stock-based compensation expense for equity-classified awards, including restricted stock units and stock options, is measured at the grant-date fair value and recognized over the requisite service period on a straight-line basis. Forfeitures are recognized as they occur.
Income Taxes
The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Taxes. Current income tax expense is the amount of income taxes expected to be payable for the current year. Deferred income tax assets and liabilities are recognized for the expected future tax consequences of differences between the financial statement carrying amounts and the tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance is established when it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by the taxing authorities.
Loss per Share
The Company computes basic net loss per share by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares and potentially dilutive common share equivalents outstanding during the period. Potentially dilutive securities, including stock options, warrants, and convertible notes, are excluded from diluted loss per share when their inclusion would be anti-dilutive.
8
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. For public business entities, this guidance is effective for annual periods beginning after December 15, 2024, and is effective for the Company’s annual period ending December 31, 2025. The Company adopted this guidance effective January 1, 2025 and will include the required disclosures in its annual financial statements. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40), which requires disaggregation of certain income statement expense line items. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact of this standard on its consolidated financial statements and related disclosures.
Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will have a material impact on the Company’s condensed consolidated financial statements.
Note 3 — Going Concern
In accordance with Accounting Standards Codification (“ASC”) 205-40, Presentation of Financial Statements — Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.
The Company has experienced recurring losses from operations and negative
cash flows from operating activities. As of March 31, 2026, the Company had cash of $
During the three months ended March 31, 2026, the Company executed
several financing transactions to address near-term liquidity needs, including (i) a Securities Purchase Agreement with Agile Hudson Partners
LLC providing for an aggregate principal amount of $
Management’s plans to address the Company’s liquidity needs include: (i) generating revenue from the LPL Season 7 (scheduled for late 2026) and other IPG cricket league operations; (ii) drawing additional tranches under the Agile Hudson Partners convertible note facility; (iii) drawing on the Hudson Global Ventures equity line of credit, subject to market conditions and SEC registration of the underlying shares; (iv) seeking additional equity or debt financing; and (v) implementing cost reduction measures.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued. Management’s plans to mitigate these conditions are not considered probable of being effectively implemented within the meaning of ASC 205-40 because they are subject to significant risks and uncertainties, including the Company’s ability to access capital markets, market acceptance of the LPL and other IPG operations, and continued compliance with Nasdaq listing standards. Accordingly, substantial doubt about the Company’s ability to continue as a going concern has not been alleviated.
9
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 4 — Business Combination
Description of Transaction
On February 17, 2026 (the “Acquisition Date”), the Company
completed its merger with Flash, pursuant to which a wholly-owned subsidiary of the Company merged with and into Flash, with Flash surviving
as a wholly-owned subsidiary of the Company. Concurrently, Flash holds a
The Company was determined to be the accounting acquirer based on the following factors: (i) the Company’s pre-Merger stockholders retained voting control of the combined entity (the Series B Non-Voting Convertible Preferred Stock issued to Flash stockholders is non-voting and has not been converted); (ii) the Company’s existing Board of Directors comprises a majority of the post-Merger Board; (iii) the Company’s pre-Merger Chief Executive Officer continues as the Chief Executive Officer of the combined entity; (iv) the Company initiated the transaction; and (v) the Company issued the equity consideration. The Nasdaq Stock Market issued a determination on February 24, 2026 confirming the two-step structure of the transaction and recognizing that the Change of Control under Listing Rule 5110(a) occurs only upon stockholder approval and conversion of the Series B Preferred Stock, which has not occurred.
Consideration Transferred
The total consideration transferred in the combined transaction consisted of two components:
| Amount | ||||
| Step 1 — Flash acquisition of 51% of IPG | ||||
| Cash (due to seller) | $ | |||
| Contingent consideration | ||||
| Subtotal — Step 1 | ||||
| Step 2 — UGRO acquisition of 100% of Flash | ||||
| Common stock | ||||
| Series B non-voting convertible preferred stock | ||||
| Subtotal — Step 2 | ||||
| Total consideration transferred | $ | |||
10
Preliminary Allocation of Purchase Price
The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the Acquisition Date:
| Amount | ||||
| Identifiable assets acquired: | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Loans, advances and other current assets | ||||
| Identifiable intangible assets | ||||
| Total identifiable assets acquired | ||||
| Liabilities assumed: | ||||
| Accounts payable | ( | ) | ||
| Due to related party | ( | ) | ||
| Deferred revenue and other current liabilities | ( | ) | ||
| Total liabilities assumed | ( | ) | ||
| Net identifiable assets acquired | ||||
| Less: Noncontrolling interest in IPG ( | ( | ) | ||
| Goodwill | ||||
| Total consideration transferred | $ | |||
Goodwill represents the excess of the consideration transferred over the fair value of the net identifiable assets acquired. Goodwill is primarily attributable to the assembled workforce of IPG, expected synergies from integrating IPG’s production capabilities with the Company’s public market platform, and growth opportunities in the global T20 cricket ecosystem. Goodwill has been assigned to the Company’s single reporting unit (sports, media, and experiential marketing). Goodwill is deductible for U.S. federal income tax purposes over 15 years pursuant to IRC §197.
Identifiable Intangible Assets
| Intangible Asset | Fair Value | Useful Life | ||||
| LPL Event Rights | $ | |||||
| First Right of Refusal on remaining | ||||||
| Customer relationships | ||||||
| Trade name | ||||||
| Production technology | ||||||
| Cricket league licenses (Malaysia, Singapore, Zimbabwe) | ||||||
| Total identifiable intangible assets | $ | |||||
The fair values of identifiable intangible assets were determined using
a combination of valuation methodologies, including the multi-period excess earnings method (LPL Event Rights), Black-Scholes option pricing
model (First Right of Refusal), with-and-without method (customer relationships), relief-from-royalty method (trade name), cost approach
(production technology), and income approach (cricket league licenses). Significant assumptions include forecasted revenue growth, EBITDA
margins, contributory asset charges, and discount rates ranging from
11
Contingent Consideration
In connection with the IPG acquisition, Flash agreed to pay contingent
earn-out consideration of up to $
First Right of Refusal
Flash holds a first right of refusal to acquire the remaining
Capital Contribution Commitment
Pursuant to the MIPA, Flash committed to fund $
Pro Forma Information
The following unaudited pro forma financial information presents the
combined results of operations as if the Merger had occurred on January 1, 2025.
| Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 | |||||||
| Pro forma revenue | $ | $ | ||||||
| Pro forma net loss | $ | ( | ) | $ | ( | ) | ||
| Pro forma net loss per share — basic and diluted | $ | ( | ) | $ | ( | ) | ||
The measurement period for the Merger remains open through February 17, 2027. The Company expects to finalize the purchase price allocation as additional information becomes available.
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Note 5 — Discontinued Operations
Background and Classification
On February 17, 2026, the Company completed the Merger with Flash. As a result, the Company’s revenue-generating operations are now conducted principally through Flash and IPG in the sports, media, and experiential marketing industry.
During the year ended December 31, 2025, the Company (i) disposed of its Services segment (comprising 2WR of Georgia, Inc., the 2WR of Colorado customer list, 2WR of Mississippi assets, and urban grow Engineering) pursuant to a Stock and Asset Purchase Agreement consummated on August 27, 2025, which was classified as discontinued operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025; (ii) experienced the loss of substantially all operating assets of UG Construction, Inc. d/b/a Emerald Construction Management, Inc. (“UG Construction”) to Gemini Finance Corp. in an Article 9 foreclosure on September 4, 2025, following the Company’s default under the UG Construction line of credit; and (iii) terminated its equipment sales force during the third quarter of 2025.
During the year ended December 31, 2025, the Company’s legacy Equipment Systems and Construction Design-Build operations (collectively, the “Legacy CEA Operations”) were retained in continuing operations. At that time, management had not made a definitive, irrevocable decision to permanently exit those operations; the Company preserved the option to pursue alternative strategic transactions, including an alternative capital raise and a potential restart of construction operations, if the Merger did not close.
Upon the closing of the Merger on February 17, 2026, each of the conditions that supported continuing-operations treatment of the Legacy CEA Operations at December 31, 2025 was resolved. The Board of Directors confirmed that the Company will not continue the Legacy CEA Operations and authorized the orderly wind-down of residual matters relating thereto. Accordingly, the Company has classified the Legacy CEA Operations as a single disposal group and has presented the Legacy CEA Operations as discontinued operations in the accompanying unaudited condensed consolidated financial statements commencing with the quarterly period ended March 31, 2026, in accordance with ASC 205-20, Presentation of Financial Statements — Discontinued Operations.
The classification of the Legacy CEA Operations as discontinued operations represents a strategic shift that has, and will have, a major effect on the Company’s operations and financial results. Comparative prior-period amounts have been reclassified to conform to the current-period presentation, in accordance with ASC 205-20-45-3.
13
Components of Loss from Discontinued Operations
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenues | ||||||||
| Equipment | $ | $ | ||||||
| Services | ||||||||
| Construction design-build | ||||||||
| Other | ||||||||
| Total revenues | ||||||||
| Cost of revenue | ||||||||
| Equipment | ||||||||
| Services | ||||||||
| Construction design-build | ||||||||
| Other | ||||||||
| Total cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Loss from discontinued operations | ( | ) | ( | ) | ||||
| Non-operating income (expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain on settlement | ||||||||
| Interest income | ||||||||
| Other income (expense) | ||||||||
| Total non-operating income (expense) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax benefit | ||||||||
| Net loss from discontinued operations, net of tax | $ | ( | ) | $ | ( | ) | ||
| Net loss per share from discontinued operations-basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding - basic and diluted | ||||||||
Assets and Liabilities of Discontinued Operations
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Prepayments and other assets | $ | $ | ||||||
| Total current assets of discontinued operations | $ | $ | ||||||
| Accounts payable | $ | $ | ||||||
| Contract liabilities | ||||||||
| Accrued expenses | ||||||||
| Customer deposits | ||||||||
| Notes payable, current | ||||||||
| Operating lease liabilities, current | ||||||||
| Total current liabilities of discontinued operations | $ | $ | ||||||
As a result of the foreclosure of UG Construction assets on September 4, 2025, the write-off of substantially all other Legacy CEA assets during 2025, and the continued wind-down during the three months ended March 31, 2026, the residual assets of the disposal group are de minimis. Residual liabilities reflect directly attributable obligations of the Legacy CEA Operations that have not yet been settled, paid, or otherwise extinguished.
14
Note 6 — Goodwill and Intangible Assets
Goodwill
The carrying amount of goodwill at March 31, 2026 was $
The Company’s tax treatment of the IPG component of the Merger is intended to result in
a step-up in tax basis under IRC §
Identifiable Intangible Assets
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| LPL Event Rights / Media Rights | $ | $ | ( | ) | $ | |||||||
| First Right of Refusal on 49% of IPG | ||||||||||||
| Customer relationships | ( | ) | ||||||||||
| Trade name — IPG / LPL | ( | ) | ||||||||||
| Production technology / Know-how | ( | ) | ||||||||||
| Cricket league licenses | ( | ) | ||||||||||
| Total | $ | $ | ( | ) | $ | |||||||
Amortization expense for the three months ended March 31, 2026 was
$
Estimated Future Amortization Expense
| Year Ending December 31, | Amount | |||
| Remainder of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
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Note 7 — Debt
| March, 31 | December 31, | |||||||
| 2026 | 2025 | |||||||
| Agile Capital | ||||||||
| Blue cap | ||||||||
| Total | ||||||||
| Less current portion | ( | ) | ||||||
| Notes payable, long-term | $ | $ | ||||||
Agile Capital Term Loan and Forbearance
On June 24, 2025, the Company issued a Confessed Judgment Secured Promissory
Note to Agile Capital Funding, LLC and Agile Lending, LLC (collectively, “Agile”) in the aggregate principal amount of $
Agile Debt-for-Equity Exchanges
Between February 27, 2026 and March 25, 2026, the Company and Hudson
Global Ventures, LLC (“Hudson Global”), as assignee of Agile, entered into
Agile Hudson Partners Convertible Note
On March 23, 2026, the Company entered into a Securities Purchase Agreement
with Agile Hudson Partners LLC (“AHP”) providing for the issuance of a Senior Secured Original Issue Discount Convertible
Promissory Note in an aggregate principal amount of $
Agile Capital February 2026 Term Loan
On February 3, 2026, the Company, together with its subsidiary urban-gro
Canada Technologies Inc. as guarantor, entered into a Business Loan and Security Agreement with Agile Capital Funding, LLC (as Collateral
Agent) and Agile Lending, LLC (as Lead Lender) and issued a Confessed Judgment Secured Promissory Note in the principal amount of $
16
Gemini Finance Corp. Line of Credit
In December 2023, UG Construction, Inc. d/b/a Emerald Construction
Management, Inc., a wholly owned subsidiary of the Company, entered into an asset-based revolving line of credit with Gemini Finance
Corp. (“Gemini”) in an amount not to exceed $
Grow Hill, LLC Secured Term Loan
On October 1, 2024, the Company entered into a secured term loan with
Grow Hill, LLC (“Grow Hill”) with an original principal amount of $
J Brothers LLC Settlement Note
On August 8, 2025, the Company entered into a Settlement and Release
Agreement with J Brothers LLC and Herb-a-More LLC relating to a dispute arising from amounts due for certain HVAC equipment. Pursuant
to the settlement, the Company issued a promissory note with an original principal amount of $
Bluecap Ventures Promissory Note
On February 18, 2026, the Company issued a Promissory Note to Bluecap
Ventures LLC (“Bluecap”) in the principal amount of $
17
Note 8 — Derivative Liabilities
The Company’s derivative liabilities consist of (i) the conversion option embedded in the AHP Note, (ii) warrants issued to AHP, and (iii) warrants issued to Hudson Global Ventures in connection with the Equity Line of Credit. Each derivative liability is initially recognized at fair value and subsequently remeasured at fair value at each reporting date, with changes recognized in earnings.
AHP Convertible Note Conversion Option
The conversion option embedded in the AHP Note has been bifurcated
and accounted for as a derivative liability under ASC 815. The Day-1 fair value at issuance on March 23, 2026 was $
AHP Warrant
In connection with the AHP Note, the Company issued a warrant to purchase
The Company evaluated the terms of the conversion features of the
note as noted above in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock, and
determined they are not indexed to the Company’s common stock and that the conversion feature, which is akin to a redemption feature,
meets the definition of a liability. Although the conversion price is subject to a floor equal to
The Company measured the derivative liability at fair value based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the derivative liability uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. Changes in the fair value of the contingent consideration liability related to updated assumptions and estimates are recognized within the statements of operations.
The Company valued the derivative liability using a Black-Scholes method using following assumptions:
| Initial Valution | Reporting Date | |||||||
| March 23, | March 31, | |||||||
| 2026 | 2026 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (in years) | | |||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | % | % | ||||||
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The following is a summary of the derivative liability:
| Derivative | ||||
| Liability | ||||
| Outstanding as of December 31, 2025 | $ | |||
| Issuance of embedded derivative liability | ||||
| Change in fair value | ( | ) | ||
| Outstanding as of March 31, 2026 | $ | |||
The fair values of the derivative liabilities are classified as Level 3 within the fair value hierarchy, as the inputs to the valuation models include unobservable inputs (volatility) that are significant to the overall fair value measurement. There were no transfers between Level 1, Level 2, or Level 3 during the three months ended March 31, 2026.
Note 9 — Stockholders’ Equity
Series B Non-Voting Convertible Preferred Stock
On February 17, 2026, in connection with the Merger, the Company filed a Certificate of Designation of the Series B Non-Voting Convertible Preferred Stock with the Delaware Secretary of State. The Series B Preferred Stock has the following key terms:
| ● | Voting rights: Non-voting on all matters submitted to stockholders, except as required by law |
| ● | Dividends: Participates in any dividends declared on the common stock on an as-converted basis |
| ● | Liquidation preference: Pari passu with common stock on an as-converted basis |
| ● | Conversion: Convertible into common stock upon stockholder approval at a |
| ● | Beneficial ownership cap: |
19
The Series B Preferred Stock has been classified as permanent equity.
As of March 31, 2026,
Common Stock Issuances
During the three months ended March 31, 2026, the Company issued the following shares of common stock:
| ● |
| ● |
| ● |
| ● |
| ● |
Treasury Stock
Treasury stock consists of
Note 10 — Earnings (Loss) Per Share
Basic and diluted net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. For periods in which the Company reports a net loss, potentially dilutive securities are excluded from the computation of diluted earnings per share, as their effect would be antidilutive.
All share and per share amounts for the three months ended March 31,
2025 have been retroactively restated to reflect the
| Three Month Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Numerator: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Less: Net loss from continuing operations attributable to non-controlling interest | ( | ) | ||||||
| Net loss from continuing operations attributable to Urban-gro, Inc. | ( | ) | ( | ) | ||||
| Net loss on discontinued operations | ( | ) | ( | ) | ||||
| Net loss attributable to Urban-gro, Inc. | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Denominator for EPS – weighted average shares | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Net loss per common share from continuing operations | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Net loss per common share from discontinued operations | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Net loss | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
20
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares outstanding because their inclusion would have been antidilutive:
| March 31, 2026 | ||||
| Series B Preferred Stock (convertible to common) | ||||
| AHP Convertible Note (variable conversion) | ||||
| AHP Warrant | ||||
| Total potentially dilutive securities | ||||
Note 11 — Related Party Transactions
The Company has the following related party balances and transactions:
| March 31, 2026 | December 31, 2025 | |||||||
| Due from related parties: | ||||||||
| Loans receivable from former Flash CEO | $ | $ | ||||||
| Receivables from IPG affiliates (Lanka, MCA, SG10) | ||||||||
| Total due from related parties | $ | $ | ||||||
| Due to related parties: | ||||||||
| Thunder Rock Capital | ||||||||
| Other related parties | ||||||||
| Total due to related parties | $ | $ | ||||||
During the three months ended March 31, 2026, the Company recognized
In connection with the acquisition, the Company also assumed a non-interest-bearing unsecured loan payable to Mr. Anil Mohan Sankhdhar, former chairman and principal shareholder of IPG. The loan carries no stated interest rate and has no fixed repayment terms within the next twelve months. The loan was recorded at fair value on the acquisition date using a market rate of interest, with the resulting discount recognized as part of the purchase price allocation. The unamortized discount is accreted to interest expense over the expected repayment period using the effective interest method.
21
In connection with the IPG MIPA, IPG operates as a member of the Sankhdhar family of companies. The Company has identified the following related party transactions involving IPG affiliates: production fees and revenue sharing arrangements with related entities operating in cricket leagues in Sri Lanka, Malaysia, Singapore, and Zimbabwe. The Company is in the process of evaluating these arrangements for related party disclosure purposes.
Note 12 — Segment Information
Following the classification of the Legacy CEA Operations as discontinued
operations, the Company operates in a segment: sports, media, and experiential marketing.
Note 13 — Commitments and Contingencies
IPG Working Capital Commitment
Pursuant to the IPG MIPA, Flash committed to fund $
Sri Lanka Cricket Event Rights Fee
The Company’s obligation to pay the ERF for any given season arises only upon its annual election to conduct that season through payment or guarantee. Future ERF commitments are accordingly contingent upon this annual election and are not recognized as liabilities until triggered. The Company is obligated to share with SLC 15% of Ground Sponsorship and International Media Rights revenues for Seasons 6 through 8 (2025–2027) and 20% for Seasons 9 through 10 (2028–2030), in each case recognized only in the period such revenues are earned. No revenue sharing obligation has been triggered as of March 31, 2026, as no LPL season was held during the year.
The Master Event Rights Agreement, as amended by five addendums (collectively, the “ERA”), provides for a 10-season term. Pursuant to the Fifth Addendum dated April 5, 2022, the term of the ERA was extended by five years, commencing on March 15, 2025 and ending on March 14, 2030, and covers Seasons 6 through 10 of the Lanka Premier League. The annual Event Rights Fee is payable to Sri Lanka Cricket only upon IPG’s annual election to conduct the LPL season; if IPG does not elect to conduct a season, no Event Rights Fee is payable for that season.
Witness Sports Alliance Advances
As of March 31, 2026, IPG had received advances of $
Operating Leases
The Company has operating leases primarily related to IPG’s
office facilities in Dubai. As of March 31, 2026, total operating lease right-of-use assets were $
Legal Proceedings
Grow Hill, LLC v. urban-gro, Inc. — In December 2025, Grow Hill,
LLC filed suit against the Company in the District Court for Adams County, Colorado (Case No. 2025CV33546) seeking enforcement of a $
J Brothers LLC — A $
22
India Basketball League Operations
The Company’s professional basketball league operations in India remain subject to ongoing legal and regulatory matters involving recognition and approvals from the Basketball Federation of India. The league previously received a favourable ruling from the Delhi High Court; however, operations remain on hold pending further resolution and regulatory clearance. Management, in consultation with legal counsel, is unable to predict the ultimate outcome or timing of these matters. No loss contingency has been recorded as of March 31, 2026, as management does not believe a loss is probable or reasonably estimable. The resolution of these matters may impact the ability of the league to resume operations and the recoverability of related assets.
LPL Franchise Agreement Dispute
On March 17, 2026, the Dubai International Financial Centre Courts granted a default judgment in favour of the Company against Innovation
Factory Royal Investment Group LLC (Claim No. CFI 054/2025) following the defendant’s failure to file a defence. The judgment awards principal
of $
The principal judgment amount of $
Earn-Out Contingent Consideration
See Note 3 — Business Combination for description of the contingent earn-out payable to the IPG sellers.
AHP Note Tranche Commitments
Under the Securities Purchase Agreement with Agile Hudson Partners
LLC, the Company has the right (but not the obligation) to draw additional tranches up to a remaining commitment of $
Hudson Global Equity Line of Credit
Under the Equity Line of Credit Agreement with Hudson Global Ventures
LLC, the Company has access to up to $
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.
The Company believes the underlying liability transferred with the divested subsidiary pursuant to the Stock and Asset Purchase Agreement and is pursuing dismissal from the case. No accrual has been recorded as any remaining loss to the Company is assessed as remote.
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 a PepsiCo plant in Tolleson, Arizona, and that as a result of work completed by RK, UG Construction
owed $
23
The Company assesses the outcome as reasonably possible but not probable under ASC 450-20. The range of potential loss is not estimable at this time. No accrual has been recorded.
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 $
Cullens - Complaint Filed & Company Filed Answer and Counter Suit
On December 25, 2025, Christopher W. Cullens (“Mr. Cullens”)
filed a complaint against urban-gro, Inc. (“UG”) and Bradley Nattrass (“Mr. Nattrass”), an individual, in District
Court, Boulder County, State of CO (Case 2025CV031164). The complaint alleged that UG Mr. Cullens had earned and was
vested in commissions totaling $
On March 30, 2026, the Defendants filed an answer to the complaint, responding that they either deny the allegations in the complaint, or lack sufficient information or knowledge to admit or deny the allegations as “the Agreement” is vague and undefined in the Complaint.
On March 30, 2026, UG filed a counter suit against Mr. Cullens (“Counterclaim Defendant”) alleging Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, and (Unjust Enrichment). On or about March 13, 2022, UG entered into the Acquisition Agreement and Plan of Merger with Emerald Merger Sub, Inc., Emerald Construction Management, Inc., Christopher Cullens, Charles Cullens, and Green Stone Property LLC (the “Acquisition Agreement”). The Acquisition Agreement sets forth the terms and conditions of urban gro’s business relationship with Emerald Merger Sub, Inc., Emerald Construction Management, Inc., Christopher Cullens, Charles Cullens, and Green Stone Property LLC. Under Article VIII of the Acquisition Agreement Indemnification, Emerald Merger Sub, Inc., Emerald Construction Management, Inc., Christopher Cullens, Charles Cullens, and Green Stone Property LLC will indemnify and hold urban gro harmless under prescribed. On or about August 10, 2023, UG and Counterclaim Defendant entered into the Amended and Restated Indemnification Claim Agreement, and effective the date of this counter suit, the Defendant failed to pay UG as required under the Amended Indemnification Agreement and the Acquisition Agreement. UG has requested that the court award urban gro its losses and damages, costs, pre- and post-judgment interest, and attorneys’ fees and costs pursuant to the Lease and otherwise allowed under Colorado law, in addition to any other relief this Court deems proper.
Other – Trade Vendors
Due to cash flow constraints and working capital issues, the Company has been delinquent in paying vendors, some of which have filed lawsuits seeking judgment for payment. The amounts due to these vendors are included in accounts payable in the consolidated balance sheet as of December 31, 2025.
Other than the foregoing, the Company is not a party to any material legal proceedings.
Note 14 — Subsequent Events
AHP Second Tranche
On April 7, 2026, the Company drew the second tranche under the AHP
Note in the principal amount of $
24
April 2026 AHP Securities Purchase Agreement
On April 7, 2026, the Company entered into a separate Securities Purchase
Agreement with Agile Hudson Partners LLC providing for the issuance of a
The April 2026 AHP Note is convertible into common stock, subject to
a
Grow Hill Loan Settlement
On or about April 20, 2026, Grow Hill, LLC assigned its rights under
the Company’s $
On May 19, 2026, the Company and its wholly-owned subsidiary urban-gro Canada Technologies Inc. entered into Amendment No. 1 (the “Amendment”)
to the Forbearance Agreement dated April 20, 2026 (the “Forbearance Agreement”) with Hudson. The Amendment (i) extended the forbearance
period to the earlier of August 17, 2026 or the occurrence of a Forbearance Default and (ii) provided for an additional forbearance fee
of $
Agile Business Loan and Security Agreement
On May 12, 2026, the Company entered into a Business
Loan and Security Agreement (the “Agile BLSA”) with Agile Capital Funding, LLC, as collateral agent, and Agile Lending, LLC,
as lead lender, with the Company’s subsidiaries urban-gro Canada Technologies Inc. and Flash Sports and Media, Inc. acting as guarantors.
The Agile BLSA provides for a term loan in the principal amount of $
The loan accrues interest as set forth in the
related supplement, resulting in a total repayment amount of $
The Agile BLSA grants Agile Capital Funding, LLC, as collateral agent for the lenders, a springing security interest in substantially all of the Company’s assets, which becomes effective automatically upon the occurrence of an Event of Default. Upon an Event of Default, outstanding obligations accrue interest at the default rate. The foregoing description is qualified in its entirety by reference to the Agile BLSA, which the Company intends to file as an exhibit to a subsequent periodic or current report.
Additional Equity Issuances
Subsequent to March 31, 2026, the Company issued additional shares of common stock under various agreements, including additional Section 3(a)(10) settlement issuances to Gemini Finance Corp. and conversions of the AHP Note.
25
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and with the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Background
urban-gro, Inc. (“we,” “us,” “our,” the “Company,” or “urban-gro”) 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 December 31, 2020, we effected a 1-for-6 reverse stock split with respect to our common stock. On February 12, 2021, we completed an uplisting to the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol “UGRO.” On February 9, 2026, we effected a 1-for-25 reverse stock split with respect to our common stock. All information in this Report gives effect to these reverse stock splits, including restating prior period reported amounts.
On February 17, 2026, the Company completed its merger (the “Merger”) with Flash Sports and Media, Inc. (“Flash”), a Delaware corporation, pursuant to an Agreement and Plan of Merger dated February 17, 2026 (the “Merger Agreement”), by and among the Company, UGRO Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), and Flash. As a result of the Merger, Merger Sub merged with and into Flash, with Flash surviving as a wholly owned subsidiary of the Company. Following the closing of the Merger, the Company began operating as a diversified sports, media, and experiential marketing platform under the Flash Sports & Media brand. The Company intends to change its name to Flash Sports & Media Holdings, Inc. or a similar name, subject to receipt of stockholder approval, which the Company intends to seek as soon as reasonably practicable.
Overview
Following the completion of the Merger, the Company is a diversified sports, media, and experiential marketing platform focused on the creation, production, and monetization of live events, original content, and branded fan experiences. The Company operates across multiple sports and entertainment verticals, leveraging proprietary intellectual property, strategic partnerships, and high-impact experiential activations to engage global audiences and deliver measurable value for brands, sponsors, and media partners. The Company’s platform integrates content creation, event execution, and media distribution to build scalable businesses within the global sports and entertainment ecosystem. Flash Sports & Media maintains corporate offices in the United Arab Emirates (headquarters), India, the United States, South Africa, and Singapore.
Through its subsidiaries, the Company holds exclusive commercial and media rights to professional cricket leagues, produces international-standard broadcast content, manages franchise operations, and monetizes sponsorship, ticketing, and digital media opportunities across multiple geographies. The Company’s core operating subsidiary, Innovative Production Group FZ LLC (“IPG”), founded in 2015 and headquartered in Fujairah, United Arab Emirates, is a global sports marketing, league management, ground sponsorship, and production company with more than 30 years of collective cricket industry experience and deep expertise in international cricket properties and sports media. IPG is headquartered in the UAE with branch offices in Sri Lanka, Singapore, India, Malaysia, and Zimbabwe, and has executed projects across 14 countries, including the United States, Ireland, Scotland, South Africa, Saudi Arabia, Pakistan, Hong Kong, and Afghanistan. IPG has produced more than 5,000 hours of live sporting event broadcasts over the past seven years and has established working relationships with numerous national cricket boards, including Cricket South Africa, the Pakistan Cricket Board, Cricket Ireland, Sri Lanka Cricket, the Afghanistan Cricket Board, Zimbabwe Cricket, Cricket Scotland, the Emirates Cricket Board, Abu Dhabi Cricket, Malaysia Cricket, Kuwait Cricket, and the Asian Cricket Council. IPG is the exclusive Event Rights Partner for the Lanka Premier League (“LPL”) under a Master Event Rights Agreement with Sri Lanka Cricket (“SLC”) dated October 14, 2020.
Flash Business and Revenue Streams
The Company derives revenue from multiple streams, primarily related to the production, commercialization, and management of professional cricket leagues and international cricket events. The Company’s significant revenue streams are described below:
Production Fee Income. Production income represents revenue earned from providing end-to-end live broadcast production services for cricket events, including international bilateral series and T20 tournaments. Services include pre-event planning, live camera operations (utilizing a minimum of 26 cameras per match, including Hawk-Eye DRS, super slow-motion, spider cam, drone, and 6 DOF robotic “Buggy Cam” technology), broadcasting infrastructure, technical staffing, satellite uplink and SNG distribution, and post-production. For the year ended December 31, 2024, production fee income represented approximately 42% of IPG’s total revenue, or approximately $5.1 million.
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Franchise Fees. The Company enters into agreements with third-party franchisees that operate individual teams in the LPL. The LPL currently features five franchise teams, each of which pays franchise fees in exchange for team ownership and naming rights, jersey sponsorship rights, merchandising and local sponsorship rights, stadium activation rights, and additional commercial and promotional rights including dugout branding, mascot rights, post-match ceremony participation, big screen branding, and perimeter board branding. Each team features a squad of up to 16 players, including a maximum of six international players from ICC Full/Associate Member Countries. For the year ended December 31, 2024, franchise fees represented approximately 29% of IPG’s total revenue, or approximately $3.5 million.
Sponsorship Fees. The Company generates sponsorship income through agreements with corporate sponsors who receive brand visibility across LPL events, including on-field signage, jersey placements, digital promotions, and title/associate sponsorship designations. Sponsorship categories include Title, Powered By, Present By, League Partner, Associate, and Umpire Partner tiers, as well as official brand partners and on-ground stall activations. IPG has secured sponsorships from a range of major global and regional brands, including Dream11, My11Circle, Daraz, Coca-Cola, Dettol, Red Bull, Pepsi, LG, Nippon Paint, Valvoline, Dialog, AIA, and others. For the year ended December 31, 2024, sponsorship fees represented approximately 20% of IPG’s total revenue, or approximately $2.4 million.
Broadcast and Streaming Rights. The Company earns licensing fees by granting third-party broadcasters and digital platforms the right to air or stream live cricket content. The Company’s international media rights cover television, radio, digital, pay television, betting, gaming, in-flight, mobile, and internet rights on an exclusive basis throughout the world excluding Sri Lanka, where terrestrial media rights are granted on an exclusive basis. For the year ended December 31, 2024, broadcast rights represented approximately 5% of IPG’s total revenue, or approximately $608,000.
Betting Data Rights. The Company licenses exclusive rights to collect and distribute real-time match data for betting purposes, including delivery of live, ball-by-ball statistical feeds for LPL tournaments, subject to compliance with applicable laws including ICC guidelines and regulations and the laws of the countries in which the broadcast takes place.
Other Revenue. The Company also earns revenue from team jersey sponsorship sales, ticketing income from the sale of match tickets to spectators attending live events, franchisee box catering, ground branding and on-ground sales at match venues, and reimbursement income. For the year ended December 31, 2024, other revenue collectively represented approximately 4% of IPG’s total revenue.
The Lanka Premier League
The Lanka Premier League is a professional franchise T20 cricket league established in 2020 in Sri Lanka, bringing together top Sri Lankan cricketers and leading international stars. The LPL is intellectual property owned by Sri Lanka Cricket; IPG holds the exclusive global commercial and media rights (excluding certain Sri Lankan domestic rights reserved by SLC) under the Master Event Rights Agreement dated October 14, 2020 (the “Event Rights Agreement”). Matches are played in the Twenty20 format by five franchise teams named after Sri Lankan cities: the Colombo Strikers, Dambulla Sixers, Jaffna Kings, Galle Marvels, and Kandy Falcons. Each team features a squad of up to 100 local and 50 international players selected through an annual player auction process. As of the completion of the 2024 season, there have been five editions of the tournament.
Since its inaugural season in 2020, the LPL has demonstrated consistent growth in audience reach and sponsorship media valuation. Season 1 (2020) achieved a TV audience of approximately 155 million, a digital audience of approximately 218 million, and a sponsorship media valuation of approximately $54.5 million. Season 2 (2021) grew to a TV audience of approximately 168 million, a digital audience of approximately 228 million, and a sponsorship media valuation of approximately $82.5 million. Season 3 (2022) reached a TV audience of approximately 212 million, a digital audience of approximately 261 million, and a sponsorship media valuation of approximately $114.7 million. Season 4 (2023) expanded to a TV audience of approximately 315 million, a digital audience of approximately 282 million, and a sponsorship media valuation of approximately $149.5 million. The most recent completed season, Season 5 (2024), achieved a TV audience of approximately 380 million, a digital audience of approximately 293 million, and a total sponsorship media valuation of approximately $176.5 million, representing year-over-year growth of approximately 18%. The cumulative sponsorship media valuation across all five LPL seasons from 2020 through 2024 was approximately $510.2 million. For Season 5 (2024), the sponsorship media valuation was comprised of approximately $100.9 million attributable to TV, $37.8 million to OTT/digital platforms, $26.2 million to social media, and $11.6 million to press coverage. LPL content has been distributed through major global broadcasters including Star Sports, Sony LIV, Sony Pictures Networks, A Sports HD, Kayo, Willow Live, Fox Sports, T Sports, Ten Cricket, beIN Sports, Free Sports, SportsMax, and Sony Six, among others.
The sixth edition of the LPL was staged from December 1 to December 23, 2025, across three premier venues in Sri Lanka — Colombo, Dambulla, and Kandy — featuring 24 matches over 24 days with five competing franchises. All match venues are International Cricket stadia owned by SLC.
Under the Event Rights Agreement, IPG holds four categories of exclusive rights: (A) Team Franchise / Team Ownership Rights — the right to select, engage, and manage franchise team owners for the LPL; (B) International Media Rights and Terrestrial Media Rights — exclusive rights to license television, radio, digital, pay television, betting, gaming, in-flight, mobile, and internet broadcasting of LPL matches globally; (C) Ground Sponsorship Rights — rights to manage and sell in-venue branding, including LED boards, boundary signage, stump branding, presentation ceremonies, and related activations; and (D) AV Production Rights — the right and obligation to produce all live and highlights content for LPL matches to internationally recognized ICC standards.
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The Event Rights Agreement has an initial term of five annual tournaments commencing in 2020, with automatic one-year renewals subject to the timely payment of the Event Rights Fee or provision of a bank guarantee to SLC. The Company’s rights must be secured annually through the payment of an Event Rights Fee or the furnishing of an Irrevocable Unconditional Bank Guarantee by March 15 of each year. Failure to make timely payment or furnish the required guarantee could result in termination of the Company’s rights for that year. IPG also holds a first right of refusal to extend the agreement for an additional five-year term (through 2029), subject to mutually agreed terms.
In consideration for the Event Rights, IPG pays SLC a minimum guaranteed annual Event Rights Fee. The minimum guaranteed fee for the launch year was USD 1,500,000 for a 13-match format and USD 1,925,000 for a 23-match format. The Event Rights Fee escalates at approximately 10.5% to 11% per year for years two through five. For the addition of teams beyond the initial five teams, an additional fee of USD 300,000 per team is payable. Additionally, SLC is entitled to a revenue share of 10% of ground sponsorship and international media rights revenue during the first two years of the agreement, increasing to 20% for years three through five. SLC also receives USD 20,000 per year in consideration for terrestrial media rights. The Event Rights Fee is payable net of all taxes, withholdings, and bank charges.
SLC is responsible for all costs related to the Match Control Team including per diems, catering for match officials and staff, cricket balls, venue costs, security, janitorial and marketing communications costs, certain administrative expenses, and a component of the prize money. SLC releases to the Event Rights Partner the entirety of the ticket sales revenue generated from all LPL matches during the term of the agreement. The Event Rights Partner bears all costs and responsibility for printing, marketing, and the sale of tickets, subject to SLC’s prior approval of ticket design. SLC reserves the President’s and Minister’s Boxes, a VIP Box, 100 grand stand tickets, and 50 complimentary tickets on each tier, at no cost to SLC.
Geographic Expansion
In addition to the LPL in Sri Lanka, IPG holds or has secured exclusive league management and commercial rights for several additional cricket properties in various stages of development. IPG holds exclusive 10-year rights to the Singapore T10 League, awarded by the Singapore Cricket Association, which encompasses TV and digital broadcasting rights, production rights, franchise sales rights, and league management rights for what is expected to be the first T10 cricket league featuring both men’s and women’s competitions, with six teams in the initial year expanding to eight from the third year. IPG holds exclusive 10-year rights to the Malaysian T20 League under a long-term agreement with the Malaysian Cricket Association on an exclusive basis, covering linear TV, digital, operations, marketing, and commercial rights. IPG holds exclusive 20-year rights to the Zimbabwe T20 Cricket League under an agreement with Zimbabwe Cricket, encompassing full league management, broadcasting, sponsorship, and franchise rights. IPG also holds exclusive 20-year rights to Kuwait’s T20 League, T10 League, and Legends League under an agreement with Kuwait Cricket. These expansion initiatives are in various stages of development and are expected to extend the Company’s footprint across high-growth emerging cricket markets. There can be no assurance that any of these expansion initiatives will be completed on the terms anticipated, or at all, or that they will generate the revenue or returns expected. For the year ended December 31, 2024, approximately 82% of IPG’s total revenue was generated from customers based in Sri Lanka, with the remaining 18% derived from Zimbabwe.
Technology and Live Production Capabilities
The Company operates at the intersection of cutting-edge broadcast engineering and experiential digital entertainment. Our infrastructure enables seamless content delivery across television, live streaming, and in-person activations from international cricket stadia and other venues. For purposes of ensuring that the production quality conforms to internationally recognized standards in keeping with ICC regulations as well as ensuring the brand image of SLC and of the LPL is duly maintained and built, the Company and its sub-licensees are required to meet minimum audio-visual production standards as set out in the Event Rights Agreement.
Key production capabilities include: live broadcast engineering utilizing 26 cameras per match (including 6 DOF robotic dolly Buggy Cam, Hawk-Eye DRS with minimum specifications, super slow-motion cameras (Sony HDC-4300 4K / LDX86 or similar), ultra-slow-motion cameras (NAC or similar), stump cameras with Zing LED technology, spider cam, drone, and standard Sony HDC 2500/3500 / HDK97 cameras); Grass Valley Kayak HD 3.5 M/E vision mixing; EVS XT3 8/12-channel replay systems; Canon/Fujinon Super Wide lens arrays; satellite uplink and SNG distribution capabilities; and Hotspot technology for Decision Review System at the discretion of SLC. The Company is required to commit to broadcast/stream the feed live in full, covering every ball of each game, and to deliver a Clean Feed in High Definition in 16:9 aspect ratio, fully edited, completed, titled and synchronized as to dialogue, music and effects.
The Company also maintains studio and event production capabilities for the production of multiplatform content, branded formats, and digital programming, including comprehensive studio shows aired before, during, and after each day’s play. IPG’s broadcast technology platform includes Hawkeye DRS, spider cameras, drone cameras, buggy cameras, 3D HD cameras, and AR/VR graphics capabilities. IPG partners with leading cricket graphics solution providers, including aegraphics.tv and wTVision, which maintain long-standing working relationships with many of the world’s leading broadcasters, production houses, and sports governing bodies. IPG’s production crew includes experienced and world-renowned directors, skilled producers, cameramen, EVS operators, and broadcast engineers. Recent live broadcast productions (2023–2025) include the Bangladesh Tour of Sri Lanka, the West Indies Tour of Sri Lanka, the India Tour of Sri Lanka, LPL Seasons 4 and 5, the Legends Cricket Trophy, the Afghanistan Tour of Sri Lanka, the Zimbabwe Tour of Sri Lanka, ACC Men’s Under 19 Asia Cup, and the Ireland Tour of Zimbabwe, among others. These capabilities have also been applied to production for international cricket bilateral series across multiple continents since 2015.
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Growth Strategy — Planned Verticals and Strategic Initiatives
Beyond the core IPG cricket operations, the Company is evaluating and pursuing a number of strategic initiatives to expand the Flash Sports & Media platform into adjacent verticals. These initiatives are in early stages and are subject to the negotiation and execution of definitive agreements, regulatory approvals, and the availability of sufficient capital. There can be no assurance that any of these initiatives will be consummated on the terms described below, or at all.
Our Competition
The Company operates in a competitive landscape that includes other sports media, event management, and rights-holding companies. In the T20 cricket league space, the Company competes for viewership, sponsorship, and franchise investment with established leagues including the Indian Premier League (IPL), Big Bash League (BBL), Caribbean Premier League (CPL), Pakistan Super League (PSL), and SA20, among others. In the broader sports media and experiential marketing space, we compete with global sports marketing agencies, broadcast production houses, and digital entertainment companies. Many of our competitors have significantly greater financial, technical, marketing, and other resources than we do. We believe our competitive advantages include our exclusive long-term contractual rights to the LPL and multiple other emerging cricket leagues, our vertically integrated model spanning rights ownership, production, franchise management, sponsorship sales, and media distribution, our track record of more than 5,000 hours of live broadcast production and established relationships with numerous national cricket boards, our demonstrated ability to grow the LPL’s sponsorship media valuation from approximately $54.5 million in Season 1 to approximately $176.5 million in Season 5, our global footprint with offices in six countries and operational experience across 14 countries, and our multi-market expansion strategy targeting high-growth emerging cricket markets.
Our Clients
The Company’s clients and commercial counterparties include franchise team owners, corporate sponsors, broadcasters and digital streaming platforms, sports governing bodies, and media distribution agencies. IPG maintains working relationships with leading sports media agencies, including Sunset+Vine, ITW, and IMG Reliance, which facilitate the distribution and monetization of IPG’s broadcast and media content globally. In 2023, sales to four customers individually exceeded 10% of the Company’s total revenue. Collectively, these customers represented approximately 53% of total revenue. The Company’s reliance on these major customers presents a concentration risk. The loss of any of these customers or a significant reduction in their orders could have a material adverse effect on the Company’s financial performance. The Company continues to focus on efforts to diversify its customer base and geographic reach to mitigate such risks.
Recent Developments
Flash Merger
On February 17, 2026, we completed the Merger with Flash, pursuant to the Agreement and Plan of Merger dated February 17, 2026. Total consideration transferred consisted of $423,217 in common stock (131,027 shares at approximately $3.23 per share) and $176,076,783 in Series B Non-Voting Convertible Preferred Stock, for total Step 2 consideration of $176,500,000. Combined with $15,630,251 of Step 1 consideration transferred directly to the former IPG sellers ($5,000,000 cash and $10,630,251 contingent earn-out), total consideration transferred under ASC 805-30-30-7 is $192,130,251. The Series B Preferred Stock will convert into approximately 54.6 million shares of common stock upon stockholder approval, which has not been obtained as of the date of this report.
Reverse Stock Split
On February 9, 2026, we effected a 1-for-25 reverse stock split of our issued and outstanding common stock to regain compliance with the Nasdaq minimum bid price requirement. All share and per share amounts in this report have been retroactively adjusted for the reverse stock split.
Debt Restructuring
During the first quarter, we restructured a substantial portion of our debt obligations. Specifically: (i) we entered into a Forbearance Agreement with Agile Capital that increased the principal balance from $972,200 to $1,380,524, recognizing a loss on debt extinguishment of $408,324; (ii) we settled the increased Agile balance through eight debt-for-equity exchanges with Hudson Global Ventures, issuing 331,640 shares of common stock; and (iii) we entered into a $1,395,000 convertible note facility with Agile Hudson Partners LLC (purchase price $1,260,000), drawing the first tranche of $420,000 on March 23, 2026.
Equity Line of Credit
On February 4, 2026, we entered into an Equity Line of Credit Agreement with Hudson Global Ventures LLC providing for up to $25,000,000 in equity financing, subject to market conditions and SEC registration.
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Results of Operations
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Continuing Operations
Revenue for the three months ended March 31, 2026 was $0. The Company’s continuing operations, conducted through Flash and IPG, commenced upon the closing of the Merger on February 17, 2026; however, no revenue was recognized during the partial period from the acquisition date through March 31, 2026, as IPG’s principal revenue source (the Lanka Premier League) is seasonal and no league season occurred during the quarter. We had no revenue from continuing operations for the three months ended March 31, 2025, as our continuing operations did not exist in their current form prior to the Merger.
Total operating expenses for the three months ended March 31, 2026 were $2,125,236, consisting of: (i) $407,188 in general and administrative expenses; and (ii) $1,718,048 in amortization of acquired intangibles. The amortization expense reflects approximately six weeks of amortization (from February 17, 2026 through March 31, 2026).
Total non-operating expense for the three months ended March 31, 2026 was $224,337, consisting of: (i) $18,063 in interest expense; (ii) $208,658 loss on issuance of derivatives (relating to the Day-1 fair value of the conversion feature embedded in the AHP Note); and (iii) a $2,384 gain from the change in fair value of derivative liabilities. We had no non-operating activity from continuing operations for the three months ended March 31, 2025. The gain on settlement related to the Agile Forbearance Agreement is reported within the loss from discontinued operations.
Loss from continuing operations was $2,349,573 for the three months ended March 31, 2026, compared to $618,901 for the three months ended March 31, 2025.
Discontinued Operations
Loss from discontinued operations was $952,121 for the three months ended March 31, 2026, compared to $3,415,011 for the three months ended March 31, 2025. The decrease reflects the substantially complete wind-down of the Legacy CEA Operations during 2025, including the August 2025 disposal of the Services segment and the September 2025 foreclosure of UG Construction assets.
Net Loss
Net loss for the three months ended March 31, 2026 was $3,301,694, of which $76,110 was attributable to non-controlling interest and $3,225,584 was attributable to urban-gro, Inc. common stockholders. Net loss for the three months ended March 31, 2025 was $4,033,912, all attributable to urban-gro, Inc. common stockholders (no non-controlling interest existed prior to the Merger).
Liquidity and Capital Resources
As of March 31, 2026, we had cash of $305,139 and a working capital deficiency. Our principal sources of liquidity during the quarter consisted of (i) cash acquired in the Merger, (ii) proceeds from the AHP convertible note ($420,000), (iii) proceeds from the Agile forbearance ($110,000), and (iv) proceeds from the One Eyed Jack private placement ($100,000).
We anticipate that our cash needs over the next twelve months will be funded through: (i) revenue from IPG cricket league operations, principally LPL Season 7 (scheduled for late 2026); (ii) additional draws under the AHP convertible note facility (remaining commitment of $975,000, representing the $1,395,000 facility less the $420,000 first tranche drawn during Q1 2026); (iii) draws on the Hudson Global ELOC ($25,000,000 capacity, subject to market conditions and SEC registration); (iv) the working capital commitment to IPG ($10,000,000 over twelve months); and (v) other equity or debt financings.
There is substantial doubt about our ability to continue as a going concern within one year after the date these financial statements are issued. See Note 3 — Going Concern.
Critical Accounting Estimates
Our critical accounting estimates have not changed materially from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, except as follows:
| ● | Business Combination Accounting: The Merger required us to allocate the purchase price to the identifiable assets acquired and liabilities assumed at fair value. Significant estimates were used in determining the fair values of identifiable intangible assets ($138,031,000) and the contingent consideration liability ($10,630,000). Goodwill of $122,778,022 represents the excess of consideration transferred over the fair value of net identifiable assets acquired. |
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| ● | Derivative Liabilities: The conversion option embedded in the AHP Note and the related warrants are classified as derivative liabilities and measured at fair value at each reporting date using Black-Scholes option pricing models with significant unobservable inputs (Level 3). During Q1 2026, the Company recognized a $208,658 loss on issuance of derivatives (Day-1 fair value of the conversion feature embedded in the AHP Note), a $2,384 gain from subsequent re-measurement of the conversion feature derivative liability, and a $488 gain from re-measurement of the AHP Warrant liability. |
| ● | Going Concern: We have evaluated the Company’s ability to continue as a going concern under ASC 205-40 and concluded that substantial doubt exists. See Note 3 — Going Concern. |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and our Chief Financial Officers, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of March 31, 2026.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officers concluded that, as of March 31, 2026, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and the additional considerations described below related to the Merger.
Material Weaknesses
As disclosed in our Annual Report on Form 10-K, we have identified material weaknesses in our internal control over financial reporting related to (i) insufficient segregation of duties, (ii) limited technical accounting resources, and (iii) inadequate documentation and review of complex accounting transactions. Following the Merger, we have additional control considerations related to the integration of Flash and IPG, including: (i) the inherent risks of integrating a foreign subsidiary (IPG) operating in the United Arab Emirates and Sri Lanka; (ii) the application of complex accounting standards including ASC 805 (business combinations) and ASC 815 (derivatives); and (iii) the need to develop new internal controls over the LPL revenue recognition process.
Remediation Plans
We are taking steps to remediate the identified material weaknesses, including: (i) engaging a qualified external accounting firm to assist with complex accounting matters; (ii) implementing additional review procedures for material non-routine transactions; (iii) enhancing our documentation standards; and (iv) integrating the financial reporting processes of Flash and IPG into our consolidated financial reporting framework.
Changes in Internal Control Over Financial Reporting
Other than the changes resulting from the Merger as described above, there were no changes in our internal control over financial reporting during the three months ended March 31, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 13 — Commitments and Contingencies, which is incorporated by reference into this Item 1.
ITEM 1A. RISK FACTORS
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 includes a discussion of certain risk factors. There have been no material changes to those risk factors, except as set forth below in connection with the Merger:
Risks Related to the Flash Merger and IPG Operations
| ● | Integration risk: The integration of Flash and IPG into our operations is complex and subject to significant risks. Failure to successfully integrate could materially harm our business, financial condition, and results of operations. |
| ● | Dependence on the Lanka Premier League: A substantial portion of our identifiable intangible assets and projected revenue is attributable to IPG’s exclusive Event Rights for the Lanka Premier League under the Master Event Rights Agreement with Sri Lanka Cricket. Loss of these rights, non-renewal of the agreement, or any disruption in the LPL season would have a material adverse effect on our business and financial condition. |
| ● | Counterparty risk — Sri Lanka Cricket: Our most significant commercial relationship is with Sri Lanka Cricket, the governing body of cricket in Sri Lanka. Any change in Sri Lanka Cricket’s leadership, regulatory status, financial condition, or willingness to perform under our agreement could materially impact our business. |
| ● | Seasonality and revenue concentration: The LPL season is held over approximately three to four weeks per calendar year, resulting in significant seasonality in IPG’s revenues. A substantial portion of our annual revenue is recognized during a single quarter, and operational disruptions during the season could disproportionately impact our annual results. |
| ● | Foreign currency risk: IPG operates in the United Arab Emirates and Sri Lanka. We are exposed to fluctuations in the U.S. Dollar relative to the UAE Dirham and the Sri Lankan Rupee. We do not currently hedge foreign currency exposure. |
| ● | Sri Lanka country risk: Sri Lanka has experienced periods of significant economic and political instability. Adverse economic, political, or regulatory developments in Sri Lanka could disrupt the LPL or our broader cricket operations. |
| ● | Dubai Free Zone regulatory environment: IPG operates as a Free Zone entity in the United Arab Emirates. Changes in Free Zone regulations, tax treatment, or licensing requirements could affect IPG’s ability to operate or repatriate capital. |
| ● | Tax risk and lack of dedicated tax advisor: We have not engaged a dedicated tax advisor for the IPG acquisition. The acquisition is intended to be treated as an asset purchase for U.S. federal income tax purposes under IRC §1001, with a related IRC §754 election. Failure to make required elections or properly characterize the transaction could result in adverse tax consequences. |
| ● | Foreign operations: IPG’s operations are conducted principally in Sri Lanka, the United Arab Emirates, and other international jurisdictions, exposing us to risks related to foreign currency fluctuations, regulatory changes, geopolitical instability, and tax controversies. |
| ● | Contingent earn-out: The IPG sellers may earn up to $24,000,000 in additional consideration over three years, which would dilute our existing common stockholders. |
| ● | Series B Preferred Stock conversion: Upon stockholder approval, our Series B Preferred Stock will convert into approximately 54.6 million additional shares of common stock, representing approximately 90% of our post-conversion outstanding common stock and substantially diluting our existing common stockholders. |
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Risks Related to Going Concern and Liquidity
| ● | Going concern: Substantial doubt exists about our ability to continue as a going concern. If we are unable to raise additional capital or generate sufficient revenue, we may be forced to curtail or cease operations. |
| ● | Reliance on dilutive financing: We have funded our operations through highly dilutive equity and convertible debt financings, including the AHP Note (variable conversion price), the Hudson Global ELOC, and Section 3(a)(10) settlement share issuances. Continued reliance on such financings could result in substantial additional dilution. |
| ● | Nasdaq listing: We have previously been deficient with Nasdaq listing standards, including the minimum bid price requirement. While we regained compliance on March 9, 2026, there can be no assurance that we will maintain compliance in the future. |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 2026, we issued the following securities in transactions exempt from registration under the Securities Act of 1933:
| ● | 131,027 shares of common stock issued to Flash stockholders in connection with the Merger (Section 4(a)(2)); |
| ● | 54,509 shares of Series B Non-Voting Convertible Preferred Stock, having an aggregate fair value of $176,187,236, issued to Flash stockholders in connection with the Merger (Section 4(a)(2)); |
| ● | 331,640 shares of common stock issued to Hudson Global Ventures, LLC in eight Agile debt-for-equity exchanges (Section 3(a)(9) and/or 4(a)(2)); |
| ● | 72,000 shares of common stock issued to Gemini Finance Corp. pursuant to a court-approved Section 3(a)(10) settlement; |
| ● | Convertible note and warrants issued to Agile Hudson Partners LLC (Section 4(a)(2) and Regulation D); |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As described in Note 7 — Debt and Note 13 — Commitments and Contingencies, the Grow Hill, LLC secured term loan ($1.4M) was settled in April 2026 in connection with the assignment of the loan to Hudson Global Ventures, LLC and the related forbearance and exchange transactions, and the related Colorado litigation was dismissed (see Note 14 — Subsequent Events). The J Brothers LLC settlement note ($0.3M) matured on March 18, 2026 and remains unpaid; the noteholder has not delivered a notice of default and the Company is in discussions regarding a payment plan or conversion of the balance into equity. Both of these obligations relate to our Legacy CEA Operations and are reflected within discontinued operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
The exhibits listed in the Exhibit Index are incorporated by reference into this Item 6.
| 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 |
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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.
| URBAN-GRO, INC. |
| Dated: May 20, 2026 |
| By: | /s/ Bradley Nattrass | |
| Bradley Nattrass | ||
| Chief Financial Officer |
| By: | /s/ Eric M. Sherb | |
| Eric M. Sherb | ||
| Chief Financial Officer |
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