Urban-Gro Inc.

Company Overview

Business Model: As of December 31, 2024, urban-gro, Inc. was an integrated professional services and Design-Build firm. The Company generated revenue by providing value-added architectural, engineering, construction management, systems procurement and integration, and construction design-build solutions. Its income was primarily derived from billing employees' time spent on client projects.

Market Position: As of December 31, 2024, urban-gro, Inc. positioned itself as a trusted partner and advisor, offering integrated design-build solutions with a single point of accountability. The Company emphasized its experience and expertise in creating high-performance indoor cultivation facilities, having worked on over 1,000 Controlled Environment Agriculture (CEA) projects.

Recent Strategic Developments:

• Business Model Transformation (Q3 2025): urban-gro, Inc. made a decision to exit its core business sectors (design-build, services) due to changing market conditions and challenges in raising funds. The Company is transitioning to operate solely as a value-added reseller (VAR) of equipment systems for the Controlled Environment Agriculture (CEA) sector, working with a select group of manufacturers and vendor partners.
• Proposed Merger (October 2025): The Company entered into a binding letter of intent with Flash Sports & Media, Inc. for a proposed merger. Under the terms, Flash Sports & Media, Inc. stockholders are expected to own approximately 90% of the combined entity, which would be renamed Flash Sports & Media Holdings, Inc.
• Asset Sales & Workforce Reduction (Q3 2025): As part of winding down legacy operations, urban-gro, Inc. began selling assets and reducing its workforce. This included the sale of 2WR of Georgia, Inc. and related assets for $2.0 million in cash, and certain customer lists for an additional $143,000.
• Loan Defaults & Settlements (2025): urban-gro, Inc. experienced defaults on significant loan agreements. This included a $1.76 million line of credit with Gemini Finance Corp., which led to a foreclosure and private sale of UG Construction, Inc.'s assets for $450,000, and a subsequent settlement for $1.49 million to be paid via common stock issuance. The Company also defaulted on a $2.1 million loan with Grow Hill, LLC, resulting in a lawsuit. A dispute with J Brrothers LLC was settled for a $395,556 promissory note and 150,000 unregistered shares of common stock.
• Nasdaq Listing Deficiencies (2024-2026): urban-gro, Inc. received multiple notices of non-compliance from Nasdaq regarding timely filing requirements, minimum bid price, and minimum stockholders' equity. While an exception was granted to regain compliance by December 31, 2025 (filing and equity) and January 28, 2026 (bid price), additional filing delinquencies and failure to hold an annual meeting have introduced further bases for delisting.

Geographic Footprint: As of December 31, 2024, urban-gro, Inc. had expanded its operations across North America (United States and Canada) and Europe.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 7.3% (2024) vs 14.2% (2023)
• Operating Margin: -88.8% (2024) vs -33.3% (2023)
• Net Margin: -91.3% (2024) vs -36.3% (2023)

Investment in Growth:

• Capital Expenditures: $0.1 million (2024) vs $0.5 million (2023)
• Strategic Investments: In 2023, urban-gro, Inc. sold its investment in Xtraction Services, Inc., a/k/a XS Financial Inc. for $2.4 million, recognizing an impairment loss of $0.3 million. No material strategic investments were disclosed for 2024.

Business Segment Analysis

Equipment Systems

Financial Performance:

• Revenue: $12.2 million (-3.7% YoY)
• Gross Profit Margin: 14%
• Key Growth Drivers: Not explicitly detailed for 2024, but the Company is transitioning to focus solely on this segment as a value-added reseller post-2024.

Product Portfolio:

• Major product lines and services within segment: Commercial horticulture lighting solutions, rolling and automated container benching systems, specialty fans, fertigation/irrigation systems, environmental control systems, and microbial mitigation and odor reduction systems.

Market Dynamics:

• Competitive positioning within segment: urban-gro, Inc. positions itself as equipment agnostic, sourcing best-in-class solutions from leading technology and manufacturing providers.
• Key customer types and market trends: Primarily clients in the CEA sector, including cannabis and produce markets.

Services

Financial Performance:

• Revenue: $8.8 million (-26.1% YoY)
• Gross Profit Margin: 37%
• Key Growth Drivers: Not explicitly detailed, but this business segment is being wound down post-2024.

Product Portfolio:

• Major product lines and services within segment: Architectural, interior, and engineering design; construction and construction management; facility and equipment commissioning; and gro-care® (an asset protection program including training, maintenance, and on-demand support).

Construction Design-Build

Financial Performance:

• Revenue: $18.6 million (-58.2% YoY)
• Gross Profit Margin: -12%
• Key Growth Drivers: Revenue decreased significantly, and gross profit margin turned negative in 2024, primarily due to losses on certain jobs. This business segment is being wound down post-2024.

Consumables

Financial Performance:

• Revenue: $0.4 million (-50.8% YoY)
• Gross Profit Margin: 36%
• Key Growth Drivers: Not explicitly detailed.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: urban-gro, Inc. did not repurchase common stock in 2024 or 2023. Since inception of the program on May 24, 2021, the Company has repurchased 1,449,833 shares for a total of $12.0 million.
• Dividend Payments: The Company has not paid any dividends on its common stock and does not anticipate doing so in the foreseeable future.
• Future Capital Return Commitments: As of December 31, 2024, $1.4 million remained under the Board-authorized stock repurchase program.

Balance Sheet Position:

• Cash and Equivalents: $0.8 million (2024) vs $1.1 million (2023)
• Total Debt: $6.8 million (2024) vs $3.2 million (2023)
• Net Cash Position: $(6.0) million (2024) vs $(2.1) million (2023)
• Debt Maturity Profile: As of December 31, 2024, notes payable included $4.4 million under a line of credit with Gemini Finance Corp. (which subsequently defaulted in 2025) and a $1.7 million note with Grow Hill, LLC (which subsequently defaulted in 2025). A promissory note with J Brrothers LLC for $395,556 was issued in August 2025, maturing March 18, 2026, and is currently in default.

Cash Flow Generation:

• Operating Cash Flow: $(2.8) million (2024) vs $(10.5) million (2023)
• Cash Conversion Metrics: The Company reported negative working capital of $26.5 million in 2024, an increase from $5.1 million in 2023, primarily due to decreases in accounts and contract receivables and increases in customer deposits and notes payable.

Operational Excellence

Production & Service Model: As of December 31, 2024, urban-gro, Inc.'s operational philosophy centered on an integrated design-build model, providing a single point of accountability for clients from project conception through operational start. This approach aimed to deliver high-performance indoor cultivation facilities and commercial projects efficiently, leveraging the Company's expertise to mitigate costly mistakes.

Supply Chain Architecture: Key Suppliers & Partners: urban-gro, Inc. relies on third-party manufacturers for the equipment solutions it sells. The Company emphasizes being "equipment agnostic," selecting solutions that best meet client design and budget constraints. It works closely with leading technology and manufacturing providers to deliver integrated solutions.

Facility Network:

• Manufacturing: Not applicable, as the Company primarily provides design-build services and resells equipment.
• Research & Development: Not explicitly detailed, but the Company's expertise is in designing and integrating complex environmental equipment systems.
• Distribution: The principal place of business is in Lafayette, Colorado, consisting of approximately 10,000 square feet, including 6,500 square feet of warehouse space. The Company also maintains six other office leases in the United States.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels: urban-gro, Inc. primarily markets and sells its solutions through direct sales to clients. It also sells equipment solutions to third parties, such as general contractors and equipment leasing companies.

Customer Portfolio: Enterprise Customers: The Company's clients include operators and facilitators in the CEA sector (cannabis and produce markets) across the United States, Canada, and Europe. In the Commercial sector, clients include food and beverage consumer packaged goods companies, as well as those in healthcare, higher education, industrial, and retail. Customer Concentration: In 2024, two customers accounted for 21% and 18% of total revenue, respectively. In 2023, two customers accounted for 28% and 15% of total revenue, respectively. One customer represented 14% of accounts receivable as of December 31, 2024.

Geographic Revenue Distribution: urban-gro, Inc. serves clients in the United States, Canada, and Europe. Specific revenue distribution percentages by region were not disclosed.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: urban-gro, Inc. operates in emerging industries, particularly the legal cannabis-focused CEA segment, which is characterized by quickly changing and inconsistent laws, regulations, practices, and perceptions. The demand for the Company's services can be negatively impacted by developments in these regulatory environments.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: For equipment sales, urban-gro, Inc. competes with traditional wholesale horticulture dealers, online retailers, and some manufacturers who sell direct. In its former design-build and services segments, it competed with companies offering similar professional services and equipment solutions.

Competitive Response Strategy: The Company's strategy, as of December 31, 2024, focused on providing integrated, design-build solutions that offer a value-add approach, leveraging its experience and expertise to prevent costly mistakes for clients.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: The Company's historical revenue majority from the legal cannabis industry exposes it to significant risks due to federal prohibition in the U.S., inconsistent state laws, and difficulty in accurately forecasting demand. Changes in federal enforcement or state laws could materially adversely affect the business. Customer Concentration: urban-gro, Inc. has historically depended on a small number of clients for a substantial portion of its revenue, creating a risk of significant revenue decline if these relationships are not retained or expanded.

Operational & Execution Risks

Supply Chain Vulnerabilities: The Company's reliance on third-party suppliers for equipment solutions poses a risk if these suppliers cease production, fail to supply sufficient quantities, or are acquired by competitors, potentially impacting urban-gro, Inc.'s ability to sell its solutions.

Financial & Regulatory Risks

Market & Financial Risks: urban-gro, Inc. has a history of recurring net losses and negative cash flow from operations, raising substantial doubt about its ability to continue as a going concern. The Company faces significant risk of delisting from Nasdaq due to non-compliance with timely filing requirements, minimum bid price, and minimum stockholders' equity rules. Regulatory & Compliance Risks: Clients in the legal cannabis industry face evolving and inconsistent regulations, potential federal enforcement, and difficulties accessing traditional banking services, which could negatively impact demand for urban-gro, Inc.'s solutions.

Geopolitical & External Risks

Geographic Dependencies: The Company is exposed to currency exchange fluctuations, particularly between the U.S. dollar, Canadian dollar, and Euro, which could materially adversely affect its financial condition and operating results.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: urban-gro, Inc. focuses on designing and integrating complex environmental equipment systems for CEA facilities. Innovation Pipeline: Not explicitly detailed in the filing.

Intellectual Property Portfolio:

• Patent Strategy: The Company's patents are limited to certain sensors obtained from third-party manufacturers and do not materially contribute to sales or profitability.
• IP Litigation: urban-gro, Inc. may be forced to litigate to enforce or defend its intellectual property rights, or to defend against claims by third parties.

Technology Partnerships: The Company works closely with leading technology and manufacturing providers to deliver integrated solutions.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company experienced significant executive changes shortly after the fiscal year end, with the Chief Financial Officer and Chief Operating Officer resigning in February 2025. The Board of Directors is also expected to be reconstituted following the proposed merger with Flash Sports & Media, Inc.

Board Composition: As of January 13, 2026, the Board consists of five directors: Bradley J. Nattrass (Chairperson & CEO), James R. Lowe, Anita Britt, David Hsu, and Sonia Lo. All non-CEO directors are independent. The Board has established an Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee. The ESG Committee was dissolved in November 2025.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 130 full-time employees as of December 31, 2024.
• Skill Mix: Approximately two-thirds of employees were considered experts, including Designers (Architects, Interior Designers, Cultivation Space Planners), Engineers (Mechanical, Electrical, Plumbing, Controls, Fire Protection), Construction Managers (Project Managers and Supervisors), and horticulturists.

Talent Management: Acquisition & Retention: Competition for senior executives and skilled personnel in the horticulture industry is intense. Employee Value Proposition: The Company offers a tax-qualified 401(k) plan with a 100% match up to 4% of deferred salary.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: The Company's business, particularly its historical focus on the legal cannabis-focused CEA segment, is subject to complex and evolving regulations. Cannabis remains a Schedule I controlled substance under U.S. federal law, creating a risk of federal enforcement despite state-level legalization. Legal Proceedings: urban-gro, Inc. is involved in several material legal proceedings, including:

• A lawsuit by Grow Hill, LLC alleging breach of contract and fraud related to a $2.1 million loan default.
• Default judgments against its subsidiary UG Construction, Inc. for $1.5 million (RK Mechanical LLC) and $380,932 (Action Equip. & Scaffold Co.) for alleged breach of contract and unpaid services/equipment leases.
• A lawsuit by MJ’s Market, Inc. alleging breach of contract, trademark infringement, and interference with contractual relations.
• Settlements with Gemini Finance Corp. and J Brrothers LLC following loan defaults and disputes.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: The Company's effective tax rate was 0% in 2024 and -0.4% in 2023.
• Geographic Tax Planning: urban-gro, Inc. files income tax returns in the United States, Canada, and the Netherlands, as well as state and local tax returns in applicable jurisdictions.
• Tax Reform Impact: As of December 31, 2024, the Company had $58.0 million in Federal net operating loss (NOL) carryovers (some with indefinite life, some expiring starting 2037), $41.2 million in various State NOLs (expiring 2037-2043), $1.9 million in Canada NOLs (expiring 2042), and $2.2 million in Netherlands NOLs (indefinite life). A full valuation allowance has been established against these deferred tax assets due to a history of operating losses.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: urban-gro, Inc. maintains insurance to protect its assets, operations, and employees, including cyber liability insurance. Management believes its coverage is adequate and customary, though it is subject to limits and exclusions.