# EDGAR Filing Document

**Accession Number:** 0001706524
**File Stem:** 0001213900-26-046211
**Filing Date:** 2026-4
**Character Count:** 174860
**Document Hash:** 5ad1d083ed535c8eb0fa266bc18e37f3
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-26-046211.hdr.sgml**: 20260421

**ACCESSION NUMBER**: 0001213900-26-046211

**CONFORMED SUBMISSION TYPE**: 10-K/A

**PUBLIC DOCUMENT COUNT**: 95

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260421

**DATE AS OF CHANGE**: 20260421

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** urban-gro, Inc.
- **CENTRAL INDEX KEY:** 0001706524
- **STANDARD INDUSTRIAL CLASSIFICATION:** WHOLESALE-MACHINERY, EQUIPMENT & SUPPLIES [5080]
- **ORGANIZATION NAME:** 07 Trade & Services
- **EIN:** 465158469
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K/A
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-39933
- **FILM NUMBER:** 26879970

**BUSINESS ADDRESS:**
- **STREET 1:** 1751 PANORAMA PT
- **STREET 2:** UNIT G
- **CITY:** LAFAYETTE
- **STATE:** CO
- **ZIP:** 80026
- **BUSINESS PHONE:** 720-390-3880

**MAIL ADDRESS:**
- **STREET 1:** 1751 PANORAMA PT
- **STREET 2:** UNIT G
- **CITY:** LAFAYETTE
- **STATE:** CO
- **ZIP:** 80026

?xml version='1.0' encoding='ASCII'?

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 10-K/A**

**Amendment No. 1**

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

FOR THE FISCAL YEAR ENDED **DECEMBER 31, 2025**

or

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

Commission File Number: **<u>001-39933</u>**

**<u>URBAN-GRO, INC.</u>**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Delaware** | **46-5158469** |
| (State or other jurisdiction of <br> incorporation or organization) | (IRS Employer <br> Identification No.) |

---

---

| | | |
|:---|:---|:---|
| **1751 Panorama Point, Unit G, <br> Lafayette, CO** | **80026** | **(720) 390-3880** |
| (Address of principal executive office) | (Zip Code) | (Registrant's telephone number,<br> Including area code) |

---

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

---

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

---

Securities registered pursuant to Section 12(g) of the Act: **None** 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No

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

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

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

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☒ Smaller Reporting Company ☒ <br> 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter on June 30, 2025 was approximately $3,068,244.

As of April 15, 2026, the registrant had 1,128,140 shares of Common Stock outstanding.

Explanatory Note

Urban-gro, Inc. (the "Company") is filing this Amendment No. 1 (this "Amendment") to its Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the U.S. Securities and Exchange Commission (the "SEC") on April 15, 2026 (the "Original Filing"), solely to (1) include a copy of the Company's Clawback Policy (the "Clawback Policy") as Exhibit 97.1 hereto, (2) to make corrections to the cover page, and (3) to restate Note 19 – *Subsequent Events* in the Notes to Consolidated Financial Statements to correct a clerical error where the name Hudson Global Ventures, LLC was incorrectly stated instead of the correct name, Agile Capital Funding, LLC. This Amendment contains only the cover page, this explanatory note, the exhibit index, the signature page and Item 8. Financial Statements and Supplementary Data.

Except for the foregoing, this Amendment does not alter or update any information contained in the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and the Company has not updated the disclosures contained therein to reflect any events that have occurred as of a date subsequent to the date of the Original Filing.

**PART II**

**<u>ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</u>**

The financial statements and supplementary financial information required by this Item are set forth immediately following the signature page and are incorporated herein by reference.

**PART IV** 

**ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.**

A list of financial statements filed herewith is contained is set forth on page F-1 of the financial statements that immediately follow the signature page of this Report and is incorporated by reference herein. The financial statement schedules have been omitted because they are not required, not applicable or the information has been included in our financial statements. The exhibits required by this Item are contained in the Exhibit Index beginning on the following page of this Annual Report on Form 10-K and are incorporated herein by reference.

**<u>EXHIBIT INDEX</u>**

---

| | |
|:---|:---|
| **Exhibit No.** | **Exhibit Description** |
| 2.1 | [Stock Purchase Agreement (incorporated by reference to Exhibit 2.1 to Form 8-K filed June 28, 2021), by and between 2WR Entities, urban-gro, Inc. and urban-gro Architect Holdings, LLC.](http://www.sec.gov/Archives/edgar/data/1706524/000149315221018256/ex2-1.htm) |
| 2.2 | [Agreement and Plan of Merger, dated February 17, 2026 by and between urban-gro, Inc., Flash Sports & Media, Inc., and UGRO Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to Form 8-K filed February 18, 2026)](http://www.sec.gov/Archives/edgar/data/1706524/000121390026017587/ea027730201ex2-1_urban.htm) |
| 2.3 | [Stock and Asset Purchase Agreement, dated as of August 27, 2025, by and among 2WR Holdco, LLC, 2WR of Georgia, Inc., urban-gro Architect Holdings, LLC, 2WR of Colorado, Inc., and 2WR of Mississippi, P.C. (incorporated by reference to Exhibit 2.1 to Form 8-K filed on September 2, 2025)](http://www.sec.gov/Archives/edgar/data/1706524/000121390025083451/ea025557301ex2-1_urban.htm) |
| 3.1 | [Amended and Restated Certificate of Incorporation of urban-gro, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed June 21, 2023)](http://www.sec.gov/Archives/edgar/data/1706524/000170652423000068/exhibit31-amendedandrestat.htm) |
| 3.2 | [Certificate of Amendment to Amended and Restated Certificate of Incorporation of urban-gro, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed February 5, 2026)](http://www.sec.gov/Archives/edgar/data/1706524/000121390026012533/ea027565601ex3-1_urban.htm) |
| 3.3 | [Bylaws of urban-gro, Inc. (incorporated by reference to Exhibit 3.4 to Form 8-K filed October 30, 2020)](http://www.sec.gov/Archives/edgar/data/1706524/000168316820003602/urbangro-ex0304.htm) |
| 3.4 | [Amendment No. 1 to Bylaws of urban-gro, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed January 12, 2021).](http://www.sec.gov/Archives/edgar/data/1706524/000168316821000117/urbangro_ex0301.htm) |
| 3.5 | [Certificate of Designation of Series B Convertible Preferred Stock, as filed with the Delaware Secretary of State on February 17, 2026 (incorporated by reference to Exhibit 3.1 to Form 8-K filed February 18, 2026)](http://www.sec.gov/Archives/edgar/data/1706524/000121390026017587/ea027730201ex3-1_urban.htm) |
| 4.1 | [Description of urban-gro, Inc.'s Common Stock (incorporated by reference to Exhibit 4.1 to Form 10-K filed March 28, 2024).](http://www.sec.gov/Archives/edgar/data/1706524/000170652424000014/a123123-ex41.htm) |
| 10.2 | [Form of Secured Promissory Note (incorporated by reference to Exhibit 10.2 to Form 8-K filed on December 18, 2023).](http://www.sec.gov/Archives/edgar/data/1706524/000149315223045198/ex10-2.htm) |
| 10.3 | [Form of Security Agreement (incorporated by reference to Exhibit 10.3 to Form 8-K filed on December 18, 2023).](http://www.sec.gov/Archives/edgar/data/1706524/000149315223045198/ex10-3.htm) |
| 10.4 | [Form of Continuing Guaranty (incorporated by reference to Exhibit 10.4 to Form 8-K filed on December 18, 2023).](http://www.sec.gov/Archives/edgar/data/1706524/000149315223045198/ex10-4.htm) |
| 10.5 | [urban-gro, Inc. 2021 Stock Incentive Plan, as amended (incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on January 20, 2026)](http://www.sec.gov/Archives/edgar/data/1706524/000121390026005270/ea0270276-02.htm) |
| 10.6 | [Bill of Sale, Assignment and Assumption, and Purchase Agreement by and among 2WR of Georgia, Inc., UG Architecture, Inc f/k/a 2WR of Colorado, Inc., and urban-gro Architect Holdings, LLC, dated November 3, 2025 (incorporated by reference to Exhibit 10.1 to Form 8-K filed on November 12, 2025).](http://www.sec.gov/Archives/edgar/data/1706524/000121390025108604/ea026472301ex10-1_urban.htm) |
| 10.7 | [Settlement Agreement and Mutual General Release, dated September 26, 2025, by and among urban-gro, Inc., UG Construction, Inc., Gemini Finance Corp., and the other parties thereto (incorporated by reference to Exhibit 10.1 to Form 8-K filed on October 3, 2025).](http://www.sec.gov/Archives/edgar/data/1706524/000121390025095792/ea025979701ex10-1_urban.htm) |
| 10.8 | [Settlement and Release Agreement, August 8, 2025, by and among urban-gro, Inc., J Brrothers LLC and Herb-a-More LLC (incorporated by reference to Exhibit 10.1 to Form 8-K filed on August 13, 2025).](http://www.sec.gov/Archives/edgar/data/1706524/000121390025075804/ea025292601ex10-1_urban.htm) |
| 10.9 | [Promissory Note, dated August 8, 2025, issued by urban-gro, Inc. to J Brrothers LLC (incorporated by reference to Exhibit 4.1 to Form 8-K filed on August 13, 2025).](http://www.sec.gov/Archives/edgar/data/1706524/000121390025075804/ea025292601ex4-1_urban.htm) |

---

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| | |
|:---|:---|
| 10.10 | [Loan Agreement, dated June 24 2025 between urban-gro, Inc. and Agile Lending, LLC (incorporated by reference to Exhibit 10.1 to Form 8-K filed on July 2, 2025).](http://www.sec.gov/Archives/edgar/data/1706524/000121390025061085/ea024806801ex10-1_urban.htm) |
| 10.11 | [Promissory Note, dated June 24 2025 between urban-gro, Inc. and Agile Lending, LLC (incorporated by reference to Exhibit 10.2 to Form 8-K filed on July 2, 2025).](http://www.sec.gov/Archives/edgar/data/1706524/000121390025061085/ea024806801ex10-2_urban.htm) |
| 10.12 | [Forbearance Agreement, dated as of February 19, 2026, by and among Agile Capital Funding, LLC, Agile Lending, LLC, urban-gro, Inc., and urban-gro Canada Technologies Inc. (incorporated by reference to Exhibit 10.1 to Form 8-K filed on February 25, 2026)](http://www.sec.gov/Archives/edgar/data/1706524/000121390026020416/ea027834701ex10-1.htm) |
| 10.13 | [Exchange Agreement, dated as of February 19, 2026, by and among Agile Capital Funding, LLC, Agile Lending, LLC, and urban-gro, Inc. (incorporated by reference to Exhibit 10.2 to Form 8-K filed on February 25, 2026)](http://www.sec.gov/Archives/edgar/data/1706524/000121390026020416/ea027834701ex10-2.htm) |
| 19 | [Insider Trading Policy. (incorporated by reference to Exhibit 19 to Form 10-K filed on April 15, 2026)](https://www.sec.gov/Archives/edgar/data/1706524/000121390026044091/ea028515001ex19.htm) |
| 21.1 | [Subsidiaries of the Registrant. (incorporated by reference to Exhibit 21.1 to Form 10-K filed on April 15, 2026)](https://www.sec.gov/Archives/edgar/data/1706524/000121390026044091/ea028515001ex21-1.htm) |
| 23.1 | [Consent of Suri and Co. (incorporated by reference to Exhibit 23.1 to Form 10-K filed on April 15, 2026)](https://www.sec.gov/Archives/edgar/data/1706524/000121390026044091/ea028515001ex23-1.htm) |
| 24.1 | [Power of Attorney. (incorporated by reference to the signature page to Form 10-K filed on April 15, 2026)](https://www.sec.gov/Archives/edgar/data/1706524/000121390026044091/ea0285150-10k_urbangro.htm#p_001) |
| 31.1 | [Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (incorporated by reference to Exhibit 31.1 to Form 10-K filed on April 15, 2026)](https://www.sec.gov/Archives/edgar/data/1706524/000121390026044091/ea028515001ex31-1.htm) |
| 31.2 | [Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (incorporated by reference to Exhibit 31.2 to Form 10-K filed on April 15, 2026)](https://www.sec.gov/Archives/edgar/data/1706524/000121390026044091/ea028515001ex31-2.htm) |
| 31.3 | [Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (incorporated by reference to Exhibit 31.3 to Form 10-K filed on April 15, 2026)](https://www.sec.gov/Archives/edgar/data/1706524/000121390026044091/ea028515001ex31-3.htm) |
| 32.1 | [Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (incorporated by reference to Exhibit 32.1 to Form 10-K filed on April 15, 2026)](https://www.sec.gov/Archives/edgar/data/1706524/000121390026044091/ea028515001ex32-1.htm) |
| 97.1 | [Clawback Policy. (incorporated by reference to Exhibit 97.1 to Form 10-K filed on January 16, 2026)](https://www.sec.gov/Archives/edgar/data/1706524/000121390026005258/ea026780101ex97-1_urbangro.htm) |
| 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). |

---

\* Denotes a management contract or compensatory plan or arrangement.

**<u>ITEM 16. FORM 10-K SUMMARY</u>**

None.

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunder duly authorized.

---

| | | |
|:---|:---|:---|
|  | **URBAN-GRO, INC.** | **URBAN-GRO, INC.** |
| Date: April 21, 2026 | By: | */s/ Bradley Nattrass* |
|  |  | Bradley Nattrass <br> Chairperson of the Board of Directors and<br> Chief Executive Officer |

---

**INDEX TO FINANCIAL STATEMENTS**

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| | |
|:---|:---|
|  | **Page No.** |
| [Report of Independent Registered Accounting Firm (PCAOB ID NO:)](#f_001) | F-2 |
| [Report of Independent Registered Accounting Firm (PCAOB ID NO: 3627)](#f_007) | F-3 |
| [Consolidated Balance Sheets as of December 31, 2025 and 2024](#f_002) | F-6 |
| [Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2025 and 2024](#f_003) | F-7 |
| [Consolidated Statement of Changes in Shareholders' Equity for the Years ended December 31, 2025 and 2024](#f_004) | F-8 |
| [Consolidated Statements of Cash Flows for the Years ended December 31, 2025 and 2024](#f_005) | F-9 |
| [Notes to the Consolidated Financial Statements](#f_006) | F-10 |

---

**<u>R</u>** **<u>EPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</u>**

To the Board of Directors and Shareholders of urban-gro, Inc.:

<u>Opinion on the Financial Statements</u>

We have audited the accompanying consolidated balance sheet of urban-gro, Inc. ("the Company") as of December 31, 2024, the related consolidated statements of operations and comprehensive loss, stockholders' deficit, and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

<u>Basis for Opinion</u>

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

*/s/ Sadler, Gibb & Associates, LLC*

We served as the Company's auditor from 2024 to 2026.

Draper, UT

January 16, 2026, except for the effect of the discontinued operations classification effected August 25, 2025, described in Note 1, and the reverse stock split effected February 9, 2026, described in Note 19, as to which the date is April 15, 2026.

**Report of Independent Registered Public Accounting Firm**

To the Stockholders and Board of Directors of urban-gro, Inc.

**Opinion on the Consolidated Financial Statements**

We have audited the accompanying consolidated balance sheet of urban-gro, Inc. (the "Company") as of December 31, 2025, the related consolidated statement of operations and comprehensive loss, consolidated statement of stockholders' deficit and consolidated statement of cash flows for year ended December 31, 2025, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for year ended December 31, 2025, in conformity with Generally Accepted Accounting Principles of United States of America.

**Matters related to Going Concern - Also constituting the Critical Audit Matter communication for Going Concern (see cross-reference in Critical Audit Matters section below)**

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring net losses from operations, has a net capital deficiency, has discontinued its services business and has experienced the foreclosure and Article 9 sale of the accounts receivables of its UG Construction, Inc. subsidiary by Gemini Finance Corp. in September 2025, retaining only an equipment reseller operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in response to these conditions include the completion of a reverse merger transaction with Flash Sports & Media, Inc. (as described in Note 1), pursuant to which the stockholders of Flash would receive shares representing approximately 90% of the combined entity and the Company would redirect its operations to the business of Flash Sports & Media. If the Company is unable to raise additional funds or increase its scope of operations through the reverse merger to alleviate liquidity needs, it may be required to reduce the scope of its planned development. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We identified a material uncertainty related to going concern, as management's assertion that the proposed reverse merger with Flash Sports & Media, Inc. mitigates substantial doubt involved significant judgment. This required us to assess the overall credibility and feasibility of management's plans, including the likelihood and timing of the merger and the adequacy of related disclosures in accordance with ASC 205-40.

**How the Critical Audit Matter Was Addressed in the Audit**

Our audit procedures related to the going concern assessment included the following amongst others:

● We conducted detailed inquiry procedures with management regarding the future business plans of the Company, including the intended business model of the merged entity, and the status of the merger transaction.

● We obtained and evaluated management's financial projections and budgets for the post-merger entity.

● We evaluated the appropriateness of management's going concern disclosures in the consolidated financial statements, including Note [X], against the requirements of ASC 205-40.

● We performed subsequent events procedures through the date of our report to identify any developments relevant to the going concern assessment.

**Emphasis of Matter**

As discussed in Note 1 to the consolidated financial statements, during the year ended December 31, 2025, the Company suspended its construction business and evaluated the recoverability of its assets in connection with suspension and the planned merger. Based on this assessment, management determined that certain assets were not recoverable and recorded impairments and write-offs totaling $7,271,522 million, including property and equipment, accounts receivables, contract receivables, inventory, and prepaid expenses and other current assets. These charges are included within operating expenses of continuing operations. Our opinion is not modified with respect to this matter.

As discussed in Note 12 to the consolidated financial statements, the Company's wholly-owned subsidiary, UG Construction, Inc., defaulted under its loan agreement with Gemini Finance Corp., resulting in a foreclosure and Article 9 sale of the assets consisting of the accounts receivables on September 4, 2025, for $450,000. The Company recognized a loss on foreclosure in its consolidated statement of operations amounting to $2,473,501, representing the excess of the carrying value of the net assets disposed over the value of the loan adjusted. In addition, the remaining outstanding debt obligation gave rise to further financial impact, which was subsequently resolved through a settlement agreement involving the issuance of the Company's common stock. These events had a material effect on the Company's financial position and results of operations. Our opinion is not modified with respect to this matter.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have nor we have engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

&nbsp;&nbsp;&nbsp;&nbsp;(1) relate to accounts or disclosures that are material to the
financial statements; and

&nbsp;&nbsp;&nbsp;&nbsp;(2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

**<u>Revenue Recognition</u>**

**Description of the Critical Audit Matter**

As described in Note 3 to the consolidated financial statements, the Company recognized revenue from three streams during the year ended December 31, 2025: (i) equipment systems, for which revenue is recognized at a point in time upon transfer of control to the customer, generally on a bill-to ship-to basis; and (ii) construction design-build whose operations were wound down in the 4<sup>th</sup> quarter and (iii) services, which were discontinued in the third quarter of 2025 and are presented within discontinued operations. Revenue from construction design-build contracts was recognized over time using a cost-to-cost measure of progress, which requires management to estimate total contract costs. Revenue from services contracts was recognized upon satisfaction of performance obligations, including arrangements with multiple performance obligations requiring allocation of the transaction price based on relative standalone selling prices.

We identified revenue recognition as a critical audit matter due to (i) the significant judgment required to estimate total costs to complete and measure progress toward completion for construction design-build contracts, (ii) the complexity and judgment involved in identifying performance obligations and allocating transaction price for services arrangements, (iii) the risk of incomplete revenue recognition for equipment transactions associated with the bill-to ship-to model, and (iv) the additional complexity associated with the discontinuation and presentation of services operations. These factors required significant auditor judgment and increased audit attention, including the need to evaluate subjective assumptions.

**How the Critical Audit Matter Was Addressed in the Audit**

Our audit procedures related to revenue recognition included the following, among others:

 

*Equipment Systems* 

&nbsp;&nbsp;&nbsp;&nbsp;▪ We tested samples of revenue transactions by inspecting customer
agreements or sales orders.

&nbsp;&nbsp;&nbsp;&nbsp;▪ We tested completeness of revenue by mapping vendor purchase
orders to customer invoices for bill-to ship-to transactions.

&nbsp;&nbsp;&nbsp;&nbsp;▪ We performed analytical procedures, including variance analysis,
and evaluated related disclosures.

*Construction Revenue*

&nbsp;&nbsp;&nbsp;&nbsp;▪ We obtained contract-wise schedules for construction contracts
with revenue activity during the year.

&nbsp;&nbsp;&nbsp;&nbsp;▪ For a selection of contracts, we evaluated contract terms,
including contract value, estimated total costs to complete, and costs incurred to date, and reviewed the percentage of completion and
related revenue recognized.

&nbsp;&nbsp;&nbsp;&nbsp;▪ We performed analytical procedures and cut-off testing for
transactions near and around the asset foreclosure and wound down of operations.

*Services Revenue (Part of the discontinued operations)*

&nbsp;&nbsp;&nbsp;&nbsp;▪ For a selection of service contracts, we identified performance
obligations and evaluated the allocation of transaction price based on relative standalone selling prices, including assessing the reasonableness
of those estimates.

&nbsp;&nbsp;&nbsp;&nbsp;▪ We inspected supporting documentation to test whether performance
obligations were satisfied and revenue was recognized in the appropriate period.

&nbsp;&nbsp;&nbsp;&nbsp;▪ We evaluated management's accounting analysis for discontinued
operations and assessed whether revenue, costs, and related assets and liabilities were appropriately segregated and presented in the
financial statements and disclosures.

**<u>Going Concern Assessment</u>**

Refer to the Explanatory Paragraph Regarding Going Concern in this report, which also constitutes the critical audit matter communication for this matter in accordance with AS 3101.

We determined that there are no other critical audit matters.

**/s/ Suri & Co., Chartered Accountants**

We have served as the Company's auditors since 2026.

Place: Chennai, India

Date: April 15, 2026

**urban-gro, Inc.**

**CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| **ASSETS** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash | $10644 | $819050 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | - | 6104926 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contract receivables | - | 4132817 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | - | 2479262 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current assets of discontinued operations | - | 2271793 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 10644 | 15807848 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-current assets: |  |  |
| Property and equipment, net | - | 813452 |
| Operating lease right-of-use assets | 321303 | 550175 |
| Non-current assets of discontinued operations | - | 2322308 |
| Total non-current assets | 321303 | 3685935 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $331947 | $19493783 |
| **LIABILITIES AND STOCKHOLDERS' DEFICIT** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $18202851 | $13518626 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contract liabilities | 13457357 | 14094176 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses | 5708526 | 4017145 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customer deposits | 2695435 | 2628463 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes payable, current | 3533255 | 5968145 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities, current | 222870 | 235223 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current liabilities of discontinued operations | 1561807 | 1837709 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 45382101 | 42299487 |
| Non-current liabilities |  |  |
| Notes payable, long-term | - | 795531 |
| Deferred tax liability | - | 14608 |
| Operating lease liabilities, long-term | 115080 | 336255 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-current liabilities of discontinued operations | - | 690444 |
| Total non-current liabilities | 115080 | 1836838 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 45497181 | 44136325 |
| Commitments and contingencies |  |  |
| Stockholders' deficit: |  |  |
| &nbsp;&nbsp;&nbsp;Preferred stock, $0.10 par value; 3,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2025 and 2024 | - | - |
| &nbsp;&nbsp;&nbsp;Common stock, $0.001 par value 200,000,000 shares authorized; 710,025 issued and 652,032 outstanding as of December 31, 2025, and 562,855 issued and 504,862 outstanding as of December 31, 2024 | 711 | 563 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | 91746837 | 90170645 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treasury shares, cost basis: 57,993 shares as of December 31, 2025 and 2024 | (12045542) | (12045542) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | (124867240) | (102768208) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' deficit | (45165234) | (24642542) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' deficit | $331947 | $19493783 |

---

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

**urban-gro, Inc.**

**CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS**

---

| | | |
|:---|:---|:---|
|  | **Years Ended** | **Years Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Revenues |  |  |
| &nbsp;&nbsp;&nbsp;Equipment | $8751226 | $12245675 |
| &nbsp;&nbsp;&nbsp;Construction design-build | 8467451 | 18604827 |
| &nbsp;&nbsp;&nbsp;Other | 180761 | 352798 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | 17399438 | 31203300 |
| Cost of revenue |  |  |
| &nbsp;&nbsp;&nbsp;Equipment | 8344998 | 10582731 |
| &nbsp;&nbsp;&nbsp;Construction design-build | 8730918 | 20782689 |
| &nbsp;&nbsp;&nbsp;Other | 148968 | 226611 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of revenue | 17224884 | 31592031 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit (loss) | 174554 | (388731) |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 17270657 | 21006685 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 349364 | 1067219 |
| &nbsp;&nbsp;&nbsp;Impairment of goodwill and intangibles | - | 5958632 |
| &nbsp;&nbsp;&nbsp;Impairment of property and equipment | 566609 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 18186630 | 28032536 |
| Loss from operations | (18012076) | (28421267) |
| Non-operating income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense | (1675713) | (1021947) |
| &nbsp;&nbsp;&nbsp;Interest income | 526 | 2420 |
| &nbsp;&nbsp;&nbsp;Gain on extinguishment of debt | 7476 | - |
| &nbsp;&nbsp;&nbsp;Loss on settlement | (62850) | (205000) |
| &nbsp;&nbsp;&nbsp;Loss on assets foreclosure | (2473501) | - |
| &nbsp;&nbsp;&nbsp;Other income (expense) | 522193 | 256811 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-operating income (expense) | (3681869) | (967716) |
| Loss before income taxes | (21693945) | (29388983) |
| Income tax benefit | 14608 | 29705 |
| Net loss from continuing operations | (21679337) | (29359278) |
| Net income loss from discontinued operations, net of tax | (419695) | (7136548) |
| Net loss | $(22099032) | $(36495826) |
| Net loss per share attributable common stockholders: |  |  |
| Net loss from continuing operations | $(41.04) | $(58.83) |
| Net loss from discontinued operations, net of taxes | $(0.79) | $(14.30) |
| Net loss per share | $(41.83) | $(73.12) |
| Weighted average common shares outstanding - basic and diluted | 528270 | 499089 |

---

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

**urban-gro, Inc.**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | | | | |
|  | **Shares** | **Amount** | **Additional**<br>**Paid-in**<br>**Capital** |<br>**Accumulated**<br>**Deficit** |<br>**Treasury**<br>**Stock** | **Total**<br>**Stockholders'**<br>**Deficit** |
| **Balance at December 31, 2023** | 540906 | $541 | $88402738 | $(66272382) | $(12045542) | $10085355 |
| Stock-based compensation |  | - | 1426877 | - | - | 1426877 |
| Stock issued for contingent consideration | 2848 | 3 | 129133 | - | - | 129136 |
| Stock grant program vesting | 19101 | 19 | (19) | - | - | - |
| Issuance of warrants |  | - | 211916.00 | - | - | 211916 |
| Net loss | - | - | - | (36495826) | - | (36495826) |
| **Balance at December 31, 2024** | 562855 | 563 | 90170645 | (102768208) | (12045542) | (24642542) |
| Stock-based compensation |  |  | 826471 | - | - | 826471 |
| Stock grant program vesting | 20649 | 21 | (21) | - | - | - |
| Issuance of common stock for loan modification | 6000 | 6 | 109494 | - | - | 109500 |
| Issuance of common stock for loan settlement | 90000 | 90 | 372460 | - | - | 372550 |
| Issuance of common stock for services | 30521 | 31 | 267788 | - | - | 267819 |
| Net loss | - | - | - | (22099032) | - | (22099032) |
| **Balance at December 31, 2025** | 710025 | $711 | $91746837 | $(124867240) | $(12045542) | $(45165234) |

---

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

**urban-gro, Inc.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

---

| | | |
|:---|:---|:---|
|  | **Years Ended** | **Years Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| **Cash flows from operating activities:** |  |  |
| Net loss from continuing operations | $(21679337) | $(29359278) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 349364 | 1023845 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 826471 | 1426877 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of the right-of-use | 228585 | 229754 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt discount | 155958 | 65958 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of property and equipment | 566609 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of goodwill and intangibles | - | 5958632 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bad debt expense | 1130760 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets write off | 1366953 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contract receivables write off | 4034280 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory write-off | 172920 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-cash interest expense | 529213 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax benefit | (14608) | (29705) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on assets foreclosure | 2473501 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on disposal of assets |  | 3274 |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable and contract receivables | 4506094 | 15739183 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | 49663 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | 1112309 | 49550 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable, contract liabilities, and accrued expenses | 5738787 | (379723) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customer deposits | 66972 | 2039100 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liability, net | (233528) | (237578) |
| &nbsp;&nbsp;&nbsp;Net cash provided by (used in) operating activities of continuing operations | 1380966 | (3470111) |
| &nbsp;&nbsp;&nbsp;Net cash (used in) provided by operating activities of discontinued operations | (540170) | 648924 |
| &nbsp;&nbsp;&nbsp;Net cash provided by (used in) operating activities | 840796 | (2821187) |
| **Cash flows from investing activities:** |  |  |
| Proceeds from the sale of property and equipment |  | 25 |
| Purchase of property and equipment | (298215) | (131387) |
| &nbsp;&nbsp;&nbsp;Net cash used in investing activities of continuing operations | (298215) | (131362) |
| &nbsp;&nbsp;&nbsp;Net cash provided by investing activities of discontinued operations | 2130548 | - |
| &nbsp;&nbsp;&nbsp;Net cash provided by (used in) in investing activities | 1832333 | (131362) |
| **Cash flows from financing activities:** |  |  |
| Proceeds from promissory notes | 1700932 | 8107685 |
| Repayments of notes payable | (5143270) | (5270343) |
| Repayment of finance lease liability | (27437) | (108775) |
| &nbsp;&nbsp;&nbsp;Net cash (used in) provided by financing activities of continuing operations | (3469775) | 2728567 |
| &nbsp;&nbsp;&nbsp;Net cash used in financing activities of discontinued operations | (11760) | (31810) |
| &nbsp;&nbsp;&nbsp;Net cash (used in) provided by financing activities | (3481535) | 2696757 |
| Net change in cash | (808406) | (255792) |
| Cash at beginning of year | 819050 | 1074842 |
| Cash at end of year | $10644 | $819050 |
| **Supplemental disclosure of cash flow information:** |  |  |
| Cash paid for interest | $454624 | $735379 |
| Cash paid for income taxes | $4611 | $20846 |
| **Supplemental disclosure of non-cash investing and financing activities:** |  |  |
| Common stock issued for services and debt modification | $749869 | $- |
| Stock issued for contingent consideration | $- | $129136 |
| Stock grant program vesting | $- | $477 |
| Warrants issued in connection with notes payable | $- | $211916 |
| Prepaid expenses financed by notes payable | $- | $807190 |
| Recording of Operating lease assets and liabilities | $- | $221880 |
| Recording of Financing lease assets and liabilities | $- | $89128 |
| Debt discount on notes payable | $- | $100000 |

---

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

**urban-gro, Inc.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1 – ORGANIZATION AND ACQUISITIONS, BUSINESS PLAN, AND LIQUIDITY**

Organization

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

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

During the third quarter of 2025, the Company made the strategic decision to wind down its legacy CEA operations due to changing market conditions, its inability to raise capital, and the proposed merger with Flash Sports and Media, Inc. The wind-down included the sale of the 2WR of Georgia subsidiary (August 27, 2025), the foreclosure of UG Construction assets by Gemini Finance Corp. (September 4, 2025), workforce reductions, and cessation of new project pursuits. As of December 31, 2025, substantially all legacy operations have been winding down. Certain operating leases remain on the balance sheet as the Company continues to evaluate subletting, early termination, or expiration of those non-cancellable obligations.

Dispositions

 ****

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

See Note 4 for further detail on the dispositions.

*Discontinued Operations Classification*

The Services segment (2WR of Georgia, Inc., 2WR of Colorado customer lists, and UG Engineering) was classified as discontinued operations effective August 27, 2025, as this disposal was the result of a Board-authorized sale constituting a strategic shift under ASC 205-20-45-1B. The CEA equipment and construction operations (including UG Construction, Inc. d/b/a Emerald Construction Management, Inc.) are NOT classified as discontinued operations and remain in continuing operations. The construction entity's assets consisting of receivables were involuntarily foreclosed upon by Gemini Finance Corp. on September 4, 2025 — a creditor enforcement action, not a volitional management decision to exit the business. Following the foreclosure, management temporarily suspended the remaining construction operations pending determination of an appropriate course of action, including the possibility of raising independent capital and restarting operations if the pending merger with Flash Sports and Media, Inc. did not proceed. Flash Sports and Media had not determined, prior to the merger closing on February 17, 2026, whether it intended to continue the construction component. Accordingly, no definitive, irrevocable decision to permanently exit the CEA or construction business was made during fiscal year 2025. The strategic shift from legacy operations to International Premier Gaming (IPG) was confirmed only upon the closing of the Merger on February 17, 2026, which is a fiscal year 2026 event.

Impairment and write-offs

In continuation to the above explained suspension of construction business and the planned merger the company evaluated the recoverability of the assets and to the extent deemed appropriate and not recoverable the company has impaired or written of the following assets within the operating expenses of continuing operations

---

| | |
|:---|:---|
| Nature | Amount written off |
| Property and equipment | $566609 |
| Trade receivables | $1130760 |
| Contract receivables | $4034280 |
| Inventory | $172920 |
| Prepaid expenses and other current assets | $1366953 |

---

Merger

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.

Liquidity and Going Concern

Following the completion of the Merger on February 17, 2026, the Company believes that the combined entity's operations, including IPG's revenue-generating cricket commercialization business, will provide improved liquidity and a path toward sustainable operations. The Company may also seek to raise additional capital through equity or debt financing to support integration and growth initiatives. There can be no assurance that the Company will be able to raise capital on terms acceptable to the Company. If it is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned development, which could harm its business, financial condition, and operating results. These factors raise substantial doubt about the Company's ability to continue as a going concern.

**NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

Basis of Presentation, Principles of Consolidation and Business Combinations

These consolidated financial statements include the accounts of urban-gro, Inc. and its wholly owned subsidiaries. They are presented in United States dollars and have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the SEC for financial reporting. All intercompany transactions and balances have been eliminated in the preparation of the consolidated financial statements. The consolidated financial statements are audited and, in the Company's opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of the Company's consolidated balance sheets, consolidated statements of operations and comprehensive loss, consolidated statements of shareholders' equity and consolidated statements of cash flows for the periods presented.

Acquisitions of businesses are accounted for using the acquisition method of accounting (Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805-10-225). The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred, liabilities incurred to the former owners of the acquired entities and the equity interests issued in exchange for control of the acquired entities. Acquisition-related costs are recognized in net income (loss) as incurred.

*Reverse Stock Split*

 

On February 9, 2026, the Company effected a 1-for-25 reverse stock split of its common stock, as approved by stockholders on January 30, 2026. Trading on a split-adjusted basis commenced on February 9, 2026. All shares and per share amounts have been presented retroactively.

Use of Estimates

In preparing consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reported periods. Actual results could differ from those estimates. Significant estimates include estimated revenues earned under percentage of completion construction contracts, professional service contracts, estimated useful lives and potential impairment of long-lived assets and goodwill, together with the write-off of prepaid expenses and other current assets, contract receivables, accounts receivables, inventory, allowance for deferred tax assets and deferred tax liabilities, and allowance for bad debts.

Balance Sheet Classifications

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

Contract Assets and Liabilities

The timing when the Company collects cash from its construction design-build customers can create a contract asset or contract liability. Please refer to *Note 3 - Revenue from Contracts with Customers* for further discussion of the Company's contract assets and liabilities.

Functional and Reporting Currency and Foreign Currency Translation

The functional and reporting currency of the Company and its subsidiaries is US dollars. All transactions in currencies other than US dollars are translated into US dollars on the date of the transaction. Any exchange gains and losses related to these transactions are recognized in the current period earnings as other income (expense).

Fair Value of Financial Instruments

The Company's financial instruments consist principally of cash, accounts receivable, accounts payable, promissory note and other current assets and liabilities. We value our financial assets and liabilities using fair value measurements. 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. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

● Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

● Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated with 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 and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The carrying amount of our cash, accounts receivable, accounts payable, promissory note, and other current assets and liabilities in our consolidated financial statements approximates fair value because of the short-term nature of the instruments as of December 31, 2025 and 2024.

There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the years ended December 31, 2025 and 2024.

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 December 31, 2025 and 2024, 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. The Company has Insured Cash Sweep programs in place with its financial institutions to ensure that these excess funds are also federally insured. There are no restricted or compensating cash balances as of December 31, 2025.

Accounts Receivable, Net

*Trade Accounts Receivable*

 

Trade accounts receivable are carried at the original invoiced amounts less an estimate of expected credit losses. The Company estimates its allowance for credit losses and the related expected credit loss based upon the Company's historical credit loss experience and the age of the account adjusted for asset-specific risk characteristics, current economic conditions, relationship with the customer, and reasonable forecasts. Credit is generally extended on a short-term basis; thus current receivables do not bear interest. The Company reviews a customer's credit history before extending credit to the customer. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, an increase in the expected credit losses balance would be required. A provision is made against accounts receivable to the extent they are considered unlikely to be collected. Occasionally, the Company will write off bad debt directly to the bad-debt expense account when the balance is determined to be uncollectible.

During the year ended December 31, 2025, the Company recorded bad debt expense of $1,130,760 related to the write-off of accounts receivable deemed uncollectible. In connection with the Company's planned merger in the first quarter of 2026, management performed a comprehensive review of outstanding receivables and determined that certain balances no longer meet the criteria for recognition as assets based on their estimated collectability. The write-off has been recorded through the allowance for doubtful accounts and is reflected within general and administrative expenses in the accompanying consolidated statement of operations in accordance with ASC 310-10 and ASC 326.

Property and Equipment, net

Property and equipment is stated at cost less accumulated depreciation and impairment. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate.

The estimated useful lives for significant property and equipment categories are as follows:

---

| | |
|:---|:---|
| Computer and technology equipment | 3 years |
| Furniture and equipment | 5 years |
| Leasehold improvements | Lease term |
| Vehicles | 3 years |
| Other equipment | 3 or 5 years |
| Software | 3 years |

---

Operating Lease Right of Use Assets

The Company accounts for leases in accordance with ASC 842. The Company determines whether a contract is a lease at contract inception or for a modified contract at the modification date. At inception or modification, the Company recognizes right-of-use ("ROU" assets and related lease liabilities on the Consolidated Balance Sheets for all leases greater than one-year in duration. Lease liabilities and their corresponding ROU assets are initially measured at the present value of the unpaid lease payments as of the lease commencement date. If the lease contains a renewal and/or termination option, the exercise of the option is included in the term of the lease if the Company is reasonably certain that a renewal or termination option will be exercised. As the Company's leases do not provide an implicit rate, the Company uses an estimated incremental borrowing rate ("IBR") based on the information available at the commencement date of the respective lease to determine the present value of the future payments. The IBR is determined by estimating what it would cost the Company to borrow a collateralized amount equal to the total lease payments over the lease term based on the contractual terms of the lease and the location of the leased asset.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term in equal amounts of rent expense attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in later years. The difference between rent expense recognized and actual rental payments is typically represented as the spread between the ROU asset and lease liability.

The Company does not recognize ROU assets and lease liabilities for short-term leases that have an initial term of 12 months or less. The Company recognizes the lease payments associated with short-term leases as an expense on a straight-line basis over the lease term.

Operating lease right-of-use assets are recorded at cost, net of accumulated depreciation, amortization, and impairment. The Company has various operating and finance equipment and office leases with an imputed annual interest rate of 11%.

Intangible Assets

The Company's intangible assets consist of legal fees for application of patents and trademarks, as well as customer relationships, trademarks and trade names and backlog from the acquisitions of DVO, 2WR and Emerald. Our patents and trademarks are recorded at cost, while the intangibles from our acquisitions are recorded at fair value and are amortized using the straight-line method over an estimated life, generally 5 years for patents, 5 years for trademarks and trade names, and 7 years for customer relationships. Intangible assets are reported in the "Intangible Asset" line on the balance sheet.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually and at any time when events or circumstances suggest impairment may have occurred.

The testing for impairment consists of a comparison of the fair value of the reporting unit with its carrying amount. If the carrying amount of the reporting unit, including goodwill, exceeds the fair value, an impairment will be recognized equal to the difference between the carrying value of the reporting unit's goodwill and the implied fair value of the goodwill. In testing goodwill for impairment, we determine the estimated fair value of our reporting units based upon a discounted future cash flow analysis. Goodwill, trade names and patents are our only indefinite-lived intangible assets. Definite-lived intangible assets are amortized using the straight-line method over the shorter of their contractual term or estimated useful lives.

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 will be recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

Investments

Investments without readily determinable fair values and for which the Company does not have the ability to exercise significant influence are accounted for at cost with adjustments for observable changes in prices or impairments.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, *Revenue from Contracts with Customers,* which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criteria standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given to whether that control happens over time or not. Determination of criteria (3) and (4) are based on judgments regarding the fixed nature of the selling prices of the services and products delivered and the collectability of those amounts.

The Company derives revenue predominately from the sale of equipment systems, services, construction design-build, and from other various immaterial contracts with customers. Please refer to *Note 3 - Revenue from Contracts with Customers* for additional discussion.

Customer Deposits

The Company's policy is to collect deposits from customers in equipment and construction segment at the beginning of the contract. Please refer to *Note 3 - Revenue from Contracts with Customers* for further discussion of the Company's customer deposits.

Cost of Revenues

The Company's policy is to recognize cost of revenues in the same manner as, and in conjunction with, revenue recognition. The Company's cost of revenues includes the costs directly attributable to revenue recognized and includes expenses related to the purchasing of products and providing services, costs related to construction design-build contracts, fees for third-party commissions, and shipping costs.

Stock-Based Compensation

The Company periodically issues restricted stock units ("RSUs") and stock options to employees, directors, and consultants in non-capital raising transactions for fees and services. The Company accounts for stock grants and stock options issued to employees and directors with the award being measured at its fair value at the date of grant and amortized ratably over the estimated service period. The Company accounts for stock issued to consultants with the value of the stock compensation based upon the measurement date as determined at the grant date of the award.

Warrants

The Company classifies warrants as equity instruments in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity's Own Equity, as the warrants are indexed to the Company's own stock and meet the criteria for equity classification. Warrants classified as equity are recorded within additional paid-in capital at their relative fair value on the date of issuance and are not subsequently remeasured. The proceeds from issuances involving warrants are allocated between the host instrument and the warrants using the relative fair value method. The cost of warrants is amortized over the vesting period or the period of benefit, as applicable, and is recognized as a component of general and administrative expense in the consolidated statements of operations.

Income Taxes

The Company files income tax returns in the United States, Canada, and the Netherlands, and state and local tax returns in applicable jurisdictions. Provisions for current income tax liabilities, if any, would be calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income taxes reported in earnings, if any, would also include deferred income tax provisions.

Deferred income tax assets and liabilities, if any, would be computed on differences between the financial statement bases of assets and liabilities at the enacted tax rates. Changes in deferred income tax assets and liabilities would be included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates would be charged or credited to income tax expense in the period of enactment. Valuation allowances would be established for certain deferred tax assets when realization is not likely.

Assets and liabilities would be established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in the judgment of the Company, do not meet a more-likely-than-not threshold based on the technical merits of the positions. Valuation allowances would be established for certain deferred tax assets when realization is not likely.

Loss per Share

The Company computes net loss per share by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share would be computed by dividing net loss by the weighted-average of all potentially dilutive shares of common stock that were outstanding during the periods presented. The diluted earnings per share calculation is not presented as it results in an anti-dilutive calculation of net loss per share.

The treasury stock method would be used to calculate diluted earnings per share for potentially dilutive stock options and share purchase warrants. This method assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants would be used to purchase common shares at the average market price for the period.

Recently Issued Accounting Pronouncements

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

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, income taxes paid disaggregated by jurisdiction, and certain other amendments related to income tax disclosures. The Company adopted this guidance effective January 1, 2025. The adoption did not have a material impact on the Company's consolidated financial statements or disclosures, as the Company maintains a full valuation allowance against its net deferred tax assets and had minimal income tax activity during the year ended December 31, 2025.

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. The 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 currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

There are other various updates recently issued by the FASB, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

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

**NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS**

The Company recognizes revenue predominantly from the sale of equipment systems, construction design-build, and from other various immaterial contracts with customers from its CEA and Commercial sectors. The table below presents the revenue by source for the years ended December 31, 2025 and 2024:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** |
|  | **CEA** | **CEA** | **Commercial** | **Commercial** | **Total** | **Total** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
| Equipment systems | $8860619 | $12245675 | $70607 | $— | 8751226 | 12245675 |
| Construction design-build | 2709642 | 3230037 | 5757810 | 15374790 | 8467451 | 18604827 |
| Other | 76673 | 352798 | 104088 |  | 180761 | 352798 |
| &nbsp;&nbsp;&nbsp;Total revenues and other income | $11466934 | $15828510 | $5932505 | $15374790 | $17399438 | $31203300 |
| Relative percentage | 66% | 51% | 34% | 49% | 100% | 100% |

---

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

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

When establishing the selling price to the customer, the Company uses various observable inputs. For equipment systems, the stand-alone selling price is determined by forecasting the expected costs of the products, and then adding in the appropriate margins established by the contract. For service revenues and construction design-build revenues, the Company estimates the selling price by reference to certain physical characteristics of the project, which include the facility size, the complexity of the design, and the mechanical systems involved, which are indicative of the scope and complexity of those services. Significant judgments are typically not required with respect to the determination of the transaction price based on the nature of the selling prices of the products and services delivered and the collectability of those amounts. Accordingly, the Company does not consider estimates of variable consideration to be constrained. Warranty in respect of equipment are directly handled by the manufacturers of the equipment and company does not incur any warranty cost. There are no warranties in respect of the other segments of operations.

The Company recognizes equipment systems, services, and construction design-build revenues when the performance obligation with the customer is satisfied. For satisfaction of equipment system revenues the control of the promised good happens either on shipment or on delivery of goods at the delivery point identified by the customer, the Company recognizes revenue when the shipment is made unless a notice of non delivery is received from the customer within the agreed time. For service revenues, satisfaction occurs as the services related to the distinct performance obligations are rendered or completed in exchange for consideration in an amount for which the Company is entitled. The time period between recognition and satisfaction of performance obligations is generally within the same reporting period; thus, there are no material unsatisfied or partially unsatisfied performance obligations for product or service revenues at the end of the reporting period.

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

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

The timing of when the Company bills customers on long-term construction design-build contracts is generally dependent upon agreed-upon contractual terms, which may include milestone billings based on the completion of certain phases of the work, or when services are provided. When as a result of contingencies, billings cannot occur until after the related revenue has been recognized; the result is unbilled revenue, which is included in contract assets. Additionally, the Company may receive advances or deposits from customers before revenue is recognized; the result is deferred revenue, which is included in contract liabilities. Retainage subject to conditions other than the passage of time are included in contract assets and contract liabilities. The payment terms are predominantly based on a standard credit period of 30 days on submission of the proof of completion of work. The contract in certain cases also provides for advances being received which are dealt with in the manner discussed herein.

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

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

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| *Contract assets* |  |  |
| Revenue recognized in excess of amounts paid or payable (contract receivables) to the Company on uncompleted contracts (contract asset), excluding retainage | $4034280 | $3757641 |
| Retainage included in contract assets due to being conditional on something other than solely passage of time | - | 375176 |
| Less:-Contract receivable write-off | (4034280) | - |
| Total contract assets | $- | $4132817 |
| *Contract liabilities* |  |  |
| Payments received or receivable (contract receivables) in excess of revenue recognized on uncompleted contracts (contract liability), excluding retainage | $13353976 | $13930251 |
| Retainage included in contract liabilities due to being conditional on something other than solely passage of time | 103381 | 163925 |
| Total contract liabilities | $13457357 | $14094176 |

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Of the $14,094,176 in total contract liabilities at December 31, 2024, $2,102,857 related to one customer that was recognized as revenue in 2025.

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

During the year ended December 31, 2025, the Company recognized an impairment loss of $4,034,280 on contract assets arising from contracts with customers primarily arising out of work having been completed and revenue recognized in line with the accounting policy but the certainty of collection or right to adjust with advances received not established. The impairment was determined based on management's assessment of the estimated recoverable amounts considering the Company's planned merger in the first quarter of 2026, which indicated that the carrying value of certain contract assets was no longer recoverable. The impairment loss has been recognized in general and administrative expenses in the accompanying consolidated statement of operations in accordance with ASC 340-40.

During the year ended December 31, 2025, the Company discontinued its service operations, including architectural and engineering design services, as part of the disposition and wind-down of its Services segment. As a result, service revenues are not anticipated in future periods. Refer to Note 4 – Discontinued Operations for further details.

**NOTE 4 – DISCONTINUED OPERATIONS**

During the year ended December 31, 2025, the Company completed the disposition and wind-down of its discontinued operations. Accordingly, the assets and liabilities previously classified as discontinued operations have been fully disposed of and are no longer reflected on the consolidated balance sheet as of December 31, 2025.

As of December 31, 2024, assets of discontinued operations consisted of current assets of $2,319,074 and non-current assets of $2,322,308. Liabilities of discontinued operations consisted of current liabilities of $1,837,709 and non-current liabilities of $690,444.

The results of operations, including any gain or loss on disposal, and cash flows of the discontinued operations have been reported separately in the consolidated financial statements for all periods presented in accordance with ASC 205-20, *Discontinued Operations*.

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

The total purchase price for the transaction was $2,000,000.

The Purchase Agreement includes customary representations and warranties, covenants, and mutual indemnification provisions between the parties. The agreement also contains non-competition and non-solicitation provisions applicable to the Seller Parties for a specified period following the closing. The Company recorded the disposition in the third quarter of 2025.

In connection with the August 27, 2025 Stock and Asset Purchase Agreement, 2WR Holdco, LLC also acquired the customer list of 2WR of Colorado, Inc. for $143,000 in cash.

In connection with the sales described above, the Company discontinued the operations of the remaining Services companies - Urban Grow Engineering "UGENG". The table below outlines the loss (gain) on sale or discontinuation of the Services companies comprising of assets taken over and written off pursuant to the sale..

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **2WRGA** | **2WRCO** | **2WRMS** | **UGENG** | **Total** |
| **<u>Carrying amount of assets and liabilities:</u>** |  |  |  |  |  |
| Cash | $12452 | $- | $- | $- | $12452 |
| Accounts receivable, net | 408368 | 196199 | 20052 | 74099 | 698718 |
| Prepaid expenses and other current assets | 2263 | 2855 | 1356 | 4879 | 11353 |
| Property and equipment, net |  | 10211 |  | 60667 | 70878 |
| Operating lease right-of-use assets | 54576 | 9876 |  | 39991 | 104443 |
| Goodwill |  | 1080638 |  |  | 1080638 |
| Intangible assets, net | 52031 | 71799 |  |  | 123830 |
| Accounts payable | (483352) |  |  |  | (483352) |
| Accrued expenses |  | (2816) |  | 141102 | 138286 |
| Customer deposits |  |  |  | 8500 | 8500 |
| Operating lease liabilities, current | (43308) |  |  |  | (43308) |
| Operating lease liabilities, long-term | (3506) | - | - | - | (3506) |
| **Total carrying amount (net)** | **(476)** | **1368762** | **21408** | **329238** | **1718932** |
| Less: Consideration from sale of shares of stock and assets |  |  |  |  | (2000000) |
| Less: Consideration from sale of customer list |  |  |  |  | (143000) |
| **Gain on sale or discontinuation of subsidiary companies** |  |  |  |  | $**(424068)** |

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The net gain on sale or discontinuance of subsidiaries is included as a component of discontinued operations, net of tax and reflected in the table below.

In accordance with the provisions of ASC 205-20, the Company has excluded the results of discontinued operations from its results of continuing operations in the accompanying consolidated statements of operations for the years ended December 31, 2025 and 2024. The results of the discontinued operations for the years ended December 31, 2025 and 2024 consist of the following:

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| | | |
|:---|:---|:---|
|  | **Years Ended** | **Years Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Revenues |  |  |
| &nbsp;&nbsp;&nbsp;Services | $3471947 | $8805550 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | 3471947 | 8805550 |
| Cost of revenue |  |  |
| &nbsp;&nbsp;&nbsp;Services | 2773820 | 5548438 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of revenue | 2773820 | 5548438 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit | 698127 | 3257112 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 1449440 | 4735926 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 92450 | 306591 |
| &nbsp;&nbsp;&nbsp;Impairment of goodwill and intangibles | - | 5323447 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 1541890 | 10365964 |
| Loss from discontinued operations | (843763) | (7108852) |
| Non-operating income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;Gain on sale of subsidiaries and assets | 424068 | - |
| &nbsp;&nbsp;&nbsp;Interest expense | - | (2802) |
| &nbsp;&nbsp;&nbsp;Other income (expense) | - | (24894) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-operating income (expense) | 424068 | (27969) |
| Income (loss) before income taxes | (419695) | (7136548) |
| Income tax benefit | - | - |
| Net loss from discontinued operations, net of tax | $(419695) | $(7136548) |
| Net loss per share from discontinued operations-basic and diluted | $(0.79) | $(14.30) |
| Weighted average common shares outstanding - basic and diluted | 528270 | 499089 |

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**NOTE 5 – RELATED PARTY TRANSACTIONS**

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

There were no revenues from related party entities for the years ended December 31, 2025 and 2024.

The table below presents the revenues from related parties:

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| | | |
|:---|:---|:---|
|  | **Years Ended** | **Years Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Potco | $- | $120751 |
| Total Revenue | $- | $120751 |

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**NOTE 6 – PREPAID EXPENSES AND OTHER CURRENT ASSETS**

Prepayments and other assets are comprised of prepayments paid to vendors to initiate orders and prepaid services and fees. The prepaid balances are summarized as follows:

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Vendor prepayments | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | $1355929 |
| Prepaid services and fees | - | 877469 |
| Inventories |  | 222581 |
| Other current assets | - | 23283 |
| Total Prepaid expenses and other assets | $- | $2479262 |

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The decrease in prepaid expenses includes amounts disposed of in connection with the August 27, 2025 sale of certain subsidiaries. See note 4 – disposition

Inventories

Inventories, consisting primarily of finished goods, are stated at the lower of cost or net realizable value, with cost determined using the weighted-average cost method. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold at the realization of change in value. Once written down, inventories are carried at this lower basis until sold or scrapped.

During the year ended December 31, 2025, the Company recorded an inventory write-down of $172,920 to reflect the net realizable value of its inventory. The write-down was primarily driven by management's evaluation of inventory that is not expected to be utilized or recovered in connection with the Company's planned merger in the first quarter of 2026. The write-down has been included in cost of revenue in the accompanying consolidated statement of operations in accordance with ASC 330-10.

**NOTE 7 – PROPERTY AND EQUIPMENT, NET**

Property and Equipment, net balances are summarized as follows:

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Computers and technology equipment | $326959 | $321421 |
| Furniture and fixtures | 209805 | 209805 |
| Leasehold improvements | 133426 | 133426 |
| Vehicles |  | 417644 |
| Software | 1259016 | 383857 |
| R&D Assets | 87425 |  |
| Other equipment | 34064 | 121489 |
| Impairment of property and equipment | (566609) | - |
| Accumulated depreciation | (1484086) | (1507854) |
| Total Property and equipment, net | $- | $813452 |

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The total depreciation expense for the years ended December 31, 2025 and 2024 was $349,364 and $607,466, respectively.

During the year ended December 31, 2025, the Company performed an impairment assessment of its long-lived assets in accordance with ASC 360-10. As a result of the planned merger in the first quarter of 2026, certain property, plant and equipment were determined to have carrying values in excess of their estimated recoverable amounts. The impairment charge has been presented as a separate line item within operating expenses in the accompanying consolidated statement of operations."

**NOTE 8 – GOODWILL & INTANGIBLE ASSETS**

The Company had recorded goodwill and intangibles in conjunction with the acquisitions it had completed. Goodwill was not amortized. The Company did not record any impairment charges related to goodwill for the years ended December 31, 2025 and 2024. The Company's goodwill and intangible assets were fully written off in connection with the August 27, 2025 sale of certain subsidiaries and related assets and discontinuing the operations of the Services segment. As a result, the balances of goodwill and intangible assets were $0 as of December 31, 2025 and 2024. See Note 4 – Dispositions for further details.

**NOTE 9 – ACCRUED EXPENSES**

Accrued expenses are summarized as follows:

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Accrued operating expenses | $415096 | $666624 |
| Accrued wages and related expenses | 300996 | 414869 |
| Business development accrual | - | - |
| Accrued interest expense | 529313 | 68115 |
| Accrued 401(k) | 18191 | 17138 |
| Accrued sales tax payable | 4728074 | 2850399 |
|  | $5708526 | $4017145 |

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Accrued sales tax payable is comprised of amounts due to various U.S. states and Canadian provinces for the years 2017 through current. The Company has been accruing estimated interest and penalties on these outstanding amounts. Periodically, certain U.S. states have contacted the Company regarding amounts owed; however, no state has taken formal enforcement or collection action against the Company to date. Canadian tax authorities have not contacted the Company with respect to the Canadian amounts reflected herein. The Company intends to proactively reach out to all relevant taxing authorities to negotiate payment plans and settlements once sufficient funds are available. Management believes it may be possible to settle these liabilities for amounts less than the total accrued balance; however, no assurance can be given as to the ultimate settlement amounts. Accordingly, the full accrued liability is reflected in the accompanying consolidated balance sheet at the amount recorded in the Company's books.

Certain accrued liabilities were settled or transferred in connection with the August 27, 2025 sale of certain subsidiaries and related assets. See Note 4 – Dispositions for further details.

**NOTE 10 – NOTES PAYABLE**

The table below presents amounts due for notes payable as of December 31, 2025 and 2024.

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Gemini line of credit | $1158522 | $4405402 |
| DVO note | - | 135 |
| Grow hill note, net | 1370531 | 1652071 |
| Agile capital | 675000 | - |
| J brothers | 320962 | - |
| Other financing agreements | 8240 | 706068 |
| Total | 3533255 | 6763676 |
| Less current portion | (3533255) | (5968145) |
| Notes payable, long-term | $- | $795531 |

---

*Revolving Line of Credit with Gemini Finance Corp.*

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. At closing of the Line of Credit, the Placement Agent earned a cash fee of $200,000. In addition to the cash fee, the Company issued to the Placement Agent or its designees, $200,000 worth of warrants (the "Placement Agent's Warrants") to purchase the Company's common stock at a price per share equal to 110% of the daily volume weighted average closing price of the Company's common stock on the Nasdaq exchange for a period consisting of ten (10) consecutive trading days ending on and inclusive of the trading day of the Closing. The Placement Agent's Warrants are exercisable at any time and from time to time, in whole or in part, during the four and a half-year period commencing six (6) months from the date of issuance. The Placement Agent's Warrants provide for registration rights (including a one-time demand registration right and unlimited piggyback rights), cashless exercise and customary anti-dilution provisions (for stock dividends and splits) and anti-dilution protection (adjustment in the number and price of such warrants and the shares underlying such warrants) resulting from corporate events (which would include dividends, reorganizations, mergers, etc.).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. If and when Emerald draws more than $4,500,000 from the Line of Credit, the Placement Agent will earn an additional cash fee of $200,000, and an additional $200,000 worth of Placement Agent's Warrants to purchase the Company's common stock at a price per share equal to 110% of the daily volume weighted average closing price of the Company's common stock on the Nasdaq exchange for a period consisting of ten (10) consecutive trading days ending on and inclusive of the trading day of the date that the draws exceeding $4,500,000 were to take place.

Line of Credit Amendment – On March 18, 2025, UG Construction entered into an agreement with the "Lender") to amend the terms of the original Loan Agreement and Promissory Note and waiver (the "Amendment") between UG Construction and the Lender. Pursuant to the Amendment, the Lender waived any potential or perceived events of default arising under certain circumstances, which events did not constitute specified events of default under the Promissory Note or the Loan Agreement. Pursuant to the Amendment, the Promissory Note was amended to provide that (i) the term during which the Lender may consider advances under the Loan Agreement has been extended to January 1, 2026, and (ii) the interest applied on the outstanding principal amount of the Promissory Note will accrue interest at a monthly rate of 1.75%, and all accrued by unpaid interest shall be paid to the Lender on the first business day of each month for the prior month. The Amendment also amended the Loan Agreement to require monthly reporting of certain accounts receivable and to include a covenant that such accounts receivable equal or exceed 125% of the sum of the total amount drawn down under the Promissory Note, plus outstanding interest, as of the applicable measurement date. In connection with the execution of the Amendment, the Company issued to the Lender, as an amendment fee, 150,000 share of the Company's common stock, par value $0.001 per share, or 6,000 shares after giving effect to a 1-for-25 reverse stock split (the "Fee Shares") of the Company's common stock, par value $0.001 per share. This resulted in an expense of $109,500, which is included in interest expense on the condensed consolidated statement of operations.

Between October and December 2025, the Company entered into a settlement agreement with Gemini to extinguish the outstanding debt through the issuance of equity in three tranches:

● Tranche 1 (October 2025): 28,000 shares issued for total consideration of $159,500

● Tranche 2 (November 2025): 28,000 shares issued for total consideration of $159,500

● Tranche 3 (December 2025): 28,000 shares issued with no stated consideration ($0)

Total shares issued under the settlement agreement were 84,000 shares, with aggregate consideration of $319,000.

The Company accounted for these transactions in accordance with ASC 470-50-40. The debt was derecognized and replaced with equity based on the fair value of the shares issued (or the carrying value of the debt, if more reliably measurable).

The transactions were measured at the fair value of the equity instruments issued (shares of common stock at the quoted market price on the date of issuance) per ASC 470-50-40. The difference between the carrying amount of the debt extinguished and the fair value of equity issued was recognized as a gain or loss on debt extinguishment in the consolidated statement of operations.

*Loan Agreement with Grow Hill, LLC*

 

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Loan
 Details

● Principal Amount: $2,000,000.

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

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

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Collateral
 and Security

● Collateral: Defined in the Security Agreement.

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The loan became effective on October 1, 2024, when the Company issued Warrants to the Grow Hill for 160,000 shares of Borrower's common stock at $2.50/share, or 6400 shares after giving effect to a 1-for-25 reverse stock split, exercisable immediately and valid for five years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Covenants:

● Affirmative Covenants:

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

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

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

● Negative Covenants:

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

Maintain a Receivable Ratio of at least 2.00:1.00, calculated monthly. The Company was unable to maintain this ratio and was accordingly in breach of this covenant, constituting an event of default under the Grow Hill Secured Promissory Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Events
 of Default

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

● Consequences of default under the Grow Hill Secured Promissory Note: Grow Hill may accelerate repayment, enforce security interests, or exercise other remedies available under the agreement.

*Business Loan and Security Agreement with Agile Entities*

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

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

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

*Truist Line of Credit*

 

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

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

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

*Settlement Agreement and Promissory Note with J Brrothers LLC*

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

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

*Other* 

 

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

**NOTE 11 – RIGHT OF USE ASSETS AND LIABILITIES**

As of December 31, 2025 and 2024, the Company has four operating type leases with an imputed annual interest rate of 11%. The remaining lease terms range from less than one year to 3 years, as of December 31, 2025.

In connection with the divestiture described in Note 4, certain operating leases previously associated with the divested entities and operations were transferred to the Buyer and are no longer reflected in the Company's consolidated balance sheet as of December 31, 2025.

As a result of the divestiture, the number of operating leases decreased from seven as of December 31, 2024 to 4 as of December 31, 2025. The remaining lease terms range from less than one year to 3 years as of December 31, 2025. The CEA-related operations and their associated leases were retained by the Company and continue to be reflected in the accompanying consolidated financial statements. As the Company has wound down its CEA operations, the remaining four leases are under non-cancellable terms. The Company is currently evaluating its options with respect to these obligations, including subletting, negotiating early termination, or allowing the leases to expire at the end of their respective terms.

As of December 31, 2025 and 2024, right of use assets were $321,303 and $550,175, respectively, and for the years ended December 31, 2025 and 2024 lease expense was $277,997 and $277,997, respectively.

The following is a summary of finance and operating lease liabilities:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Operating lease liabilities related to right of use assets | $286188 | $497053 |
| Finance lease liability | 51762 | 74425 |
| Less current portion | (222870) | (235223) |
| Long term | $115080 | $336255 |

---

The following is a schedule showing total future minimum lease payments for the Company's operating leases:

---

| | |
|:---|:---|
| <br>**Period Ended December 31,** | **Minimum**<br>**Lease**<br>**Payments** |
| 2026 | 218700 |
| 2027 | 91348 |
| Total lease payments | 310048 |
| Less imputed interest | (23860) |
| Net lease obligations | $286188 |

---

**NOTE 12 – COMMITMENTS AND CONTINGENCIES**

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

***Gemini Loan Agreement Amendment and Default***

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

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

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

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

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

---

| | |
|:---|:---|
|  | **Amount** |
| Gross receivables of Emerald | $2923501 |
| Less:-Notes payable | 450000 |
| Loss on assets foreclosure | $2473501 |

---

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

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

 ****

 **

***Grow Hill Default***

 **

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

 ****

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

The Company has accrued the outstanding note balance of $1,370,531 (net of warrant discount) as of December 31, 2025. The Company believes additional losses beyond the accrued amount are reasonably possible but not probable under ASC 450-20. No additional accrual has been recorded for the fraud allegation. Subsequent to year-end, the Company is in discussions for the Grow Hill debt to be acquired by a third party, which is expected to resolve the litigation.

***J Brrothers Settlement***

 ****

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

 ****

***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 $1,522,716 to RK as a result of alleged breach of contract, breach of implied covenant of good faith and fair dealing, violation of the Arizona Prompt Payment Act, and lien foreclosure. On or about October 2025, a default judgment was entered against UG Construction for $1,511,716, plus prejudgment interest of $288,346 and post-judgment interest at 8.25% plus $10,057 in attorney fees.

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 $380,932 plus interest and attorneys' fees in connection with a contract pursuant to which Action leased equipment to UG Construction, and alleged breach of contract, breach of covenant of good faith and fair dealing, and unjust enrichment. The Company assesses the outcome as reasonably possible but not probable under ASC 450-20. No accrual has been recorded.

***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 $650,000 which, pursuant to the Colorado Wage Claim Act ("CWA"), were earned, vested, and determinable wages that were due and payable immediately upon his discharge. Further, the complaint alleged that Mr. Cullens is entitled to a severance package that includes nine (9) months of his base salary and nine (9) months of COBRA premium payments.

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.

**NOTE 13 – RISKS AND UNCERTAINTIES**

Concentration Risk

The tables below show customers who account for 10% or more of the Company's total revenues and 10% or more of the Company's accounts receivable for the periods presented:

*Customers exceeding 10% of revenue*

---

| | | |
|:---|:---|:---|
| | **Years Ended** | **Years Ended** |
| | **December 31,** | **December 31,** |
| <br>**Company Customer Number** | **2025** | **2024** |
| C000001462 | \* | 27% |
| C000002187 | \* | 23% |
| C000002552 | 12% | \* |
| C000001462 | 10% | \* |
| C000002607 | 18% | \* |
| C000002722 | 21% | \* |
| C000002655 | 61% | 39% |

---

*Customers exceeding 10% of accounts receivable*

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| <br>**Company Customer Number** | **2025** | **2024** |
| C000002187 | \* | 19% |

---

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

 *vendors exceeding 10% of purchases*

---

| | | |
|:---|:---|:---|
| | **Years Ended** | **Years Ended** |
| | **December 31,** | **December 31,** |
| <br>**Company Vendor Number** | **2025** | **2024** |
| V000002503 | \* | 16% |
| V000001029 | 15% | \* |

---

\* Amounts less than 10%

Foreign Exchange Risk

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

**NOTE 14 – STOCK-BASED COMPENSATION**

Stock-based compensation expense for the years ended December 31, 2025 and 2024 was $826,471 and $1,426,877 respectively, all of which relates to RSU vestings and board grants. No compensation expense was recognized from stock option activity during either year, as no options were granted or exercised in 2025 or 2024." During the year ended December 31, 2025, 20,649 RSUs vested and were issued to employees and directors. During the year ended December 31, 2024, 19,101 RSUs vested and were issued to employees and directors. No cash flow effects are anticipated for stock grants.

The Company's shareholders approved the 2021 Omnibus Stock Incentive Plan, as amended (the "Omnibus Incentive Plan"), which provides for the issuance of incentive stock options, stock grants and stock-based awards to employees, directors, and consultants of the Company to reward and attract employees and compensate the Company's Board of Directors (the "Board") and vendors when applicable, up to an aggregate 1,100,000 authorized shares of common stock. In 2023, an additional 1,200,000 shares were authorized by the shareholders. The Omnibus Incentive Plan is administered by the Company's Board. Grants of RSUs under the Omnibus Incentive Plan are valued at no less than the market price of the stock on the date of grant. The fair value of the options is calculated using the Black-Scholes pricing model based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the options, risk-free interest rate and expected volatility of the price of the underlying common stock of 100%. There is a moderate degree of subjectivity involved when estimating the value of stock options with the Black-Scholes option pricing model as the assumptions used are moderately judgmental. Stock grants and stock options are sometimes offered as part of an employment offer package, to ensure continuity of service or as a reward for performance. Stock grants and stock options typically require a 1 to 3 year period of continued employment or service performance before the stock grant of RSUs or stock option vests.

The following schedule shows grants of RSU activity for the years ended December 31, 2025 and 2024:

---

| | |
|:---|:---|
|  | **Number of<br> Shares** |
| **Grants unissued as of December 31, 2023** | **23176** |
| Grants awarded | 50042 |
| Forfeiture/cancelled | (3853) |
| Grants vested and issued | (19102) |
| **Grants unissued as of December 31, 2024** | **50263** |
| Grants awarded |  |
| Forfeiture/cancelled |  |
| Grants vested and issued | (20649) |
| **Grants unissued as of December 31, 2025** | **29614** |

---

The following table summarizes grants of RSU vesting periods:

---

| | | |
|:---|:---|:---|
| **Number of Shares** | **Unrecognized Stock<br> Compensation Expense** | **As of**<br> **December 31,** |
| 16158 | $172605 | 2026 |
| 12470 | 11373 | 2027 |
| 986 | - | 2028 |
| **29614** | $**183978** |  |

---

The following schedules show stock option activity for the years ended December 31, 2025 and 2024:

---

| | | | |
|:---|:---|:---|:---|
|  | **Options** | **Weighted<br> Average<br> Remaining<br> Life (Years)** | **Weighted<br> Average<br> Exercise<br> Price** |
| Outstanding as of December 31, 2023 | 20073 | 4.67 | $170.25 |
| Issued |  |  |  |
| Exercised |  |  |  |
| Forfeited | (1784) |  | 169.50 |
| Outstanding as of December 31, 2024 | 18289 | 7.85 | 169.25 |
| Granted |  |  |  |
| Exercised |  |  |  |
| Forfeited | - |  |  |
| Outstanding as of December 31, 2025 | 18289 | 6.85 | $169.25 |
| Exercisable as of December 31, 2025 | 18289 | 6.85 | $169.25 |
| Exercisable as of December 31, 2024 | 18178 | 7.85 | $170.50 |

---

The following table summarizes stock option vesting periods under the Incentive Plans:

---

| | | |
|:---|:---|:---|
| **Number of Shares** | **Unrecognized Stock <br> Compensation Expense** | **As of <br> December 31,** |
| 2768 | $1511 | 2025 |

---

The aggregate intrinsic value of the stock options outstanding and exercisable at December 31, 2025 is $0.

**NOTE 15 – STOCKHOLDERS' DEFICIT**

*Common Stock*

 

The Company is authorized to issue 200,000,000 shares of common stock at $0.001 par value. At December 31, 2025 and 2024, there were 710,025 and 562,855 shares of common stock outstanding, respectively, after giving effect to the 1-for-25 reverse stock split effective February 9, 2026.

During the year ended December 31, 2025, the Company issued the following shares of common stock (all share amounts presented on a post-reverse stock split basis):

● 20,649 shares pursuant to the vesting of restricted stock unit grants under the Company's 2021 Omnibus Stock Incentive Plan;

● 6,000 shares to Gemini Finance Corp. as an amendment fee in connection with the amendment to the Loan Agreement and Promissory Note, valued at $109,500;

● 56,000 shares to Gemini Finance Corp. pursuant to the first and second tranches of the Gemini Settlement Agreement under Section 3(a)(10) of the Securities Act, valued at $319,000;

● 28,000 shares to Gemini Finance Corp. pursuant to the third tranche of the Gemini Settlement Agreement;

● 6,000 shares to J Brothers LLC in connection with a settlement agreement, valued at $53,550;

● 30,521 shares to Hudson Global Ventures LLC, valued at $267,819;

*Preferred Stock*

 

The Company is authorized to issue 3,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company's Board of Directors. The preferred stock has a par value of $0.10. As of December 31, 2025 and 2024, there were no shares of preferred stock outstanding.

 

*Treasury Stock*

As of December 31, 2025 and 2024, there were 57,993 shares of treasury stock outstanding, after giving effect to the 1-for-25 reverse stock split that was effective on February 9, 2026.

**NOTE 16 – INCOME TAXES**

The Company accounts for income taxes in accordance with the asset and liability method prescribed in ASC 740, "Accounting for Income Taxes." The Company has adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income tax returns that were considered to be uncertain.

The Company has experienced cumulative losses for both book and tax purposes since inception. The potential future recovery of any tax assets that the Company may be entitled to due to these accumulated losses is uncertain and any tax assets that that the Company may be entitled to have been fully reserved based on management's current estimates. Management intends to continue maintaining a full valuation allowance on the Company's deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

The income tax benefit for the years ended December 31, 2025 and 2024 are as follows:

---

| | | |
|:---|:---|:---|
|  | **Years Ended** | **Years Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Current: |  |  |
| &nbsp;&nbsp;&nbsp;Federal | - | - |
| &nbsp;&nbsp;&nbsp;State | - | - |
| &nbsp;&nbsp;&nbsp;Foreign | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current | - | - |
| Deferred: |  |  |
| &nbsp;&nbsp;&nbsp;Federal | $(14608) | $(29705) |
| &nbsp;&nbsp;&nbsp;State | - | - |
| &nbsp;&nbsp;&nbsp;Foreign | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred | $(14608) | $(29705) |
| Total income tax expense (benefit) | $(14608) | $(29705) |

---

A reconciliation between the expected income tax provision at the federal statutory tax rate and the reported income tax provision for the periods ended are approximately as follows:

---

| | | |
|:---|:---|:---|
|  | **Years Ended** | **Years Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Statutory Federal income tax rate | 21.0% | 21.0% |
| State and local income taxes, net of federal benefit | 3.8% | 3.8% |
| Stock-based compensation | -1.9% | 0.0% |
| Impairment of property and equipment | -0.8% | 0.0% |
| Change in valuation allowance | -22.0% | -22.0% |
| Change in state effective tax rate | 0.0% | -1.9% |
| Permanent differences - other | -0.1% | 0.0% |
| Goodwill impairment | 0.0% | 0.0% |
| Other | 0.2% | -0.8% |
| Effective income tax rate | 0.0% | 0.0% |

---

The tax effects of significant items comprising the Company's deferred taxes as of December 31, 2025 and 2024 are as follows (in thousands):

---

| | | |
|:---|:---|:---|
|  | **Years Ended** | **Years Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Deferred tax assets: |  |  |
| &nbsp;&nbsp;&nbsp;Federal, state and foreign NOL carryover | $19715000 | $14980000 |
| &nbsp;&nbsp;&nbsp;Lease liabilities | 81000 | 369000 |
| &nbsp;&nbsp;&nbsp;Bad debts and other reserves | - | 766000 |
| &nbsp;&nbsp;&nbsp;Fixed assets | - | 113000 |
| &nbsp;&nbsp;&nbsp;Investments | 20239 | 23000 |
| &nbsp;&nbsp;&nbsp;Share-based compensation | 706000 | 532000 |
| &nbsp;&nbsp;&nbsp;Interest expense limitation (§163(j)) | 717000 | 283000 |
| &nbsp;&nbsp;&nbsp;Other | 50000 | 195000 |
| Total deferred tax assets | 21287239 | 17261000 |
| Valuation allowance | (21287239) | (17829000) |
| Net deferred tax assets | - | (568000) |
| Deferred tax liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Goodwill | - | 689000 |
| &nbsp;&nbsp;&nbsp;Intangible assets | - | 223000 |
| &nbsp;&nbsp;&nbsp;ROU assets | - | (359000) |
| Total deferred tax liabilities | - | 553000 |
| Net deferred tax asset (liability) | $- | $(15000) |

---

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Valuation Allowance Rollforward: |  |  |
| &nbsp;&nbsp;&nbsp;Beginning balance | (17829000) | (9786000) |
| &nbsp;&nbsp;&nbsp;Change in valuation allowance | (3458239) | (8043000) |
| &nbsp;&nbsp;&nbsp;Reductions for dispositions/write-offs | - | - |
| Ending balance | $(21287239) | $(17829000) |

---

At December 31, 2025, the Company had $76.7 million of federal net operating loss which are set to expire beginning in 2037. The Internal Revenue Code contains provisions that may limit the net operating loss carryovers available to be used in any year if certain events occur, including significant changes in ownership interest.

Below is a table showing the gross net operating loss carryovers available at December 31, 2025 and their respective expiration:

---

| | | |
|:---|:---|:---|
|  | **Amount** | **Expiration** |
| Federal NOL — with expiration | $1945019 | 2037 |
| Federal NOL — indefinite life | $73121000 | Indefinite |
| Total Federal NOL | $75066019 |  |
| Various State NOL | $54000000 | 2037-2043 |
| Canada NOL | $1925000 | 2042 |
| Netherlands NOL | $2246000 | Indefinite |

---

In assessing the realizability of its deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As the Company evaluate the reversal of deferred tax liabilities, projections of future taxable income over the periods in which the deferred tax assets are deductible, and after consideration of the history of operating losses, the Company does not believe it is more likely than not that it will realize the benefits of net deferred tax assets and, accordingly, has established a valuation allowance on the net deferred tax assets. The valuation allowance increased by $3.5 million during 2025.

As of December 31, 2025 and 2024, the company has not recorded any unrecognized tax benefits related to uncertain tax positions. The Company does not believe it is reasonably possible that its unrecognized tax benefits will significantly change in the next twelve months.

The Company monitors proposed and issued tax law, regulations, and cases to determine the potential impact of uncertain income tax positions. At December 31, 2025, the Company had not identified any potential subsequent events that would have a material impact on unrecognized income tax benefits within the next twelve months.

Federal and State tax returns are open for examination for the tax years beginning December 31, 2017 for three years and four years from the date of utilization of any net loss carryforwards.

Realization of operating loss carryforwards to offset future operating income for tax purposes are subject to various limitations including change of ownership and current year taxable income percentage limitations. The Company has no credit carryforwards for tax purposes.

The Company's primary filing jurisdictions are the United States, Canada, and the Netherlands. Due to the Company's net operating loss carryforwards, the Company's income tax returns remain subject to examination by federal, foreign and most state taxing authorities for all tax years.

**NOTE 17 – WARRANTS**

The following table shows warrant activity for the years ended December 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **Warrants** | **Weighted<br> Average<br> Exercise<br> Price** |
| Outstanding as of December 31, 2023 | 20467 | $218.50 |
| Exercised |  |  |
| Terminated/Expired | (1026) | 361.50 |
| Issued | 6400 | 62.50 |
| Outstanding as of December 31, 2024 | 25841 | 174.25 |
| Exercised |  |  |
| Terminated/Expired |  |  |
| Issued | - |  |
| Outstanding as of December 31, 2025 | 25841 | $174.25 |
| Exercisable as of December 31, 2025 | 25841 | $174.25 |
| Exercisable as of December 31, 2024 | 25841 | $174.25 |

---

The fair value of the warrants is calculated using the Black-Scholes pricing model based on the estimated market value of the underlying common stock at the valuation measurement date, the contractual term of the options, the risk-free interest rate at the date of grant and expected volatility of the price of the underlying common stock of 100%. There is a moderate degree of subjectivity involved when estimating the value of warrants with the Black-Scholes option pricing model as the assumptions used are moderately judgmental.

**NOTE 18 – SEGMENTS**

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

The Company has identified the following continuing operating segments for fiscal year 2025. The Services segment was classified as discontinued operations effective August 27, 2025 and its results have been excluded from the segment disclosures below. See Note 4 – Discontinued Operations for further detail.

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

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

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

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

The following tables present financial information relating to our operating segments for the fiscal years ended December 31, 2025 and 2024:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Year ended December 31, 2025** | **Year ended December 31, 2025** | **Year ended December 31, 2025** | **Year ended December 31, 2025** |
|  | **Equipment** | **Construction** | **Corporate/other** | **Total** |
| Revenues | $8751226 | $8467451 | $180761 | 17399438 |
| Cost of revenues | 8344998 | 8730918 | 148968 | 17224884 |
| Gross profit | $406228 | $(263467) | $31793 | $174554 |
| Gross profit % | 5% | -3% | 18% | 1% |
| Income (Loss) before income taxes | $(8102710) | $(13432133) | $(159101) | $(21693945) |
| Total assets | $141844 | $190103 | $- | $331947 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Year ended December 31, 2024** | **Year ended December 31, 2024** | **Year ended December 31, 2024** | **Year ended December 31, 2024** |
|  | **Equipment** | **Construction** | **Corporate/other** | **Total** |
| Revenues | $12245675 | $18604827 | $352798 | 31203300 |
| Cost of revenues | 10582731 | 20782689 | 226611 | 31592031 |
| Gross profit (loss) | $1662944 | $(2177862) | $126187 | $(388731) |
| Gross profit (loss) % | 14% | -12% | 36% | -1% |
| Income (Loss) before income taxes | $(10978807) | $(17102560) | $(1307616) | $(29388983) |
| Total assets | $4727454 | $10036318 | $135.910 | $14899682 |

---

**NOTE 19 – SUBSEQUENT EVENTS**

***Completion of the Merger***

 ****

On February 17, 2026, the Company completed the Merger with Flash Sports and Media, Inc. pursuant to the Merger Agreement dated February 17, 2026. Under the terms of the Merger Agreement, Flash stockholders received (i) shares of UGRO Common Stock equal to 19.99% of the outstanding shares of UGRO calculated based on the outstanding shares immediately prior to the issuance of 1,000,000 shares of Common Stock on January 23, 2026 (adjusted to 40,000 shares following the reverse stock split) as disclosed in the Current Report on Form 8-K filed January 29, 2026, and (ii) shares of UGRO Non-Voting Convertible Preferred Stock to be issued pro rata in proportion to their respective stock ownership in Flash, in an aggregate amount such that, upon effectiveness of the conversion, the total number of shares of UGRO Common Stock issuable to the stockholders of Flash shall equal a number of shares determined by dividing Flash's agreed equity valuation by $3.23, representing the closing price of UGRO Common Stock on February 17, 2026. The conversion of the Preferred Stock is subject to approval by the Company's stockholders in accordance with Nasdaq Listing Rule 5635(d). As a result of the Merger, the Company believes it has stockholders' equity in excess of $2.5 million. On a pro forma basis as of December 31, 2024, the combined entity had total assets of approximately $265.4 million (including goodwill of approximately $225.5 million), total liabilities of approximately $79.3 million, and total stockholders' equity of approximately $186.1 million.

***Board and Management Changes***

 ****

Following the Merger, Anita Britt resigned from the Board of Directors effective February 17, 2026. Ms. Britt did not advise the Company of any dispute or disagreement with the Company on any matter relating to the Company's operations, policies, or practices. Effective February 18, 2026, Donald Fell was elected to the Board and appointed to serve as a member of the Audit Committee and the Nominating Committee. David Hsu was appointed Chair of the Audit Committee, replacing Ms. Britt. The Company appointed Richard Akright and Eric Sherb to serve as Co-Chief Financial Officers. Mr. Akright previously served as Chief Financial Officer of urban-gro, Inc. and brings deep public company financial reporting, compliance, and operational finance experience. Mr. Sherb previously served as Chief Financial Officer of Flash Sports and Media, Inc. and contributes significant expertise in strategic finance, growth initiatives, and capital markets. Bradley Nattrass continues to serve as Chairman and Chief Executive Officer of the combined company.

***Auditor Change***

 ****

On February 27, 2026, the Company dismissed Sadler, Gibb & Associates, LLC ("Sadler") as the Company's independent registered public accounting firm. The decision to dismiss Sadler was approved by the audit committee of the Company's board of directors. Sadler's reports on the Company's consolidated financial statements as of and for the fiscal years ended December 31, 2022, 2023 and 2024 did not contain any adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. From the date Sadler was engaged through the date of dismissal, there were no disagreements with Sadler on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, and there were no reportable events. On March 3, 2026, Suri and Co., Chartered Accountants of Chennai, India were appointed to audit the Company's financial statements for the year ended December 31, 2025.

***Nasdaq Compliance***

 ****

On January 6, 2026, the Company received a determination letter from Nasdaq stating that because the Company did not hold an annual meeting of stockholders within twelve months from the Company's prior fiscal year end as required by Nasdaq Listing Rule 5620(a), the resulting non-compliance would be an additional basis for delisting the Company's securities. The Panel requested that the Company present its views in writing by January 9, 2026. On January 13, 2026 the Panel notified the Company that it had granted a further extension to regain compliance with the Stockholders' Equity Requirement, the Annual Meeting Requirement, and the Timely Filing Requirement on or before February 17, 2026 and with the Bid Price Rule on or before February 24, 2026.

On March 4, 2026, the Company received written notice from the Listing Qualifications staff of Nasdaq informing the Company that it had regained compliance with the Stockholders' Equity Requirement, the Annual Meeting Requirement, and the Timely Filing Requirement. Nasdaq has placed the Company on a one-year Discretionary Panel Monitor under Listing Rule 5815(d)(4)(A) to ensure ongoing compliance.

***Reverse Stock Split***

 ****

On February 9, 2026, the Company effected a 1-for-25 reverse stock split of its common stock, as approved by stockholders on January 30, 2026. Trading on a split-adjusted basis commenced on February 9, 2026.

 ****

 ****

***Annual Meeting and Shareholder Approvals***

On January 30, 2026, the shareholders of the Company approved the following at the Company's 2025 Annual Meeting of Stockholders: (i) an amendment to the Company's 2021 Omnibus Stock Incentive Plan to increase the number of shares authorized for issuance under the plan by 5,000,000 shares (prior to any reverse stock split) and to increase the individual annual award limit to 500,000 shares (prior to any reverse stock split), or 20,000 shares after giving effect to the 1-for-25 reverse stock split; (ii) an amendment to the Company's Amended and Restated Certificate of Incorporation to effect a reverse stock split of the shares of the Company's common stock at a ratio of not less than 1-for-2 and not greater than 1-for-25, with the exact ratio, effective time, and decision to implement to be determined by the Board of Directors; and (iii) an amendment to the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock to 200,000,000 shares (the number of authorized shares of common stock is not affected by any reverse stock split).

***ELOC Purchase Agreement***

 ****

On February 4, 2026, the Company entered into an equity purchase agreement (the "ELOC Purchase Agreement") with Hudson Global Ventures, LLC (the "Investor"), pursuant to which the Company has the right, but not the obligation, to direct the Investor to purchase up to $25,000,000 of the Company's common stock (the "ELOC Shares") upon satisfaction of certain terms and conditions contained in the ELOC Purchase Agreement. Sales of the ELOC Shares, if any, are subject to certain limitations, and may occur from time to time at the Company's sole discretion over the approximately 24-month period commencing on the date of execution of the ELOC Purchase Agreement, unless the ELOC Purchase Agreement is earlier terminated pursuant to its terms.

The Investor has no right to require any sales by the Company but is obligated to make purchases at the Company's direction subject to certain conditions. Each purchase must involve an aggregate amount of shares of the Company's common stock of at least $25,000 but not exceeding the lesser of (i) $2,000,000 or (ii) 200% of the average daily trading volume of the common stock during the three trading days immediately before the date the Company directs the Investor to purchase the shares of common stock (the "Put Notice Date").

The purchase price to be paid by the Investor for the ELOC Shares will be the lesser of (i) ninety percent (90%) of the average of the three lowest traded prices of the Company's common stock during the ten trading days immediately preceding the date of the Put Notice (as defined in the ELOC Purchase Agreement) and (ii) ninety percent (90%) of the lowest traded price of the Company's common stock on any trading day during the period beginning on the date of delivery of the Put Notice and continuing through the date that is three trading days immediately following the Clearing Date (as defined in the ELOC Purchase Agreement).

Actual sales of ELOC Shares to the Investor from time to time will depend on a variety of factors, including, without limitation, market conditions, the trading price of the Company's common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations. The net proceeds that the Company may receive under the ELOC Purchase Agreement, if any, cannot be determined at this time, since the amount will depend on the frequency and prices at which the Company sells ELOC Shares to the Investor, the Company's ability to meet the conditions of the ELOC Purchase Agreement, the other limitations, terms and conditions of the ELOC Purchase Agreement, and any impacts of the beneficial ownership limitation (described below).

As consideration for the Investor's execution and delivery of the ELOC Purchase Agreement, the Company issued to the Investor certain common stock purchase warrant for the purchase of 55,556 shares of the common stock at an exercise price of $12.50 per share, subject to adjustment (the "Warrant"). Under the Warrant, the Investor may exercise the Warrant during the period commencing on February 4, 2026 and ending on 5:00 p.m. eastern standard time on the date that is five (5) years after February 4, 2026. In addition, the Company will pay up to $20,000 to the Investor's legal counsel for the Investor's expenses relating to the preparation of the ELOC Purchase Agreement.

The ELOC Purchase Agreement contains customary representations, warranties, conditions and indemnification obligations of the parties.

The Company must obtain stockholder approval to issue an aggregate number of shares of common stock to the Investor, under the ELOC Purchase Agreement, in excess of 136,845 shares of common stock outstanding immediately prior to the execution of the ELOC Purchase Agreement.

In connection with the ELOC Purchase Agreement, the Company also entered a registration rights agreement with the Investor on February 4, 2026 (the "Registration Rights Agreement"). Under the Registration Rights Agreement, the Company is obligated to file with the SEC a registration statement for the resale by the Investor of a specified number of shares of the Company's Common Stock issuable according to the ELOC Purchase Agreement. The Company agreed to file such registration statement within forty-five (45) days of the execution of the ELOC Purchase Agreement, and to file one or more additional registration statements if necessary.

Unless earlier terminated as provided in the ELOC Purchase Agreement, the ELOC Purchase Agreement will terminate automatically on the earliest to occur of: (i) twenty-four (24) months after the execution of the ELOC Purchase Agreement, (ii) the date on which the Investor shall have purchased the maximum amount of ELOC Shares issuable under the ELOC Purchase Agreement, or (iii) the effective date of any written notice of termination delivered pursuant to the terms of the ELOC Purchase Agreement.

Pursuant to the ELOC Purchase Agreement, as long as the ELOC Purchase Agreement is effective, the Company agreed not, without the prior written consent of the Investor, to enter into an agreement whereby the Company has the right to "put" its securities to an investor or underwriter over an agreed period of time and at an agreed price or price formula. Additionally, the Company agreed, without the prior written consent of the Investor, not to (i) issue or sell any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock (a) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (b) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) issues securities at a future determined price (a "Variable Rate Transaction"), provided, however, that an Equity Line of Credit shall not be deemed to be a Variable Rate Transaction.

In connection with the ELOC Purchase Agreement, the Company has reserved 200,000 shares of Common Stock with the Transfer Agent for issuance in connection with a Put Notice and/or an Exercise Notice. Such Reserve Shares do not represent issued or outstanding shares and are not being registered for resale pursuant to this registration statement.

The ELOC Purchase Agreement and Warrant were executed prior to the Company's 1-for-25 reverse stock split effected on February 9, 2026. All share numbers and per-share prices in this Current Report have been adjusted to reflect the reverse stock split. Under the terms of the Warrant, the exercise price and number of shares issuable upon exercise automatically adjusted upon the reverse stock split.

 **

***Loan Agreement***

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On February 4, 2026, the Company entered into a business loan and security agreement (the "Loan Agreement") with an effective date of February 3, 2026 (the "Effective Date") by and among, Agile Capital Funding, LLC, Agile Lending , LLC, a Virginia limited liability company, each an existing lender to the Company and each assignee that becomes a party pursuant to Section 12.1 of the Loan Agreement (the "Lenders"), the Company and urban-gro Canada Technologies Inc., a wholly owned subsidiary of the Company (individually, collectively, jointly and severally, the "Guarantors"). The Company expects to use the proceeds for general working capital purposes, with a primary focus on vendor payments related to the Company's efforts to comply with Nasdaq requirements.

Pursuant to the Loan Agreement, the Lenders extended to the Company a term loan of $105,000 (the "Term Loan") to be used to fund the Company's general business requirements. The Loan Agreement is for a term of twenty-eight weeks from the Effective Date (the "Maturity Date") and includes an administrative agent fee of $5,000 to be remitted to Agile Capital Funding, LLC which was added to the amount of the loan. The Company may make a full prepayment or partial prepayment of the Term Loan, however, upon the prepayment of any principal amount, the Company shall be obligated to pay a premium payment of such principal so paid, which shall be equal to the aggregate and actual amount of interest that would be paid through the Maturity Date (the "Prepayment Fee"); provided however that, if the Company makes a prepayment within 90 calendar days after the Effective Date, the Company will receive the discounted Prepayment Fee that is included in Exhibit E to the Loan Agreement. The Loan contains standard events of default and representations and warranties by the Company and the Lenders including a mandatory prepayment, and an additional five (5%) percent interest rate following the occurrence of an event of default.

As of December 31, 2025, the Company had ceased making the required weekly payments of $54,000. The last payment was made on or about September 9, 2025. The outstanding principal balance was $675,000 at December 31, 2025. On February 19, 2026, the Company entered into a Forbearance Agreement with Agile, establishing total outstanding indebtedness of $1,380,524 (inclusive of accrued interest, default interest at 5%, and prepayment premiums). In satisfaction of this balance, the Company issued 331,640 shares of common stock (post-split) to Agile Capital Funding, LLC through a series of exchanges between February 27 and March 25, 2026. The Agile indebtedness was fully satisfied as of March 25, 2026.

The term loan is evidenced by a confessed judgment secured promissory note issued by the Company to the Lenders (the "<u>Promissory Note</u>"). Pursuant to the Loan Agreement, upon an event of default, the Lenders will receive a security interest in certain of the Company's assets, subject to certain exceptions.

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***Private Placement of Common Stock***

On January 19, 2026, the Company entered into a private placement transaction pursuant to a Purchase and Subscription Agreement with One Eyed Jack Enterprises LLC, an accredited investor, in a private offering exempt from registration under applicable securities laws. Under the agreement, the Company agreed to issue 1,000,000 shares of its common stock at a purchase price of $0.10 per share for total gross proceeds of $100,000, on a pre-reverse stock split basis. After giving effect to the 1-for-25 reverse stock split, this is equivalent to 40,000 shares of common stock at an adjusted price of $2.50 per share.

***Gemini Settlement Share Issuances***

Subsequent to December 31, 2025, the Company commenced issuing shares of common stock to Gemini Finance Corp. pursuant to the Gemini Settlement Agreement and the Section 3(a)(10) fairness hearing approved on October 14, 2025. Per the Company's transfer agent records, Gemini held 6,000 shares (post-split) as of February 18, 2026, representing the 150,000 shares previously issued as an amendment fee adjusted for the 1-for-25 reverse stock split. Subsequent to the reverse stock split, the Company issued additional shares to Gemini pursuant to the settlement: 36,000 shares were issued on or about March 11, 2026, and an additional 36,000 shares were issued on or about March 24, 2026, with shares being surrendered and reissued in connection with Gemini's sales of common stock on the open market. As of March 27, 2026, Gemini held 42,000 shares (post-split) on the Company's transfer agent register, including both the original amendment fee shares and shares issued under the Section 3(a)(10) settlement. All issuances remain subject to the 4.99% beneficial ownership limitation and the 19.99% aggregate issuance cap set forth in the Gemini Settlement Agreement. As of March 27, 2026, total shares of common stock outstanding on the Company's transfer agent register were approximately 1,128,140 (post-split).

***Convertible Note and Warrants — Agile Hudson Partners***

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On March 23, 2026, the Company entered into a Securities Purchase Agreement with Agile Hudson Partners LLC pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of up to $1,395,000 (the "AHP Note"), with a purchase price of up to $1,260,000 and an original issue discount of up to $135,000. The AHP Note bears a one-time interest charge of 12% on the principal amount. The first tranche of $420,000 was funded at closing (resulting in an outstanding principal amount of $465,000 including the prorated OID), with net proceeds to the Company of $415,000 after deducting $5,000 in legal fees. The AHP Note is convertible into shares of the Company's common stock at a conversion price equal to the lesser of (i) $2.50 per share or (ii) 75% of the average of the three lowest traded prices of the common stock during the ten trading days immediately preceding the conversion date, subject to adjustment. In connection with the first tranche, the Company issued to the Buyer a common stock purchase warrant to purchase 186,000 shares of common stock at an exercise price of $2.50 per share, exercisable for a period of five years from the date of issuance. Additional tranches under the AHP Note remain available but have not yet been funded as of the date of this report.

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On April 7, 2026, the Company entered into a Securities Purchase Agreement with Agile Hudson Partners LLC, and the Company agreed to issue and sell to Agile Hudson Partners LLC a 12% secured promissory note in an aggregate principal amount of up to $2,775,000, at an aggregate purchase price of up to $2,525,000, in one or more tranches. Agile Hudson Partners LLC funded the first tranche in the original principal amount of $2,225,495.05 (the "First Tranche") for a purchase price of $2,025,000. Agile Hudson Partners LLC withheld $25,000 from the purchase price to cover the its legal fees in connection with the First Tranche. The note is convertible into shares of the Company's common stock, par value $0.001 per share, subject to certain limitations, including a beneficial ownership limitation of 4.99% and an exchange cap, unless the Company obtains stockholder approval as required by applicable Nasdaq rules. The conversion price is equal to the lesser of (i) a fixed price of $36.00 per share (subject to adjustment) and (ii) 80% of the average of the three lowest traded prices of the common stock on the Company's principal market during the ten trading days immediately preceding the applicable conversion date (subject to adjustment). In connection with the funding of the First Tranche, the Company issued to the Agile Hudson Partners LLC (i) a Common Stock purchase warrant to purchase up to 154,166 shares of Common Stock at an initial exercise price of $18.00 per share and (ii) a pre-funded Common Stock purchase warrant to purchase up to 26,000 shares of Common Stock at an initial exercise price of $0.01 per share. The first warrant is exercisable for a period ending five (5) years after April 7, 2026, and contains customary provisions regarding, among other things, cashless exercise (in certain circumstances), beneficial ownership limitations and adjustments upon certain corporate events.

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***Agile Debt Conversion***

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On February 19, 2026, the Company entered into a Forbearance Agreement with Agile Capital Funding, LLC and Agile Lending, LLC, establishing total outstanding indebtedness of $1,380,524. In satisfaction of this balance, the Company issued 331,640 shares of common stock (post-split) to Agile Capital Funding, LLC through exchanges between February 27, 2026 and March 25, 2026. The Agile indebtedness was fully satisfied as of March 25, 2026. The total indebtedness of $1,380,524 includes the original principal of $675,000, the February 2026 loan of $110,000, and approximately $595,524 representing accrued interest, default interest (at 5%), and prepayment premiums, all of which have been charged to the consolidated statements of operations in the applicable periods.