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What changed in urban-gro, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of urban-gro, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+270 added−286 removedSource: 10-K (2026-01-16) vs 10-K (2024-03-28)

Top changes in urban-gro, Inc.'s 2024 10-K

270 paragraphs added · 286 removed · 130 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

46 edited+66 added−90 removed8 unchanged
Biggest changeAdditionally, our experience and expertise within our sectors help to prevent costly mistakes for our clients. 4- Outlined below is an example of a complete end-to-end design-build project that demonstrates how we provide value to our clients over time.
Biggest changeOutlined below is an example of a complete end-to-end design-build project that demonstrates how we provided value to our clients over time. 3 Our Service Solutions in 2024 Architectural Design, Engineering, and Construction Services In 2024, we generated revenue by providing our clients with design-build service offerings that included architectural, interior, and engineering design, construction and construction management, as well as services for the operational stages of the facility.
Information contained on our website is not incorporated by reference into this Form 10-K. The SEC maintains a public website, www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that that file electronically with the SEC.
Information contained on our website is not incorporated by reference into this Form 10-K. The SEC maintains a public website, www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that that file electronically with the SEC. 10
Though the cultivation and distribution of cannabis containing THC remains illegal under federal law, H.R. 83, enacted by Congress on December 16, 2014, provides that none of the 12- funds made available to the DOJ pursuant to the 2015 Consolidated and Further Continuing Appropriations Act may be used to prevent states from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical cannabis.
Though the cultivation and distribution of cannabis containing THC remains illegal under federal law, H.R. 83, enacted by Congress on December 16, 2014, provides that none of the funds made available to the DOJ pursuant to the 2015 Consolidated and Further Continuing Appropriations Act may be used to prevent states from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical cannabis.
We believe that many elements of our design and 14- engineering processes involve proprietary know-how, technology or data that are not covered by patents or patent applications, including technical processes, test equipment designs, algorithms and procedures.
We believe that many elements of our design and engineering processes involve proprietary know-how, technology or data that are not covered by patents or patent applications, including technical processes, test equipment designs, algorithms and procedures.
The Department of Justice defines Schedule I controlled substances as "the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence." If the federal government decides to enforce the Controlled Substances Act with respect to cannabis, persons that are charged with distributing, possessing with intent to distribute, or growing cannabis could be subject to fines and terms of imprisonment, the maximum being life imprisonment and a $50 million fine.
The Department of Justice defines Schedule I controlled substances as “the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.” If the federal government decides to enforce the Controlled Substances Act with respect to cannabis, persons that are charged with distributing, possessing with intent to distribute, or growing cannabis could be subject to fines and terms of imprisonment, the maximum being life imprisonment and a $50 million fine.
Pre-Construction Services include providing a forecast summary of what it will take to get a high-performance facility built, giving initial indication and detailed analysis of budget, timeline/schedule, and potential large decision impacts including value analysis and value engineering options. The integration of Pre-Construction Services can expedite project completion, lower initial project costs, and help reduce costly change orders.
Pre-Construction Services included providing a forecast summary of what it will take to get a high-performance facility built, giving initial indication and detailed analysis of budget, timeline/schedule, and potential large decision impacts including value analysis and value engineering options. The integration of Pre-Construction Services can expedite project completion, lower initial project costs, and help reduce costly change orders.
Regulations While we do not generate any revenue from the direct sale of cannabis products, we have historically, and may continue to, offer our solutions to indoor cultivators that are engaged in various aspects of the cannabis industry. Tetrahydrocannabinol ("THC"), one of the main active chemicals in cannabis, is a Schedule I controlled substance and is illegal under federal law.
Regulations While we do not generate any revenue from the direct sale of cannabis products, we have historically, and may continue to, offer our solutions to indoor cultivators that are engaged in various aspects of the cannabis industry. Tetrahydrocannabinol (“THC”), one of the main active chemicals in cannabis, is a Schedule I controlled substance and is illegal under federal law.
Combined, this solution focuses on the troubleshooting, tuning, and support of a myriad of cultivation systems and equipment while further providing guidance for client interactions with tradespeople working on HVAC, electrical, and plumbing in the facility on an ongoing basis.
Combined, this solution focused on the troubleshooting, tuning, and support of a myriad of cultivation systems and equipment while further providing guidance for client interactions with tradespeople working on HVAC, electrical, and plumbing in the facility on an ongoing basis.
Our team confirms contractors and specialty trades are installing systems to the design intent allowing for rapid installation, continuous process improvement, and increased revenue for our clients. gro-care ® is a highly differentiated service offering that provides a combination of CEA cultivation facility commissioning and an asset protection program through training, equipment maintenance, on-demand support, standard operating procedures ("SOP"), and a client-specific OSS that acts as an online hub for clients’ ongoing services.
Our team confirmed contractors and specialty trades are installing systems to the design intent allowing for rapid installation, continuous process improvement, and increased revenue for our clients. gro-care ® is a highly differentiated service offering that provides a combination of CEA cultivation facility commissioning and an asset protection program through training, equipment maintenance, on-demand support, standard operating procedures (“SOP”), and a client-specific OSS that acts as an online hub for clients’ ongoing services.
CSP is an early-stage engagement with stakeholders that provides an optimized basis of design including the interaction of people, plants, and processes. The output of CSP provides an optimized analysis of spatial needs based on stipulated criteria and can accelerate construction and regulatory approval paths, save stakeholders money and time, and enable a process-driven decision-making approach.
CSP is an early-stage engagement with stakeholders that provides an optimized basis of design including the interaction of people, plants, and processes. The output of CSP provided an optimized analysis of spatial needs based on stipulated criteria and could accelerate construction and regulatory approval paths, save stakeholders money and time, and enable a process-driven decision-making approach.
For CEA, the environmental goal is to maintain a stable and consistent vapor pressure deficit ("VPD") according to the client’s priorities through environmental control of relative humidity and temperature during all stages of growth.
For CEA, the environmental goal is to maintain a stable and consistent vapor pressure deficit (“VPD”) according to the client’s priorities through environmental control of relative humidity and temperature during all stages of growth.
Architectural Design is the implementation of a defined process from development of vision to built environment. Architecture includes the integration and coordination of all project required disciplines such as civil, landscape, structural, mechanical, plumbing and electrical engineering, fire protection, security, interior design, and other specialty disciplines.
Architectural Design is the implementation of a defined process from development of vision to built environment. Architecture includes the integration and coordination of all project required disciplines such as civil, landscape, structural, mechanical, plumbing and electrical engineering, fire protection, security, interior design, and other specialty disciplines. Interior Design involves branding and development of the interior aesthetic vision.
Strategic Vendor Relationships with Premier Manufacturers We work closely with leading technology and manufacturing providers to deliver an integrated solution designed to achieve the stated objectives of our clients.
Relationships with Premier Manufacturers We work closely with leading technology and manufacturing providers to deliver an integrated solution designed to achieve the stated objectives of our clients.
Construction and Construction Management provides all the additional necessary parts to deliver our clients' projects, from the initial estimate and bid process, to subcontractor selection, and management of all construction details.
Construction and Construction Management provided all the additional necessary parts to deliver our clients’ projects, from the initial estimate and bid process, to subcontractor selection, and management of all construction details.
Our Additional Service Offerings Our Facility and Equipment Commissioning Services provide a cultivation-level view of the complex system made up by each piece of equipment and ensures systems are running properly. Many of the current service options available to CEA cultivation clients are isolated to vendors providing post-sale service for a single piece of equipment.
Our Additional Service Offerings in 2024 Our Facility and Equipment Commissioning Services provided a cultivation-level view of the complex system made up by each piece of equipment and ensures systems are running properly. Many of the current service options available to CEA cultivation clients are isolated to vendors providing post-sale service for a single piece of equipment.
ICD creates cultivation space-focused design layouts that integrate climate control, fertigation, benching, air flow, and lighting. Our ICD team’s deep understanding of cultivation systems provides the foundation for ensuring optimal space utilization as they utilize an integrated and collaborative design process focused on understanding, vetting, and implementing the client’s vision.
ICD creates cultivation space-focused design layouts that integrate climate control, fertigation, benching, air flow, and lighting. Our ICD team’s deep understanding of cultivation systems provided the foundation for ensuring optimal space utilization as they utilized an integrated and collaborative design process focused on understanding, vetting, and implementing the client’s vision.
Maintaining a consistent desired temperature and humidity level within the cultivation spaces ensures less stress on plants. urban-gro designs these systems to fit within our clients' 7- budgets and provides our clients' facilities a more stable environment to maximize plant health and yields, minimize crop loss, minimize utility costs, save on capital equipment, and maximize sustainability.
Maintaining a consistent desired temperature and humidity level within the cultivation spaces ensures less stress on plants. urban-gro designed these systems to fit within our clients’ budgets and provided our clients’ facilities a more stable environment to maximize plant health and yields, minimize crop loss, minimize utility costs, save on capital equipment, and maximize sustainability.
As of December 31, 2023, we employed 130 full time employees, approximately two-thirds of which are considered experts in their areas of focus. Our team includes Designers (Architects, Interior Designers, Cultivation Space Planners), Engineers (Mechanical, Electrical, Plumbing, Controls, and Fire Protection), Construction Managers (Project Managers and Supervisors), and horticulturists.
As of December 31, 2024, we employed approximately 130 full time employees, approximately two-thirds of which were considered experts in their areas of focus. Our team included Designers (Architects, Interior Designers, Cultivation Space Planners), Engineers (Mechanical, Electrical, Plumbing, Controls, and Fire Protection), Construction Managers (Project Managers and Supervisors), and horticulturists.
There are four main variables in CEA that affect plant growth (and can impact VPD): (i) water and nutrients; (ii) environmental control; (iii) CO 2 ; and (iv) lighting. The complex equipment systems that we design and procure for our clients play an important role in helping control and maintain the cultivation facility's environment for plants.
There are four main variables in CEA that affect plant growth (and can impact VPD): (i) water and nutrients; (ii) environmental control; (iii) CO 2 ; and (iv) lighting. The complex equipment systems that we had designed and procured for our clients played an important role in helping control and maintain the cultivation facility’s environment for plants.
We attempt to protect our intellectual property via the deployment of non-disclosure agreements with both prospective clients and business partners as well as licensees; however, these non-disclosure agreements may not prevent a third party from infringing upon our rights. Human Capital As of December 31, 2023, we employed 130 employees, all of which were full-time employees.
We attempt to protect our intellectual property via the deployment of non-disclosure agreements with both prospective clients and business partners as well as licensees; however, these non-disclosure agreements may not prevent a third party from infringing upon our rights. Human Capital As of December 31, 2024, we employed approximately 130 employees.
Integrated Equipment Solutions While our engineers play an integral part in the design of most of the complex equipment systems that are then integrated into a CEA facility, we also provide consultative reselling of more common solutions that we integrate into the overall design.
Our Integrated Equipment Solutions in 2024 While our engineers played an integral part in the design of most of the complex equipment systems that are then integrated into a CEA facility, we also provided consultative reselling of more common solutions that we integrated into the overall design.
Our Solutions Since commencing business in March 2014, we have expanded our ongoing operations across North America and Europe while diversifying our services offerings organically and through acquisitions into full design-build solutions by adding design, engineering, construction, and construction-management services, introducing new equipment solutions, products and services, and successfully diversifying into several additional commercial sectors beyond cannabis-focused CEA, including produce-focused CEA; or vertical farming, healthcare, industrial, commercial packaged goods ("CPG"), and retail.
Overview Since commencing business in March 2014, we expanded our operations across North America and Europe while diversifying our services offerings organically and through acquisitions into full design-build solutions by adding design, engineering, construction, and construction-management services, introducing new equipment solutions, products and services, and successfully diversifying into several additional commercial sectors beyond the initial cannabis-focused Controlled Environment Agriculture (“CEA”) sector, including produce-focused CEA; or vertical farming, healthcare, industrial, commercial packaged goods (“CPG”), and retail.
Our in-house architectural, interior design, engineering, construction and cultivation design services integrate design with pre-construction services and thereby reduce project schedule and capital investments.
Our in-house architectural, interior design, engineering, construction and cultivation design services integrated design with pre-construction services and thereby reduced project schedule and capital investments.
While this appropriations measure has remained in effect from 2016 through 2022, continued re-authorization cannot be guaranteed. If this appropriations rider is no longer in effect, the risk of federal enforcement and override of state cannabis laws would increase. However, state laws do not supersede the prohibitions set forth in the federal drug laws.
While this appropriations measure has remained in effect from 2016 through 2022, continued re-authorization cannot be guaranteed. If this appropriations rider is no longer in effect, the risk of federal enforcement and override of state cannabis laws would increase.
While we have successfully diversified our target markets across several commercial sectors, the majority of our clients are commercial CEA cultivators. We believe a key differentiation point that clients value is the depth of our employees’ and Company’s experience.
While we successfully diversified our target markets across several commercial sectors, the majority of our clients were commercial CEA cultivators as we believed that a key differentiation point that clients values is the depth of our employees’ and Company’s experience.
We are a trusted partner and adviser to our clients and provide value to our clients regardless of the sector in which they sit or solution for which they are utilizing us. As is detailed in the Project Delivery Comparison chart below, in the CEA sector, the advantages of the urban-gro design-build model vs the traditional owner-contracted model are clear.
We became a trusted partner and adviser to our clients and provided value to our clients regardless of the sector. As is detailed in the Project Delivery Comparison chart below, in the CEA sector, the advantages of the urban-gro design-build model vs the traditional owner-contracted model were clear.
There is a single responsible party for our clients' needs from conception through operational start. This results in greater efficiencies throughout the design-build process and a faster speed to launch.
There was a single responsible party for our clients’ needs from conception through operational start. This resulted in greater efficiencies throughout the design-build process and a faster speed to launch. Additionally, our experience and expertise within our sectors helped to prevent costly mistakes for our clients.
Regulations may be enacted in the future that may be directly applicable to our business. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.
We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business. Binding Letter of Intent with Flash Sports & Media, Inc.
Design, Source, and Integration of Complex Environmental Equipment Systems Complex Environment Systems for CEA include environmental controls, fertigation and irrigation distribution, a complete line of water treatment and wastewater reclamation systems, and HVAC equipment systems.
Design, Source, and Integration of Complex Environmental Equipment Systems Complex Environment Systems for CEA include environmental controls, fertigation and irrigation distribution, a complete line of water treatment and wastewater reclamation systems, and HVAC equipment systems. 4 As related to systems and equipment, the most significant and influential variable within a CEA facility is the ability to control and maintain the cultivation environment.
Value-Added Reselling of Cultivation Equipment Systems We act as an experienced vendor providing VAR to our clients when selling vetted best-in-class 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.
We pride ourselves as being equipment agnostic – meaning we do not have allegiances to any single manufacturer – we offer the solution that will best meet the design and budget constraints of our client’s and design, engineer, and integrate whatever equipment fits the client’s needs. 1 Value-Added Reselling of Cultivation Equipment Systems We act as an experienced vendor providing VAR to our clients when selling vetted best-in-class 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.
Local, state and federal medical cannabis laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations.
Laws and regulations affecting the medical cannabis industry are constantly changing, which could detrimentally affect our existing and proposed operations. Local, state and federal medical cannabis laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan.
Clients, regardless of sector they are in, engage us to deliver their vision because of our experience and expertise, and because our integrated, design-build solutions offer a value-add approach to design, engineering, procurement, construction-management, construction, and equipment integration, providing a single point of accountability across all aspects of a project. 3- For our CEA clients in particular, we create high-performance indoor cultivation facilities to grow specialty crops, including cannabis as well as produce such as leafy greens, vegetables, herbs and berries.
Clients, regardless of sector they are in, had engaged us to deliver their vision because of our experience and expertise, and because our integrated, design-build solutions offer a value-add approach to design, engineering, procurement, construction-management, construction, and equipment integration, providing a single point of accountability across all aspects of a project.
Gross profit margins are highly dependent on the complexity and size of the project. Our Clients We primarily market and sell our solutions to clients in the CEA and Commercial sectors. In the CEA sector, our clients include operators and facilitators in both the cannabis and produce markets in the United States, Canada, and Europe.
Our Clients in 2024 We primarily marketed and sold our solutions to clients in the CEA and Commercial sectors. In the CEA sector, our clients included operators and facilitators in both the cannabis and produce markets in the United States, Canada, and Europe.
Our expertise translates into clients saving time, money, and resources through expertise that they can leverage without having to add headcount to their own operations. We provide this experience in addition to offering a platform of the highest quality equipment systems that can be integrated holistically into our clients’ facilities.
Our expertise translates into clients saving time, money, and resources through expertise that they can leverage without having to add headcount to their own operations.
We offer value-added architectural, engineering, systems procurement and integration, and construction design-build solutions to customers operating in the controlled environment agriculture ("CEA") and industrial and other commercial ("Commercial") sectors.
We derived income from our ability to generate revenue from our clients through the billing of our employees’ time spent on client projects. We offered value-added architectural, engineering, systems procurement and integration, and construction design-build solutions to customers operating in the CEA and industrial and other commercial (“Commercial”) sectors.
As related to systems and equipment, the most significant and influential variable within a CEA facility is the ability to control and maintain the cultivation environment. This is accomplished through the integration of mechanical systems (HVAC), lighting, air movement systems, irrigation systems, and environmental controls.
This is accomplished through the integration of mechanical systems (HVAC), lighting, air movement systems, irrigation systems, and environmental controls.
In order to participate in either the medical or adult use sides of the cannabis industry, all businesses must obtain licenses from the state and local jurisdictions. In addition, in most jurisdictions, all owners and employees must obtain an occupational license to be permitted to own or work in a facility.
However, state laws do not supersede the prohibitions set forth in the federal drug laws. 5 In order to participate in either the medical or adult use sides of the cannabis industry, all businesses must obtain licenses from the state and local jurisdictions.
Intellectual Property The success of our business depends, in part, on our ability to maintain and protect our proprietary technologies, information, processes and know-how. We rely primarily on patent, trademark, copyright and trade secret laws in the U.S. and similar laws in other countries, confidentiality agreements and procedures and other contractual arrangements to protect our technology and confidential information.
We rely primarily on patent, trademark, copyright and trade secret laws in the U.S. and similar laws in other countries, confidentiality agreements and procedures and other contractual arrangements to protect our technology and confidential information. Our patents are limited to certain sensors that we obtain from third party manufacturers that do not contribute materially to our sales or profitability.
The acquired knowledge of how each of these systems work in combination with and in tangent to the overall ecosystem is a significant benefit that our engineers and product experts offer to our clients.
The acquired knowledge of how each of these systems work in combination with and in tangent to the overall ecosystem is a significant benefit that we offer to our clients. Our Competition For equipment sales, we currently view our competition to be focused on predominantly commodity “off-the-shelf” items like lighting and other cultivation staple products, both pre-startup and post-startup.
On March 10, 2017, we converted to a Colorado corporation and exchanged shares of our common stock for every member's interest issued and outstanding on the date of conversion. On October 29, 2020, we reincorporated as a Delaware corporation. On December 31, 2020, we effected a 1-for-6 reverse stock split with respect to our common stock.
ITEM 1. BUSINESS Background urban-gro, Inc. (“we,” “us,” “our,” the “Company,” or “urban-gro”) was originally formed on March 20, 2014, as a Colorado limited liability company. On March 10, 2017, we converted to a Colorado corporation and exchanged shares of our common stock for every member’s interest issued and outstanding on the date of conversion.
Our collaborative and integrated approach from our award-winning team begins with inspiration boards focused on understanding the client’s aesthetic desires. Interior design is holistic and thereby includes all aspects of the building interiors from full branding to the selection and design of all finishes and interior systems.
Interior design is holistic and thereby includes all aspects of the building interiors from full branding to the selection and design of all finishes and interior systems. Common discussions beyond aesthetics include the cost, durability, and maintainability of systems presented.
Common discussions beyond aesthetics include the cost, durability, and maintainability of systems presented. 6- Mechanical, Electrical, and Plumbing ("MEP") engineering design focuses on the entire building, not just the cultivation space, which in turn eliminates the "gap" between cultivation systems and the building systems.
Mechanical, Electrical, and Plumbing (“MEP”) engineering design focuses on the entire building, not just the cultivation space, which in turn eliminates the “gap” between cultivation systems and the building systems. We provided engineered construction contract documents for mechanical, HVAC, plumbing and electrical systems required for the building permits necessary to obtain a Certificate of Occupancy.
Our patents are limited to certain sensors that we obtain from third party manufacturers that do not contribute materially to our sales or profitability. Our trademarks are solely for branding purposes, although we no longer sell any goods or services under the Soleil brand.
Our trademarks are solely for branding purposes, although we no longer sell any goods or services under the Soleil brand. 6 We rely on trade secret protection and confidentiality agreements to safeguard our interests with respect to proprietary know-how that is not patentable and processes for which patents are difficult to enforce.
In addition, the majority of our non-CEA client base is developed from long-term relationships that provide our Company with a strategic advantage. Regulation As it relates to our business conducted in the legalized cannabis-focused CEA segment, the regulations for each region are detailed as follows. U.S.
In the Commercial sector, we worked with leading food and beverage consumer packaged goods companies in the United States, and clients in healthcare, higher education, and hospitality. Regulation As it relates to our business conducted in the legalized cannabis-focused CEA segment, the regulations for each region are detailed as follows. U.S.
For product sales, we currently view our competition to be focused on predominantly commodity "off-the-shelf" items like lighting and other cultivation staple products, both pre-startup and post-startup. This competition comes from traditional wholesale horticulture dealers, online retailers, and some manufacturers who sell direct.
This competition comes from traditional wholesale horticulture dealers, online retailers, and some manufacturers who sell direct. Our Clients We primarily market and sell our solutions to clients in the CEA sector.
Costs and Effects of Compliance with Environmental Laws Our current business operations are not subject to any material environmental laws, rules or regulations that would have an adverse material effect on our business operations or financial condition or result in a material compliance cost.
In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations. Regulations may be enacted in the future that may be directly applicable to our business.
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ITEM 1. BUSINESS Background 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.
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On October 29, 2020, we reincorporated as a Delaware corporation. On December 31, 2020, we effected a 1-for-6 reverse stock split with respect to our common stock. All information in this Report gives effect to this reverse stock split, including restating prior period reported amounts.
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All information in this Report gives effect to this reverse stock split, including restating prior period reported amounts. On February 12, 2021, we completed an uplisting to the Nasdaq Capital Market ("Nasdaq") under the ticker symbol "UGRO". Overview urban-gro is an integrated professional services and construction design-build firm.
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On February 12, 2021, we completed an uplisting to the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol “UGRO”.
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Our business focuses primarily on providing fee-based knowledge-based services as well as the value-added reselling of equipment. We derive income from our ability to generate revenue from our clients through the billing of our employees’ time spent on client projects.
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After making the decision to exit our core business sectors in the third quarter of 2025 due to changing market conditions and our inability to raise significant funds due to our filing status and compliance with the Nasdaq, we began the process of selling assets, reducing our work force, and preparing the company for a subsequent merger.
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Our evolution, both organically and through the acquisition of engineering, architecture, and construction management firms has enabled us to successfully diversify into the commercial sectors of the clients we serve, as well as the capabilities we offer, which we believe has helped insulate our business from any one sector.
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As we continue to wind down operations, today, only a single division of our legacy business remains and urban-gro is a value-added reseller of equipment systems to the Controlled Environment Agriculture (“CEA”) sector. We work with a select group of manufacturers and vendor partners to source equipment solutions that our clients utilize when building out their cultivation facilities.
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Even with this successful diversification, our main focus and value-add has always been and remains in providing solutions to our CEA clients, where we have experience and expertise in designing, engineering, building, and integrating complex environmental equipment systems into indoor CEA cultivation and retail facilities, and then providing ongoing maintenance, training, and support services to those same facilities.
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In the CEA sector, our clients include operators and facilitators in both the cannabis and produce markets in the United States and Canada. urban-gro at December 31, 2024 As of December 31, 2024, and building on the acquisition of engineering, architecture, and construction management firms, we were an integrated professional services and Design-Build firm offering value-added architectural, engineering, and construction management solutions to the CEA, industrial, healthcare, and other sectors.
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We aim to work with our clients from inception of their project in a way that provides value throughout the life of their facility.
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For our CEA clients in particular, we created high-performance indoor cultivation facilities to grow specialty crops, including cannabis as well as produce such as leafy greens, vegetables, herbs and berries.
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We also provide design-build solutions for our CEA clients' retail facilities.
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We provide this experience in addition to offering a platform of the highest quality equipment systems that can be integrated holistically into our clients’ facilities. 2 Our Solutions in 2024 Over the past decade we expanded our ongoing operations across North America and Europe while diversifying our services offerings organically and through acquisitions into full design-build solutions by adding design, engineering, construction, and construction-management services, introducing new equipment solutions, products and services, and successfully diversifying into several additional commercial sectors beyond cannabis-focused CEA, including produce-focused CEA; or vertical farming, healthcare, industrial, commercial packaged goods (“CPG”), and retail.
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We help 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 establish facilities that allow clients to manage, operate and perform at the highest level throughout their entire cultivation lifecycle once they are up and running.
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In addition, in most jurisdictions, all owners and employees must obtain an occupational license to be permitted to own or work in a facility. Applicants for licenses undergo a background investigation, including a criminal record check for all owners and employees.
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For these CEA clients, our team provides services to meet the most stringent regulatory environments, whether they are energy efficiency goals, Good Agricultural and Collection Practices ("GACP"), or Good Manufacturing Practice ("GMP") and/or European Medicine Agency EU GMP ("EU/GMP") certification.
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On October 14, 2025, we entered into a binding letter of intent (the “LOI”) with Flash Sports & Media, Inc. (“Flash”) regarding a proposed transaction pursuant to which the parties intend to merge Flash with and into a newly formed wholly-owned subsidiary of us, which would then merge with and into a second wholly-owned subsidiary of us (collectively, the “Merger”).
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Since January 1, 2023, we have announced the following contracts: • September 26, 2023 - Awarded contract for more than $11.0 million of design-build services with an existing client in the Hospitality & Recreation sector to be recognized over the next six quarters.
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Pursuant to the LOI, the parties have agreed, subject to satisfaction of certain conditions, to negotiate and execute a definitive merger agreement in accordance with the terms set forth in the LOI. Flash paid us a cash deposit of $200,000 within fifteen days following the date of the LOI.
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While this contract has been started as of December 31, 2023, the Company now expects that the contract will take two quarters longer than expected to complete, therefore extending into 2025. • October 2, 2023 - Secured contracts of nearly $8.0 million across four clients in the CEA sector to be recognized over the next four quarters.
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In connection with the Merger, the stockholders of Flash would receive (i) unregistered shares of our common stock equal to 19.99% of the outstanding shares of common stock as of immediately prior to the Merger, and (ii) unregistered shares of a newly-created series of non-voting preferred stock that would be economically equivalent to common stock (the “Preferred Stock”) and would automatically convert into common stock upon receipt of approval by our stockholders.
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While the largest of these contracts, valued at approximately $7 million dollars, did start in the first quarter of 2024, the Company now it will be completed by the first quarter of 2025, one additional quarter more than had been forecast.
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The LOI contemplates that the former stockholders of Flash would own approximately 90% of the resulting company following the Merger, assuming full conversion of the Preferred Stock. Upon closing of the Merger, we would change our name to Flash Sports & Media Holdings, Inc. or a similar name.
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The Company expects that the other three contracts will be completed in the previously announced timeframe. • October 4, 2023 - Signed multiple contracts valued at more than $4.5 million to be recognized over the next two quarters.
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We would be required to obtain approval of its stockholders for conversion of the Preferred Stock as soon as reasonably practicable following the Merger.
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The Company expects that these contracts will be completed in the previously announced timeframe. • November 30, 2023 - Awarded $9.6 million industrial design-build contract with an existing CPG client to be recognized over the next three quarters.
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The LOI provides that following the Merger, our board of directors (the “Board”) would be reconstituted such that four members of the Board would be designated by the Board prior to the Merger and one member of the Board would be designated by the former stockholders of Flash.
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While this contract did not start as anticipated in the fourth quarter of 2023, the value was increased to $11 million dollars with the addition of supplying mechanical equipment systems to the scope, it did kick off in the first quarter of 2024.
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Upon approval of our stockholders for the conversion of the Preferred Stock, the Board would be further reconstituted such that one member of the Board would be designated by the Board prior to the Merger and four members of the Board would be designated by the former stockholders of Flash.
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The Company now expects that the contract will take one additional quarter over the previously announced timeframe to be completed. • January 2, 2024 - Secures design-build contract valued at approximately $20.0 million of design-build services with an existing vertically integrated United States based multi-state cannabis cultivation and retail dispensary operator to be recognized over the next six quarters.
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The LOI provides for an exclusivity period of 90 days following the execution of the LOI. During that period, we agreed that neither us nor our affiliates will, among other things, solicit, provide any information or enter into any agreement with any other party concerning a transaction similar to the Merger.
Removed
This contract was not started as of December 31, 2023, but kicked off in the first quarter of 2024, and the Company still expects that the contract will be completed in the previously announced timeframe.
Added
For an overview of additional developments in the business since December 31, 2024, note ‘section 18, subsequent events.’ Intellectual Property The success of our business depends, in part, on our ability to maintain and protect our proprietary technologies, information, processes and know-how.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+30 added−24 removed103 unchanged
Biggest changeAlthough we have been able to successfully generate substantial sales to different clients over time, we may not be able to continue to do this in the future. Our operating results for the foreseeable future could continue to depend on substantial sales to a small number of clients.
Biggest changeIf we fail to retain or expand our client relationships, or if a significant client were to terminate its relationship with us or reduce its purchases, our revenue could decline significantly. Although we have been able to successfully generate substantial sales to different clients over time, we may not be able to continue to do this in the future.
The price of our common stock has been, and could continue to be, subject to wide fluctuations in response to a number of factors, including those described elsewhere in this Report and others such as: • our ability to generate revenues sufficient to achieve profitability and positive cash flow; • competition in our industry and our ability to compete effectively; • our ability to attract, recruit, retain and develop key personnel and qualified employees; • reliance on significant clients and third-party suppliers; • our ability to successfully identify and complete acquisitions and effectively integrate those acquisitions into our operations; • our actual or anticipated operating and financial results, including how those results vary from the expectations of management, securities analysts and investors; • changes in financial estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other industry participants; • developments in our business or operations or our industry sectors generally; • any future offerings by us of our common stock; • any coordinated trading activities or large derivative positions in our common stock, for example, a "short squeeze" (a short squeeze occurs when a number of investors take a short position in a stock and have to buy the borrowed securities to close out the position at a time that other short sellers of the same security also want to close out their positions, resulting in a surge in stock prices, i.e., demand is greater than supply for the stock sold short); • legislative or regulatory changes affecting our industry generally or our business and operations specifically; • the operating and stock price performance of companies that investors consider to be comparable to us; • announcements of strategic developments, acquisitions, restructurings, dispositions, financings and other material events by us or our competitors; • actions by our current shareholders, including future sales of common shares by existing shareholders, including our directors and executive officers; • proposed or final regulatory changes or developments; • anticipated or pending regulatory investigations, proceedings, or litigation that may involve or affect us; and • the other factors described under Risk Factors in Part I, Item 1A of this Report.
The price of our common stock has been, and could continue to be, subject to wide fluctuations in response to a number of factors, including those described elsewhere in this Report and others such as: ● our ability to generate sufficient revenues to achieve profitability and positive cash flow; ● competition in our industry and our ability to compete effectively; ● our ability to attract, recruit, retain and develop key personnel and qualified employees; ● reliance on significant clients and third-party suppliers; ● our ability to successfully identify and complete acquisitions and effectively integrate those acquisitions into our operations; ● our actual or anticipated operating and financial results, including how those results vary from the expectations of management, securities analysts and investors; ● changes in financial estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other industry participants; ● developments in our business or operations or our industry sectors generally; ● any future offerings by us of our common stock; ● any coordinated trading activities or large derivative positions in our common stock, for example, a “short squeeze” (a short squeeze occurs when a number of investors take a short position in a stock and have to buy the borrowed securities to close out the position at a time that other short sellers of the same security also want to close out their positions, resulting in a surge in stock prices, i.e., demand is greater than supply for the stock sold short); ● legislative or regulatory changes affecting our industry generally or our business and operations specifically; ● the operating and stock price performance of companies that investors consider to be comparable to us; ● announcements of strategic developments, acquisitions, restructurings, dispositions, financings and other material events by us or our competitors; ● actions by our current shareholders, including future sales of common shares by existing shareholders, including our directors and executive officers; ● proposed or final regulatory changes or developments; ● anticipated or pending regulatory investigations, proceedings, or litigation that may involve or affect us; and ● the other factors described under Risk Factors in Part I, Item 1A of this Report.
The fluctuations in economic and market conditions that impact the prices of commercially grown cannabis, such as increases in the supply of cannabis and decreases in demand for cannabis, could have a negative impact on our clients that are legal cannabis producers, and therefore could negatively impact our business. 20- Our contracts may not be legally enforceable in the United States.
The fluctuations in economic and market conditions that impact the prices of commercially grown cannabis, such as increases in the supply of cannabis and decreases in demand for cannabis, could have a negative impact on our clients that are legal cannabis producers, and therefore could negatively impact our business. Our contracts may not be legally enforceable in the United States.
In addition, to attract and retain personnel with appropriate skills and knowledge to support our business, we may offer a variety of benefits, which could reduce our earnings or have a material adverse effect on our business, financial condition or results of operations. Our insurance may not adequately cover our operating risk.
In addition, to attract and retain personnel with appropriate skills and knowledge to support our business, we may offer a variety of benefits, which could reduce our earnings or have a material adverse effect on our business, financial condition or results of operations. 21 Our insurance may not adequately cover our operating risk.
We will incur expenses and dedicate attention and resources associated with the review of acquisition opportunities, whether or not we consummate such acquisitions. Additionally, even if we are able to acquire suitable targets on agreeable terms, we may not be able to successfully integrate their operations with ours.
We will incur expenses and dedicate attention and resources associated with the review of acquisition opportunities, whether or not we consummate such acquisitions. 13 Additionally, even if we are able to acquire suitable targets on agreeable terms, we may not be able to successfully integrate their operations with ours.
Any inability to secure required products or to do so on appropriate terms could have a materially adverse impact on the business, financial condition, results of operations or prospects of urban-gro. We have historically depended on a small number of clients for a substantial portion of our revenue.
Any inability to secure required products or to do so on appropriate terms could have a materially adverse impact on the business, financial condition, results of operations or prospects of urban-gro. 12 We have historically depended on a small number of clients for a substantial portion of our revenue.
Delayed sales, lower profits, or lost clients resulting from these disruptions could adversely affect our financial results, stock price and reputation. 17- We may be forced to litigate to defend our intellectual property rights, or to defend against claims by third parties against urban-gro relating to intellectual property rights.
Delayed sales, lower profits, or lost clients resulting from these disruptions could adversely affect our financial results, stock price and reputation. We may be forced to litigate to defend our intellectual property rights, or to defend against claims by third parties against urban-gro relating to intellectual property rights.
Our reputation is a valuable component of our business. Threats to our reputation can come from many sources, including adverse sentiment about our industry generally, unethical practices, employee misconduct, failure to deliver minimum standards of 24- service or quality, compliance deficiencies, and questionable or fraudulent activities of our clients.
Our reputation is a valuable component of our business. Threats to our reputation can come from many sources, including adverse sentiment about our industry generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of our clients.
While we have attempted to identify our business risks in the legal cannabis industry, investors should carefully consider that there are other 18- risks that cannot be foreseen or are not described in this Report, which could materially and adversely affect our business and financial performance.
While we have attempted to identify our business risks in the legal cannabis industry, investors should carefully consider that there are other risks that cannot be foreseen or are not described in this Report, which could materially and adversely affect our business and financial performance.
Any inroads these companies make in halting or impeding legislative initiatives that would be beneficial to the legal cannabis industry could have a detrimental impact on our clients and, in turn on our operations. The legality of cannabis could be reversed in one or more states.
Any inroads these companies make in halting or impeding legislative initiatives that would be beneficial to the legal cannabis industry could have a detrimental impact on our clients and, in turn on our operations. 15 The legality of cannabis could be reversed in one or more states.
In response to any one or more of these events, the market price of shares of our common stock could decrease significantly. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock 21- price.
In response to any one or more of these events, the market price of shares of our common stock could decrease significantly. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price.
We will continue to encounter risks and uncertainty relating to our operations that may be difficult to overcome. We may continue to incur losses in the near future, which may impact our ability to implement our business strategy and adversely affect our financial condition.
We will continue to encounter risks and uncertainty relating to our operations that may be difficult to overcome. 11 We may continue to incur losses in the near future, which may impact our ability to implement our business strategy and adversely affect our financial condition.
Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results. U.S. generally accepted accounting principles ("U.S.
Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results. U.S. generally accepted accounting principles (“U.S.
We cannot predict if investors will find our common stock less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our common stock. 22- Provisions of our certificate of incorporation and bylaws may delay or prevent a take-over that may not be in the best interests of our shareholders.
We cannot predict if investors will find our common stock less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our common stock. 19 Provisions of our certificate of incorporation and bylaws may delay or prevent a take-over that may not be in the best interests of our shareholders.
Department of Justice ("DOJ") enforces federal law against the industry and some of our clients are negatively impacted. The legal cannabis industry in the U.S. remains in state of flux, and many aspects of this industry’s development and evolution cannot be accurately predicted. Therefore, losing any clients could have a material adverse effect on our business.
Department of Justice (“DOJ”) enforces federal law against the industry and some of our clients are negatively impacted. The legal cannabis industry in the U.S. remains in state of flux, and many aspects of this industry’s development and evolution cannot be accurately predicted. Therefore, losing any clients could have a material adverse effect on our business.
GAAP") and related pronouncements, implementation guidelines and interpretations with regard to a wide variety of matters that are relevant to our business, such as, but not limited to, revenue recognition, stock-based compensation, trade promotions, and income taxes are highly complex and involve many subjective assumptions, estimates and judgments by our management.
GAAP”) and related pronouncements, implementation guidelines and interpretations with regard to a wide variety of matters that are relevant to our business, such as, but not limited to, revenue recognition, stock-based compensation, trade promotions, and income taxes are highly complex and involve many subjective assumptions, estimates and judgments by our management.
The legal cannabis industry may come under the scrutiny or further scrutiny by the United States Food and Drug Administration (the "FDA"), the SEC, the DOJ, the Financial Industry Regulatory Authority or other federal, state or nongovernmental regulatory authorities or self-regulatory organizations that supervise or regulate the production, distribution, sale or use of cannabis for medical or nonmedical purposes in the United States.
The legal cannabis industry may come under the scrutiny or further scrutiny by the United States Food and Drug Administration (the “FDA”), the SEC, the DOJ, the Financial Industry Regulatory Authority or other federal, state or nongovernmental regulatory authorities or self-regulatory organizations that supervise or regulate the production, distribution, sale or use of cannabis for medical or nonmedical purposes in the United States.
As a result of the foregoing, an investment in our securities necessarily involves uncertainty about the stability of our operating results, cash flows and, ultimately, our prospects generally. We had negative cash flow from operations for the fiscal years ended December 31, 2023 and December 31, 2022.
As a result of the foregoing, an investment in our securities necessarily involves uncertainty about the stability of our operating results, cash flows and, ultimately, our prospects generally. We had negative cash flow from operations for the fiscal years ended December 31, 2024 and December 31, 2023.
Clients who represented a substantial portion of our historical revenue may decide to purchase products and services from other providers in the future, which could cause our revenue to decline materially and negatively impact our financial condition and results of operations.
Clients who represent a substantial portion of our historical revenue may decide to purchase products and services from other providers in the future, which could cause our revenue to decline materially and negatively impact our financial condition and results of operations.
Additionally, 21 U.S.C. 856 makes it illegal to "knowingly open, lease, rent, use, or maintain any place, whether permanently or temporarily, for the purpose of manufacturing, distributing, or using any controlled substance." Even in those states in which the use of cannabis has been authorized under state law, its use remains a violation of federal law.
Additionally, 21 U.S.C. 856 makes it illegal to “knowingly open, lease, rent, use, or maintain any place, whether permanently or temporarily, for the purpose of manufacturing, distributing, or using any controlled substance.” Even in those states in which the use of cannabis has been authorized under state law, its use remains a violation of federal law.
Compliance with these rules and regulations involves significant legal and financial compliance costs, may make some activities more difficult, time-consuming or costly and may increase demand on our systems and resources, particularly after we are no longer an "emerging growth company," as defined in the JOBS Act.
Compliance with these rules and regulations involves significant legal and financial compliance costs, may make some activities more difficult, time-consuming or costly and may increase demand on our systems and resources, particularly after we are no longer an “emerging growth company,” as defined in the JOBS Act.
As a company with clients operating in the legal cannabis industry, we face many particular and evolving risks associated with that industry, including uncertainty of United States federal enforcement and the need to renew temporary safeguards. The "FinCEN Memo" dated February 14, 2014, de-prioritizes enforcement of the Bank Secrecy Act against financial institutions and cannabis related businesses which utilize them.
As a company with clients operating in the legal cannabis industry, we face many particular and evolving risks associated with that industry, including uncertainty of United States federal enforcement and the need to renew temporary safeguards. The “FinCEN Memo” dated February 14, 2014, de-prioritizes enforcement of the Bank Secrecy Act against financial institutions and cannabis related businesses which utilize them.
Cannabis, which is referred to as "Marijuana" in the Controlled Substances Act, is currently classified as a Schedule I controlled substance under the Controlled Substances Act and is illegal under United States federal law.
Cannabis, which is referred to as “Marijuana” in the Controlled Substances Act, is currently classified as a Schedule I controlled substance under the Controlled Substances Act and is illegal under United States federal law.
Moreover, if one or more of the analysts who cover us downgrades our stock or publishes inaccurate or unfavorable research about our business, or if our results of operations do not meet their expectations, our stock price could decline. Taking advantage of the reduced disclosure requirements applicable to "emerging growth companies" may make our common stock less attractive to investors.
Moreover, if one or more of the analysts who cover us downgrades our stock or publishes inaccurate or unfavorable research about our business, or if our results of operations do not meet their expectations, our stock price could decline. Taking advantage of the reduced disclosure requirements applicable to “emerging growth companies” may make our common stock less attractive to investors.
We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"). An emerging growth company may take advantage of certain reduced reporting and other requirements that are otherwise generally applicable to public companies, as described above. We currently intend to take advantage of each of these exemptions.
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). An emerging growth company may take advantage of certain reduced reporting and other requirements that are otherwise generally applicable to public companies, as described above. We currently intend to take advantage of each of these exemptions.
In 2014, Congress passed a spending bill ("2015 Appropriations Bill") containing a provision ("Appropriations Rider") blocking federal funds and resources allocated under the 2015 Appropriations Bill from being used to "prevent such States from implementing their own State medical marijuana law." The Appropriations Rider seemed to have prohibited the federal government from interfering with the ability of states to administer their medical cannabis laws, although it did not codify federal protections for medical cannabis patients and producers.
In 2014, Congress passed a spending bill (“2015 Appropriations Bill”) containing a provision (“Appropriations Rider”) blocking federal funds and resources allocated under the 2015 Appropriations Bill from being used to “prevent such States from implementing their own State medical marijuana law.” The Appropriations Rider seemed to have prohibited the federal government from interfering with the ability of states to administer their medical cannabis laws, although it did not codify federal protections for medical cannabis patients and producers.
Our engineering and design services are focused on facilities that grow a wide variety of crops that are subject to regulation by the United States Food and Drug Administration and other federal, state or foreign agencies.
We may become subject to additional regulation of CEA facilities. Our engineering and design services are focused on facilities that grow a wide variety of crops that are subject to regulation by the United States Food and Drug Administration and other federal, state or foreign agencies.
Changes to any regulations and laws 16- that could complicate the engineering of these CEA facilities, such as waste water treatment and electricity-related mandates, make it possible that potential related enforcement could decrease the demand for our services, and in turn negatively impact our revenues and business opportunities. Competition in our industry is intense.
Changes to any regulations and laws that could complicate the engineering of these CEA facilities, such as waste water treatment and electricity-related mandates, make it possible that potential related enforcement could decrease the demand for our services, and in turn negatively impact our revenues and business opportunities. Competition in the various sectors in which we operate is intense.
Since federal law criminalizing the use of cannabis is not preempted by state laws that legalize its use, strict enforcement of federal law regarding cannabis may result in the inability of our clients that are involved in the cannabis industry to proceed with their operations, which would adversely affect our operations.
Since federal law criminalizing the use of cannabis is not preempted by state laws that legalize its use, strict enforcement of federal law regarding cannabis may result in the inability of our clients that are involved in the cannabis industry to proceed with their operations, which would adversely affect our operations. 14 Our solutions are used by legal and licensed cannabis growers.
There are many competitors in the horticulture industry, including many who offer somewhat categorically similar equipment solutions and services as those offered by us. In the future other companies may enter this arena by developing solutions that directly compete with us.
There are many competitors in the industries in which we operate, including many who offer somewhat categorically similar professional services and equipment solutions as those offered by us. In the future other companies may enter this arena by developing solutions that directly compete with us.
Risks Related to Ownership of Our Common Stock Our stock price could be extremely volatile. As a result, shareholders may not be able to resell their shares at or above the price they paid for them. The market price of our common stock may be highly volatile and could be subject to wide fluctuations.
As a result, shareholders may not be able to re-sell their shares at or above the price they paid for them. The market price of our common stock may be highly volatile and could be subject to wide fluctuations.
Additional risks of which we are not presently aware or that we currently believe are immaterial may also harm our business and results of operations. Some statements in this report, including such statements in the following risk factors, constitute forward-looking statements.
Additional risks of which we are not presently aware or that we currently believe are immaterial may also harm our business and results of operations. Some statements in this report, including such statements in the following risk factors, constitute forward-looking statements. See the section entitled Cautionary Information about Forward-Looking Statements in Part I of this Report.
We had negative cash flow from operations of $11.2 million for the fiscal year ended December 31, 2023 and $12.6 for the fiscal year ended December 31, 2022. To the extent that we have negative cash flow from operations in future periods, we may need to allocate a portion of our cash reserves to fund such negative cash flow.
We had negative cash flow from operations of $2.8 million for the fiscal year ended December 31, 2024 and $10.5 million for the fiscal year ended December 31, 2023. To the extent that we have negative cash flow from operations in future periods, we may need to allocate a portion of our cash reserves to fund such negative cash flow.
In March 2017, we converted into a corporation and on February 12, 2021, we completed an uplisting to Nasdaq under the ticker symbol "UGRO." The following is a summary of our recent historical operating performance: • During the year ended December 31, 2023, we generated revenue of $71.5 million and incurred a net loss of $18.7 million. • During the year ended December 31, 2022, we generated revenue of $67.0 million and incurred a net loss of $15.3 million. • During the year ended December 31, 2021, we generated revenue of $62.1 million and incurred a net loss of $0.9 million. • During the year ended December 31, 2020, we generated revenue of $25.8 million and incurred a net loss of $5.1 million.
In March 2017, we converted into a corporation and on February 12, 2021, we completed an uplisting to Nasdaq under the ticker symbol “UGRO.” The following is a summary of our recent historical operating performance: ● During the year ended December 31, 2024, we generated revenue of $40.0 million and incurred a net loss of $36.5 million. ● During the year ended December 31, 2023, we generated revenue of $69.9 million and incurred a net loss of $25.4 million. ● During the year ended December 31, 2022, we generated revenue of $66.3 million and incurred a net loss of $15.3 million. ● During the year ended December 31, 2021, we generated revenue of $62.1 million and incurred a net loss of $0.9 million. ● During the year ended December 31, 2020, we generated revenue of $25.8 million and incurred a net loss of $5.1 million.
The additional costs that we incur, 23- the timing of such costs and the impact that management’s attention to these matters may adversely affect our business and operating results.
The additional costs that we incur, the timing of such costs and the impact that management’s attention to these matters may adversely affect our business and operating results. 20 We have identified material weaknesses in our internal control over financial reporting.
We believe that established businesses in other industries may have a strong economic interest in opposing the development of the cannabis industry. Cannabis may be seen by companies in other industries as an attractive alternative to their products, including recreational cannabis as an alternative to alcohol, and medical cannabis as an alternative to various commercial pharmaceuticals.
Cannabis may be seen by companies in other industries as an attractive alternative to their products, including recreational cannabis as an alternative to alcohol, and medical cannabis as an alternative to various commercial pharmaceuticals.
Shareholders may be diluted by future issuances of preferred stock or additional common stock in connection with our incentive plans, acquisitions or otherwise; future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price.
This type of litigation could result in substantial costs and divert our management’s attention and resources and could also require us to make substantial payments to satisfy judgments or to settle litigation. 18 Shareholders may be diluted by future issuances of preferred stock or additional common stock in connection with our incentive plans, acquisitions or otherwise; future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price.
We may not be able to attract, hire or retain qualified personnel if competing companies offer a more desirable work model. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Additionally, the COVID pandemic has changed the way businesses operate with companies allowing employees to work remotely from home or in hybrid work models. We may not be able to attract, hire or retain qualified personnel if competing companies offer a more desirable work model. 22 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Our clients have no purchase commitments and may cancel, change or delay purchases with little or no notice or penalty. As a result of this, our revenue could fluctuate materially and could be materially and disproportionately impacted by purchasing decisions of any client.
As a result of this, our revenue could fluctuate materially and could be materially and disproportionately impacted by purchasing decisions of any client.
See the section entitled Cautionary Information about Forward-Looking Statements in Part I of this Report. 15- Risks Related to Our Operations We have a relatively limited history of operations, a history of losses, and our future earnings, if any, and cash flows may be volatile, resulting in uncertainty about our prospects generally.
Risks Related to Our Operations We have a relatively limited history of operations, a history of losses, and our future earnings, if any, and cash flows may be volatile, resulting in uncertainty about our prospects generally. We were initially organized as a limited liability company in the State of Colorado on March 20, 2014.
While there may be ample public support for legislative action, numerous factors impact the legislative and regulatory process, including election results, scientific findings or general public events.
While there may be ample public support for legislative action, numerous factors impact the legislative and regulatory process, including election results, scientific findings or general public events. Any one of these factors could slow or halt progressive legislation relating to cannabis and the current tolerance for the use of cannabis by consumers, which could adversely affect our operations.
Failure to retain our existing workforce and to attract qualified new personnel in the current labor market could adversely affect our business and results of operations. The current U.S. labor shortage has and may continue to impact our ability to hire and retain qualified personnel and may impact our ability to operate our business effectively.
The current U.S. labor shortage has and may continue to impact our ability to hire and retain qualified personnel and may impact our ability to operate our business effectively. We may experience a labor shortage preventing us from filling targeted staffing levels. A labor shortage may also impact our ability to attract qualified new personnel.
If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating results and the value of our common stock may be materially adversely affected. Increased attention to climate change and ESG matters may adversely impact our business. We are subject to a variety of risks arising from ESG matters.
If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating results and the value of our common stock may be materially adversely affected. Failure to retain our existing workforce and to attract qualified new personnel in the current labor market could adversely affect our business and results of operations.
Collectively, this may impact our ability to implement our business strategy and adversely affect our financial condition. This potentially would have a negative impact on our share price. We may become subject to additional regulation of CEA facilities.
Collectively, this may impact our ability to implement our business strategy and adversely affect our financial condition. This potentially would have a negative impact on our share price. To the extent that future net losses are in excess of additions to equity, we may fall below the Nasdaq’s listing requirement of having a net equity balance of at least $2,500,000.
Removed
We were initially organized as a limited liability company in the State of Colorado on March 20, 2014.
Added
If we fail to continue to satisfy this or any other continued listing requirements, Nasdaq will take steps to delist our common stock.
Removed
If we fail to retain or expand our client relationships, or if a significant client were to terminate its relationship with us or reduce its purchases, our revenue could decline significantly. During the year ended December 31, 2023, two clients represented 43% of total revenue. During the year ended December 31, 2022 three clients represented 40% of total revenue.
Added
Such a delisting would likely have a negative effect on the price of our common stock and would impair shareholders’ ability to sell or purchase our common stock when they wish to do so, as well as adversely affect our ability to issue additional securities and obtain additional financing in the future.
Removed
Our solutions are used by legal and licensed cannabis growers.
Added
Our operating results for the foreseeable future could continue to depend on substantial sales to a small number of clients. Our clients have no purchase commitments and may cancel, change or delay purchases with little or no notice or penalty.
Removed
Any one of these factors could slow or halt progressive legislation relating to cannabis and the current tolerance for the use of cannabis by consumers, which could adversely affect our operations. 19- The legal cannabis industry could face strong opposition from other industries.
Added
The legal cannabis industry could face strong opposition from other industries. We believe that established businesses in other industries may have a strong economic interest in opposing the development of the cannabis industry.
Removed
This type of litigation could result in substantial costs and divert our management’s attention and resources and could also require us to make substantial payments to satisfy judgments or to settle litigation.
Added
Risks Related to Ownership of Our Common Stock Our failure to meet the continued listing requirements of Nasdaq could result in the delisting of our Common Stock. If we fail to satisfy the continued listing requirements of Nasdaq, Nasdaq will take steps to delist our common stock.
Removed
We could be an emerging growth company until December 31, 2023.
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Such a delisting would likely have a negative effect on the price of our common stock and would impair stockholders’ ability to sell or purchase our common stock when they wish to do so, as well as adversely affect our ability to issue additional securities and obtain additional financing in the future. 16 On August 20, 2024, we received a notice from The Nasdaq Stock Market LLC (“Nasdaq”) stating that because we had not yet filed our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Timely Filing Requirement”).
Removed
However, for as long as we remain an "emerging growth company," we may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Added
On November 21, 2024, we received a notice from Nasdaq stating that because we had not yet filed our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024. We continued to not be in compliance with the Timely Filing Requirement.
Removed
We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." December 31, 2023 was our last day as an emerging growth company, and we will no longer be eligible for these exemptions going forward.
Added
On February 18, 2025, we filed each of our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2024 and September 30, 2024 and an amendment to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and on February 19, 2025 we filed an amendment to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, which amendments included restated financial statements for the periods covered therein.
Removed
ESG matters include increasing attention to climate change, climate risk, expectations on companies to address climate change, hiring practices, the diversity of the work force, racial and social justice issues involving the Company’s personnel, customers and third parties with whom it otherwise does business, and investor and societal expectations regarding ESG matters and disclosures.
Added
As a result of these filings, on February 24, 2025, the Listing Qualifications Department of Nasdaq notified us that we had regained compliance with the Timely Filing Requirement.
Removed
Risks arising from ESG matters may adversely affect, among other things, reputation and the market price of our stock. Further, we may be exposed to negative publicity based on the identity and activities of those we do business with and the public’s view of the approach and performance of our customers and business partners with respect to ESG matters.
Added
On February 24, 2025, we received a deficiency letter from Nasdaq notifying us that (i) for the last 30 consecutive business days, the bid price for our common stock had closed at a price of below $1.00 per share, which is the minimum closing price required to maintain continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”), and (ii) because our stockholder’s equity was below $2.5 million as reported on our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024, we no longer met the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market under Nasdaq Rule 5550(b)(1), requiring a minimum stockholders’ equity of $2.5 million (the “Stockholders’ Equity Requirement”).
Removed
Any such negative publicity could arise from adverse news coverage in traditional media and could also spread through the use of social media platforms. Our relationships and reputation with our existing and prospective customers and third parties with which we do business could be damaged if we were to become the subject of any such negative publicity.
Added
On April 16, 2025, we received a notice from Nasdaq stating that because we had not yet filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Form 10-K”), we were no longer in compliance with the Timely Filing Requirement.
Removed
This, in turn, could have an adverse effect on our ability to attract and retain customers and employees and could have a negative impact on the market price for our stock. Investors have begun to consider the steps taken and resources allocated by financial institutions and other commercial organizations to address ESG matters when making investment and operational decisions.
Added
On May 21, 2025, we received a notice from Nasdaq stating that because we had not yet filed our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025 or our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, we continued to be out of compliance with the Timely Filing Requirement.
Removed
Certain investors are beginning to incorporate the business risks of climate change and the adequacy of companies’ responses to the risks posed by climate change and other ESG matters into their investment theses.
Added
On August 18, 2025, we received a determination letter from Nasdaq stating that Nasdaq had determined that we did not file the Form 10-K and the Form 10-Q by August 15, 2025, the date required for the delinquent filings by an exception previously received from Nasdaq staff.
Removed
These shifts in investing priorities may result in adverse effects on the market price of our stock to the extent investors determine we have not made sufficient progress on ESG matters. In addition, customers, employees, regulators and suppliers have also been focused on ESG matters.
Added
The letter stated that, as a result, unless we timely requested an appeal, the trading of our common stock would be suspended at the opening of business on August 27, 2025 and a Form 25-NSE will be filed with the SEC, which would remove our common stock securities from listing and registration on Nasdaq.
Removed
Companies that do not adapt to or comply with ESG expectations and standards, or that are perceived to have not responded appropriately to the growing concern regarding ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and other adverse consequences.
Added
The letter also stated that we were not in compliance the Bid Price Rule and the Stockholders’ Equity Requirement. We timely requested an appeal to a Nasdaq Hearings Panel (the “Panel”). On October 14, 2025, we attended a hearing before the Panel in connection with the determination letter.
Removed
To the extent ESG matters negatively impact our reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations. Further, growing public concern about climate change has resulted in the increased focus of local, state, regional, national and international regulatory bodies on greenhouse gas emissions and climate change issues.
Added
On October 30, 2025, we received a notice from Nasdaq notifying us that the Panel had determined to grant our request to continue our listing on The Nasdaq Capital Market, conditioned on us regaining compliance with the Timely Filing Requirement and the Stockholders’ Equity Requirement on or before December 31, 2025 and regaining compliance with the Bid Price Rule on or before January 28, 2026.
Removed
Policy changes and changes in federal, state and local legislation and regulations based on concerns about climate change, including regulations aimed at limiting greenhouse gas emissions and the implementation of "green" building codes, could result in increased capital expenditures on our existing properties (for example, to improve their energy efficiency) without a corresponding increase in revenue, resulting in adverse impacts to our results of operations.
Added
During the exception period, we are required to provide prompt notification to the Panel of any significant event that may affect our compliance with Nasdaq requirements. Any documentation evidencing our compliance will be subject to review by the Panel, which may, in its discretion, request additional information before determining whether we have regained compliance.
Removed
In March 2024, the SEC issued final rules on climate change disclosure requirements that will require disclosure of climate-related information by all registrants. To the extent new rules impose additional reporting obligations on us, we could face increased costs.
Added
On November 18, 2025, we received a determination letter from Nasdaq stating that because we did not timely file our Quarterly Report on Form 10-Q for the period ended September 30, 2025, the resulting filing delinquency would be an additional basis for delisting our securities pursuant to the Timely Filing Requirement.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

4 edited+0 added−2 removed13 unchanged
Biggest changeOur Board of Directors receives quarterly updates on our cybersecurity posture, threats, and incidents from our Senior Vice President of Technology. Our Board of Directors also delegates certain oversight functions to our Audit Committee, which reviews our cybersecurity policies, procedures, controls, and audit results.
Biggest changeOur Board of Directors receives quarterly updates on our cybersecurity posture, threats, and incidents from our Senior Vice President of Technology, who now serves in a consulting role with the Company. Our Board of Directors also delegates certain oversight functions to our Audit Committee, which reviews our cybersecurity policies, procedures, controls, and audit results.
Moreover, the regulatory environment related to information security, data protection, and privacy is increasingly demanding and complex, and compliance with applicable laws and regulations may result in significant costs or require changes in our business practices that could adversely affect our operations. Cybersecurity Leadership Our Board of Directors is actively involved in overseeing our cybersecurity risk management.
Moreover, the regulatory environment related to information security, data protection, and privacy is increasingly demanding and complex, and compliance with applicable laws and regulations may result in significant costs or require changes in our business practices that could adversely affect our operations. 23 Cybersecurity Leadership Our Board of Directors is actively involved in overseeing our cybersecurity risk management.
Our Board of Directors and our Audit Committee regularly assess the adequacy of our cybersecurity risk management framework and the effectiveness of our mitigation strategies. Our cybersecurity operations are led by our Senior Vice President of Technology, who has over 20 years of experience in the field of cybersecurity.
Our Board of Directors and our Audit Committee regularly assess the adequacy of our cybersecurity risk management framework and the effectiveness of our mitigation strategies. Our cybersecurity operations are led by our consulting Senior Vice President of Technology, who has over 20 years of experience in the field of cybersecurity.
We have 26- also crafted over 12 internal policies to help maintain a secure environment, such as our information security policy, our data classification policy, our incident response policy, and our password policy.
We have also crafted over 12 internal policies to help maintain a secure environment, such as our information security policy, our data classification policy, our incident response policy, and our password policy.
Removed
For example, in 2019, we were a victim of a wire fraud scheme, in which a fraudulent party compromised the email account of one of our employees and sent a fraudulent wire transfer request to our bank. We believe the bank did not follow its verification procedures and executed the wire transfer without our authorization.
Removed
Please see Legal Proceedings section for more information. After this incident, we implemented multi-factor authentication (MFA) across all our systems and email accounts, to prevent unauthorized access and impersonation. We also enhanced our internal controls and training to prevent and detect wire fraud and other cyber risks.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−1 removed0 unchanged
Biggest changeITEM 2. PROPERTIES Our principal place of business is located at 1751 Panorama Point, Unit G, Lafayette, Colorado, 80026. This location is leased and consists of approximately 10,000 square feet, including approximately 3,500 square feet of office space and 6,500 square feet of warehouse space.
Biggest changeITEM 2. PROPERTIES Our principal place of business is located at 1751 Panorama Point, Unit G, Lafayette, Colorado, 80026. This location is leased and consists of approximately 10,000 square feet, including approximately 3,500 square feet of office space and 6,500 square feet of warehouse space. Additionally, we have six other office leases in the United States.
Removed
Additionally, we have six other office leases in the United States and one office lease located in the Netherlands. We currently do not own any property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+38 added−10 removed7 unchanged
Biggest changeThe Company recorded 50% of this amount as a liability on the opening balance sheet as of the date of the acquisition. • Pullar – urban-gro’s former Chief Financial Officer, George Pullar, filed a suit in the District Court of Boulder County, Colorado against urban-gro and Bradley Nattrass, in his capacity as urban-gro’s CEO, claiming breach of fiduciary duty.
Biggest changeThe Company recorded 50% of this amount as a liability on the opening balance sheet as of the date of the acquisition. 24 ● Pullar – urban-gro’s former Chief Financial Officer, George Pullar, filed a suit in the District Court of Boulder County, Colorado against urban-gro and Bradley Nattrass, in his capacity as urban-gro’s CEO, claiming breach of fiduciary duty.
There can be no assurance that future developments related to pending claims filed in the future, whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material effect on urban-gro's financial condition, results of operations or cash flows. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 28- PART II
There can be no assurance that future developments related to pending claims filed in the future, whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material effect on urban-gro’s financial condition, results of operations or cash flows. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 26 PART II
Removed
We believe we have substantial defenses to the claim asserted in this lawsuit and intend to vigorously defend this action. • Crest Ventures, LLC – urban-gro was sued on July 29, 2021, by Crest Ventures, LLC in a breach of contract case in the District Court for Arapahoe County, Colorado.
Added
We believe we have substantial defenses to the claim asserted in this lawsuit and intend to vigorously defend this action. Gemini Loan Agreement Amendment and Default On December 13, 2023, our wholly-owned subsidiary UG Construction, Inc. d/b/a Emerald Construction Management, Inc.
Removed
The allegations in the action are based on a claim that Crest Ventures, LLC is entitled to commission compensation on the February 2021 uplisting of our common stock to Nasdaq. urban-gro joined as a third-party defendant, Andrew Telsey, for breach of fiduciary duty and fraud. urban-gro also counter-claimed 27- Crest Ventures, LLC for fraud and declaratory judgment. Mr.
Added
(“UG Construction”) entered into (i) an interest only asset based revolving loan agreement (the “Loan Agreement”) with Gemini Finance Corp.
Removed
Telsey was urban-gro's counsel at the time and he claims he was also a member of Crest Ventures. urban-gro entered into a finder's fee agreement with Crest Ventures for a potential M&A transaction. Crest Ventures and Mr. Telsey claim the finder's fee agreement also applies to the uplisting onto the Nasdaq. urban-gro denies these claims, believes Crest Ventures and Mr.
Added
(“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”).
Removed
Telsey are perpetrating fraud, and Mr. Telsey breached his fiduciary duties as legal counsel for urban-gro in the transaction. We believe we have substantial defenses to the claim asserted in this lawsuit and intend to vigorously defend this action.
Added
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.
Removed
On August 11, 2023, the Company entered into a settlement agreement and mutual release (the “Settlement Agreement”) with Crest Ventures, LLC and Andrew Telsey to settle all claims in the litigation filed in the District Court for Arapahoe County, Colorado, Case No. 2021CV31301.
Added
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.
Removed
Pursuant to the Settlement Agreement, the Company made a payment of $1,500,000 to Crest Ventures, LLC on September 7, 2023. In connection with this settlement, the Company recorded a loss in the second quarter of 2023 of $1,500,000 in accordance with GAAP related to loss contingencies.
Added
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.
Removed
The case was dismissed with prejudice by the Court on October 5, 2023. • Sunflower Bank – urban-gro filed a lawsuit on November 5, 2021, against Sunflower Bank in the District Court for Boulder County, Colorado related to fraudulent wire transfers of approximately $5.1 million that were made from our accounts at Sunflower Bank in October 2021.
Added
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.
Removed
During 2022, $1.7 million of these funds were returned to us and we received $0.25 million from our insurance company.
Added
In connection with the execution of the Amendment, we issued to Gemini, as an amendment fee, 150,000 shares of our common stock 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.
Removed
We sued Sunflower Bank for $3.4 million, exclusive of the insurance proceeds, under a theory of breach of contract, negligence, and breach of UCC standards, as we believed that Sunflower Bank failed to follow industry standard procedures designed to prevent such a theft and was therefore liable for the unrecovered balance.
Added
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.
Removed
Sunflower Bank filed counterclaims against us for breach of contract and negligence. urban-gro entered into a settlement agreement with Sunflower bank and received $2.4 million in settlement proceeds on March 27, 2023. The case was dismissed with prejudice on March 29, 2023.
Added
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”).
Added
The Asset Sale occurred on September 4, 2025, at which Gemini acquired the assets constituting the collateral under the line of credit for $450,000. On August 29, 2025, Gemini commenced a lawsuit captioned Gemini Finance Corp. v. UG Construction, Inc. et al. , case number 25CV2259 W SBC, in the U.S.
Added
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.
Added
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.
Added
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.
Added
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.
Added
The fairness hearing occurred on October 14, 2025. 25 Agile Term Loan On June 26, 2025, we and certain of our subsidiaries entered into a business loan and security agreement (the “Agile Loan Agreement”) with Agile Capital Funding, LLC and Agile Lending LLC (together, “Agile”).
Added
Pursuant to the Agile Loan Agreement, Agile extended to us a term loan of $1,050,000.00 (the “Term Loan”) to be used to fund our general business requirements.
Added
The Agile Loan Agreement is for a term of twenty-eight weeks from its effective date and includes an administrative agent fee of $50,000.00 to be remitted to Agile, which was added to the amount of the loan.
Added
We could make a full prepayment or partial prepayment of the Term Loan, however, upon the prepayment of any principal amount, we would be obligated to pay a premium payment of principal, which would be equal to the aggregate and actual amount of interest that would be paid through the maturity date.
Added
The Agile Loan Agreement contains standard events of default and representations and warranties by us and Agile 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 us to Agile.
Added
Pursuant to the Agile Loan Agreement, upon an event of default, Agile will receive a security interest in certain of our assets, subject to certain exceptions.
Added
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.
Added
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.
Added
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.
Added
Pursuant the complaint, Grow Hill stated that we were in default under the Secured Promissory Note due to a failure to timely make payments, and elected to accelerate all amounts due under the Secured Promissory Note, including a default fee equal to 1% of the outstanding principal amount.
Added
We are currently investigating available options to resolve the complaint and intends to vigorously defend the allegation of fraud.
Added
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.
Added
Pursuant to the terms of the Settlement Agreement, among other things, we issued a promissory note to J Brrothers with an original principal amount of $395,556 and issued 150,000 unregistered shares of our common stock to J Brrothers. The note accrues simple interest at an annual rate of 12% and has a maturity date of March 18, 2026.
Added
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.
Added
The note includes customary representations and warranties, customary events of default and a 17% default interest rate.
Added
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).
Added
The complaint alleged that UG Construction served as general contractor for the construction of the construction of a PepsiCo plant in Tolleson, Arizona, and that as a result of work completed by RK, UG Construction owed $1,522,716 to RK as a result of alleged breach of contract, breach of implied covenant of good faith and fair dealing, violation of the Arizona Prompt Payment Act, and lien foreclosure.
Added
On or about October 2025, a default judgment was entered against UG Construction for $1,511,716, plus prejudgment interest of $288,346 and post-judgment interest at 8.25% plus $10,057 in attorney fees. . Action Equipment- complaint filed On April 21, 2025, Action Equip. & Scaffold Co.
Added
(“Action”) filed a complaint against UG Construction in the Superior Court of Arizona for Maricopa County (Case No. CV2025-014165).
Added
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.
Added
A default judgment was subsequently entered against UG Construction, and Action filed a writ of garnishment on October 21, 2025. 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.
Added
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.
Added
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−2 removed6 unchanged
Biggest changeOn September 12, 2022, the Board authorized an additional $2.0 million increase to the stock repurchase program, to a total of $10.5 million. In total, the Company has repurchased 1,099,833 shares of common stock at an average price per share of $8.25 for a total of $9.1 million, under this program.
Biggest changeIn total, the Company has repurchased 1,449,833 shares of common stock at an average price per share of $8.31 for a total of $12.0 million, under this program. As of December 31, 2024, we have $1.4 million remaining under the repurchase program. ITEM 6. [RESERVED]
The Company’s Board has authorized the Company to repurchase common stock through a variety of methods, including open market repurchases, purchases by 29- contract (including, without limitation, 10b5-1 and 10b-18 plans), and/or privately negotiated transactions. The amount, timing, or prices of repurchases, may vary based on market conditions and other factors.
The Company’s Board has authorized the Company to repurchase common stock through a variety of methods, including open market repurchases, purchases by contract (including, without limitation, 10b5-1 and 10b-18 plans), and/or privately negotiated transactions. The amount, timing, or prices of repurchases, may vary based on market conditions and other factors.
OTCQX Marketplace under the symbol "UGRO." Although our shares were quoted on the OTCQX Marketplace from October 7, 2019 through February 11, 2021, because trading on the OTCQX Marketplace was infrequent and limited in volume, the prices at which such transactions occurred did not necessarily reflect the price that would have been paid for our common stock in a more liquid market.
OTCQX Marketplace under the symbol “UGRO.” Although our shares were quoted on the OTCQX Marketplace from October 7, 2019 through February 11, 2021, because trading on the OTCQX Marketplace was infrequent and limited in volume, the prices at which such transactions occurred did not necessarily reflect the price that would have been paid for our common stock in a more liquid market.
No commissions were paid regarding the share issuances, and the share certificates were issued with a Rule 144 restrictive legend. Purchase of Equity Securities by Issuer and Affiliated Purchasers During the year ended December 31, 2023, the Company did not repurchase common stock.
No commissions were paid regarding the share issuances, and the share certificates were issued with a Rule 144 restrictive legend. 27 Purchase of Equity Securities by Issuer and Affiliated Purchasers During the year ended December 31, 2024, the Company did not repurchase common stock.
In connection with the offering, we received approval to list our common stock on Nasdaq Capital Market under the symbol "UGRO." Prior to the offering, shares of our common stock were quoted on the OTC Markets Group, Inc.
In connection with the offering, we received approval to list our common stock on Nasdaq Capital Market under the symbol “UGRO.” Prior to the offering, shares of our common stock were quoted on the OTC Markets Group, Inc.
The program does not have an expiration date and can be modified or terminated by the Board at any time. On May 24, 2021, the Board authorized a stock repurchase program to purchase up to $5.0 million of outstanding shares of the Company’s common stock.
The program does not have an expiration date and can be modified or terminated by the Board at any time. Since inception on May 24, 2021, the Board authorized a stock repurchase program to purchase up to $10.5 million of outstanding shares of the Company’s common stock.
The trading price of our common stock has been, and may continue to be, subject to wide price fluctuations in response to various factors, many of which are beyond our control, including those described in Part I, Item 1A, "Risk Factors." HOLDERS As of March 16, 2024, we had 89 holders of record of our Common Stock.
The trading price of our common stock has been, and may continue to be, subject to wide price fluctuations in response to various factors, many of which are beyond our control, including those described in Part I, Item 1A, “Risk Factors.” HOLDERS As of January 12, 2025, we had 79 holders of record of our Common Stock.
UNREGISTERED SALES OF EQUITY SECURITIES During the quarter ended December 31, 2023, we issued the following securities that were not registered under the Securities Act: • During the quarter ended, December 31, 2023, the Company issued shares of the Company's common stock to satisfy contingent consideration purchase price liabilities for the Emerald and DVO acquisitions as follows: ◦ Emerald - 85,639 shares at an average price per share of $1.31. ◦ DVO - 110,486 shares at an average price per share of $1.33.
UNREGISTERED SALES OF EQUITY SECURITIES During the year ended December 31, 2024, we issued the following securities that were not registered under the Securities Act: ● The Company issued the following shares of the Company’s common stock to satisfy contingent consideration purchase price liabilities for acquisitions as follows: ○ DVO - 44,032 shares at an average price per share of $1.82. ○ UG Construction – 27,115 shares at an average price per share of $1.82.
Removed
On January 18, 2022, the Board authorized a $2.0 million increase to the stock repurchase program, to a total of $7.0 million. On February 2, 2022, the Board authorized an additional $1.5 million increase to the stock repurchase, to a total of $8.5 million.
Removed
As of December 31, 2023, we have $1.4 million remaining under the repurchase program. ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

25 edited+6 added−27 removed4 unchanged
Biggest changeThis increase in revenues is the net result of the following changes in individual revenue components: • Construction design-build revenues increased $26.4 million, primarily due to significant organic growth within this group; • Services revenue decreased $0.9 million, which was the result of a decrease in revenues in our existing business due to negative market conditions in the CEA sector; • Equipment systems revenue decreased $20.7 million due to negative market conditions in the CEA sector and a reduction in capital equipment spending by customers; and • Other revenue decreased $0.3 million. 30- During the year ended December 31, 2023, cost of revenues was $61.3 million compared to $52.8 million during the year ended December 31, 2022, an increase of $8.4 million, or 16%.
Biggest changeThis decrease in revenues is the net result of the following changes in individual revenue components: ● Construction design-build revenues decreased $26.0 million due to decrease in our business due to negative market conditions. ● Services revenue decreased $3.1 million, which was the result of a decrease in revenues in our existing business due to negative market conditions in the CEA sector; ● Equipment systems revenue decreased $0.5 million due. ● Other revenue decreased $0.4 million. 28 During the year ended December 31, 2024, cost of revenues was $37.1 million compared to $60.0 million during the year ended December 31, 2023, a decrease of $22.9 million, or 38%.
Actual results may differ from these estimates under different assumptions or conditions. Please refer to Note 2 – Summary of Significant Accounting Policies set forth immediately following the signature page of this Report for more information on our significant accounting policies.
Actual results may differ from these estimates under different assumptions or conditions. Please refer to Note 2 – Summary of Significant Accounting Policies set forth immediately following the signature page of this Report for more information on our significant accounting policies. 30
Lender will consider requests under the Line of Credit, which Lender may accept or reject in its discretion, until September 12, 2024 ("the Initial Term"), subject to an automatic extension for an additional nine-,month term until May 12, 2025. provided that UG Construction is in compliance with all the terms of the applicable loan documents and Lender has not sent a written notice of non-renewal at least 60 days prior to expiration of the Initial Term.
Lender will consider requests under the Line of Credit, which Lender may accept or reject in its discretion, until September 12, 2024 (“the Initial Term”), subject to an automatic extension for an additional nine-,month term until May 12, 2025, provided that UG Construction is in compliance with all the terms of the applicable loan documents and Lender has not sent a written notice of non-renewal at least 60 days prior to expiration of the Initial Term.
("Lender") pursuant to which Lender extended to UG Construction the Line of Credit in an amount not to exceed $10.0 million to be used to assist UG Construction and the Company with cash management.
(“Lender”) pursuant to which Lender extended to UG Construction the Line of Credit in an amount not to exceed $10.0 million to be used to assist UG Construction and the Company with cash management.
Investing Activities: Net cash provided by investing activities was $1.7 million for the year ended December 31, 2023, primarily from the sale of our investment in XS Financial for $2.3 million offset by the acquisition of property, plant and equipment of $0.6 million. We had no material commitments for capital expenditures as of December 31, 2023.
Net cash provided by investing activities was $1.9 million for the year ended December 31, 2023, primarily from the sale of our investment in XS Financial for $2.4 million offset by the acquisition of property, plant and equipment of $0.5 million. We had no material commitments for capital expenditures as of December 31, 2023.
This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and "Cautionary Information about Forward-Looking Statements" and elsewhere in this Report.
This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and “Cautionary Information about Forward-Looking Statements” and elsewhere in this Report.
On December 13, 2023, UG Construction, Inc, ("UG Construction"), a wholly owned subsidiary of the Company, entered into an interest only asset based revolving loan agreement ("the Line of Credit") with Gemini Finance Corp.
On December 13, 2023, UG Construction, Inc, (“UG Construction”), a wholly owned subsidiary of the Company, entered into an interest only asset based revolving loan agreement (“the Line of Credit”) with Gemini Finance Corp.
The $4.2 million decrease in net operating assets and liabilities was primarily due to the net effects of a $2.5 million increase in accounts receivable, a $10.8 million increase in customer deposits, offset by a $1.1 million increase in accounts payable and accrued expenses, and an $8.4 million increase in prepayments and other assets.
The $2.2 million decrease in net operating assets and liabilities was primarily due to the net effects of a $11.9 million increase in accounts receivable, a $0.0 million increase in customer deposits, offset by a $13.0 million increase in accounts payable and accrued expenses, and an $2.5 million increase in prepayments and other assets.
This use of cash was the net effect of the net loss of $18.7 million, offset by non-cash expenses of $4.8 million, and a reduction in net operating assets and liabilities of $2.7 million.
This use of cash was the net effect of the net loss of $25.4 million, offset by non-cash expenses of $12.7 million, and a decrease in net operating assets and liabilities of $2.2 million.
As of December 31, 2023, we had cash of $1.1 million, which represented a decrease of $10.9 million from $12.0 million as of December 31, 2022. Changes in cash during 2023 and 2022 are discussed below.
As of December 31, 2024, we had cash of $0.8 million, which represented a decrease of $0.3 million from $1.1 million as of December 31, 2023. Changes in cash during 2024 and 2023 are discussed below.
This increase is directly attributable to the increase in revenues indicated above. Gross profit was $10.3 million (14% of revenue) during the year ended December 31, 2023, compared to $14.2 million (21% of revenue) during the year ended December 31, 2022.
This decrease is directly attributable to the decrease in revenues indicated above. Gross profit was $2.9 million (7% of revenue) during the year ended December 31, 2024, compared to $9.9 million (14% of revenue) during the year ended December 31, 2023.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.
Material Cash Requirements: Our material cash requirements include payments on the UG Construction Line of Credit. CRITICAL ACCOUNTING ESTIMATES Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.
Cash used from financing activities during the year ended December 31, 2023 primarily relates to cash provided by our line of credit and other financing agreements of $3.0 million offset by $3.8 million of payments made on the promissory note related to the DVO acquisition and $0.7 million of payments made for the contingent consideration and finance lease. 34- Net cash used by financing activities was $5.5 million for the year ended December 31, 2022.
Net cash used in financing activities during the year ended December 31, 2023 primarily relates to cash provided by our line of credit and notes payable of $2.5 million offset by $3.9 million of payments made on the DVO Promissory Note and $0.5 million of payments related to contingent consideration.
All share and per share amounts presented herein have been restated to reflect the implementation of the 1-for-6 reverse stock split as if it had occurred at the beginning of the earliest period presented. OVERVIEW AND HISTORY – S EE "I TEM 1.
All share and per share amounts presented herein have been restated to reflect the implementation of the 1-for-6 reverse stock split as if it had occurred at the beginning of the earliest period presented. OVERVIEW AND HISTORY In 2024, urban-gro was an integrated professional services and Design-Build firm.
During 2021 and 2022, we made the following acquisitions: • July 2021 - Three affiliated architecture design companies (the "2WR Entities") • April 2022 - A construction Design-Build firm ("Emerald") • October 2022 - An engineering firm ("DVO") RESULTS OF OPERATIONS Comparison of Results of Operations for the years ended December 31, 2023 and 2022 During the year ended December 31, 2023, we generated revenues of $71.5 million compared to revenues of $67.0 million during the year ended December 31, 2022, an increase of $4.5 million, or 7%.
During 2021 and 2022, we made the following acquisitions: ● July 2021 - Three affiliated architecture design companies (the “2WR Entities”) ● April 2022 - A construction Design-Build firm (“Emerald”) ● October 2022 - An engineering firm (“DVO”) RESULTS OF OPERATIONS Comparison of Results of Operations for the years ended December 31, 2024 and 2023 During the year ended December 31, 2024, we generated revenues of $40.0 million compared to revenues of $69.9 million during the year ended December 31, 2023, a decrease of $29.9 million, or 43%.
In the CEA sector, our clients include operators and facilitators in both the cannabis and produce markets in the United States, Canada, and Europe. In the Commercial sector, we work with leading Food and Beverage CPG companies in the United States, and clients in other commercial sectors including light industrial, healthcare, higher education, laboratories, and hospitality.
In the Commercial sector, we worked with leading Food and Beverage CPG companies in the United States, and clients in other commercial sectors including light industrial, healthcare, higher education, laboratories, and hospitality.
Loans made under the Line of Credit earns interest at a monthly rate of one and seventy-five hundredths percent (1.75%). As of December 31, 2023, we had borrowed $2.5 million under the Line of Credit. Operating Activities: Net cash used in operating activities was $11.2 million during the year ended December 31, 2023.
Loans made under the Line of Credit earns interest at a annual rate of 12%. As of December 31, 2024, we had borrowed $4.4 million under the Line of Credit. 29 Operating Activities: Net cash used in operating activities was $2.8 million during the year ended December 31, 2024.
Non-operating expense was $2.2 million for the year ended December 31, 2023, compared to $3.0 million for the year ended December 31, 2022, a decrease of $0.7 million. This decrease was primarily due to a $1.5 million loss on settlement and a $0.3 million impairment loss in 2023 compared to a $2.7 million impairment loss recorded in 2022.
Non-operating expense was $1.0 million for the year ended December 31, 2024, compared to $2.1 million for the year ended December 31, 2023, a decrease of $1.1 million.
We derive income from our ability to generate revenue from our clients through the billing of our employees’ time spent on client projects. We offer value-added architectural, engineering, systems procurement and integration, and construction solutions to customers operating in the CEA and Commercial sectors.
Our business focused primarily on providing fee-based professional services, Design-Build solutions, as well as the value-added reselling and integration of equipment systems. We derived income from our ability to generate revenue from our clients through the billing of our employees’ time spent on client projects.
Gross profit as a percentage of revenues decreased overall due to increases in lower margin construction design-build revenue combined with decreases in higher margin equipment systems and services revenue. Operating expenses increased by $0.1 million, or 0%, to $27.0 million for the year ended December 31, 2023 compared to $26.8 million for the year ended December 31, 2022.
Gross profit as a percentage of revenues decreased overall due primarily to reduced margins on construction design-build revenue due to losses on certain jobs. Operating expenses increased by $5.2 million, or 16%, to $38.4 million for the year ended December 31, 2024 compared to $33.2 million ended December 31, 2023.
Net cash used in operating activities was $12.6 million during the year ended December 31, 2022. This use of cash was the net effect of the net loss of $15.3 million, offset by non-cash expenses of $6.9 million, and a decrease in net operating assets and liabilities of $4.2 million.
This use of cash was the net effect of the net loss of $36.5 million, offset primarily by a $11.3 million impairment of goodwill and intangible assets, depreciation and amortization of $1.4 million, stock-based compensation of $1.4 million, and a reduction in net operating assets and liabilities of $18.6 million.
Net cash used in investing activities was $4.5 million for the year ended December 31, 2022. This use of cash was due to $3.9 million from the acquisition of the DVO Entities and $0.6 million for the purchase of fixed assets. Financing Activities: Net cash used by financing activities was $1.4 million for the year ended December 31, 2023.
Net cash used in financing activities was $2.0 million for the year ended December 31, 2023.
The $2.7 million reduction in net operating assets and liabilities was due to the net effects of a $23.4 million increase in accounts payable, contract liabilities and accrued expenses, a $2.2 million decrease in prepayments and other assets, offset by an $19.2 million increase in accounts receivable and a decrease in contract assets, customer deposits, operating lease liability, and contingent consideration of $3.6 million.
The $18.6 million reduction in net operating assets and liabilities was primarily due to the a $1.6 increase in accounts payable, contract liabilities and accrued expenses and a $17.6 million decrease in accounts receivable. Net cash used in operating activities was $10.5 million during the year ended December 31, 2023.
As a result of the above, we incurred a net loss of $18.7 million for the year ended December 31, 2023, or a net loss per share of $1.66, compared to a net loss of $15.3 million for the year ended December 31, 2022, or a net loss per share of $1.44. 31- NON-GAAP FINANCIAL MEASURES The Company uses the supplemental financial measure of Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") as a measure of our operating performance.
As a result of the above, we incurred a net loss of $36.5 million for the year ended December 31, 2024, or a net loss per share of $2.98, compared to a net loss of $25.4 million for the year ended December 31, 2023, or a net loss per share of $2.34.
This decrease in working capital was primarily due to a decrease in cash of $10.9 million (which is further detailed below) and the net effects of reductions in customer deposits of $2.0 million and prepaid expenses and other current assets of $1.4 million.
This decrease in working capital was primarily due to decreases in accounts receivables of $13.3 million and contract receivables of $4.3 million, and impairment of goodwill and intangible assets of $11.3 million, and increases in customer deposits of $2.1 million, and notes payable of $3.6 million.
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B USINESS" FOR A FURTHER DESCRIPTION OF OUR H ISTORY AND B ACKGROUND urban-gro is an integrated professional services and Design-Build firm. Our business focuses primarily on providing fee-based professional services, Design-Build solutions, as well as the value-added reselling and integration of equipment systems.
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We offered value-added architectural, engineering, systems procurement and integration, and construction solutions to customers operating in the CEA and Commercial sectors. In the CEA sector, our clients included operators and facilitators in both the cannabis and produce markets in the United States, Canada, and Europe.
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This increase was due to the net effects of the following: • a $3.8 million increase in general and administrative expenses due to an increase in legal fees defending lawsuits, increases in the average number of personnel and increases in construction design-build revenue which increased business insurance and lease costs; • a $3.3 million decrease in a one-time business development expense related to satisfying an equipment lighting issue encountered by a major customer; and • a $0.4 million decrease in share based compensation due to a reduction in the number of employees who received grants in 2023 as compared to 2022.
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This increase is primarily due to a $5.0 million increase in the impairment of goodwill and intangibles. Additionally, general and administrative expenses were relatively flat due to restructuring costs in 2024, offset by bad debt expense write-downs in 2024.
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Adjusted EBITDA is not calculated in accordance with U.S. GAAP and it is not a substitute for other measures prescribed by U.S. GAAP such as net income (loss), income (loss) from operations, and cash flows from operating activities. We define Adjusted EBITDA as net income (loss) attributable to urban-gro, Inc., determined in accordance with U.S.
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This decrease was primarily due to a $0.2 million loss on settlement recorded in 2024 compared to a $1.5 million loss on settlement of debt recorded in 2023. as well as no write-down on investment in 2024 compared to a $0.3 million write-down on investment. This was partially offset by an increase in interest expense of $0.8 million.
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GAAP, excluding the effects of certain operating and non-operating expenses including, but not limited to, interest expense/income, income taxes/benefit, depreciation of tangible assets, amortization of intangible assets, impairment losses, unrealized exchange gains/losses, debt forgiveness and extinguishment, stock-based compensation expense, acquisition costs, and other nonrecurring expenses that we do not believe reflect our core operating performance.
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LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2024, we had negative working capital of $26.5 million, compared to negative working capital of $5.1 million as of December 31, 2023, an increase of $21.4 million.
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Our Board and management team focus on Adjusted EBITDA as a key performance and compensation measure. We believe that Adjusted EBITDA assists us in comparing our operating performance over various reporting periods because it removes from our operating results the impact of items that our management believes do not reflect our core operating performance.
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Investing Activities: Net cash used in investing activities was $0.1 million for the year ended December 31, 2024, primarily due to purchases of property and equipment. We had no material commitments for capital expenditures as of December 31, 2024.
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The following table reconciles net loss attributable to the Company to Adjusted EBITDA for the periods presented: Years Ended December 31, 2023 2022 Net loss $ (18,681,061) $ (15,277,909) Interest expense 271,686 54,579 Interest income (173,895) (329,012) Federal and state income tax (provisions) (215,864) (322,092) Federal and state income tax payments 185,910 16,253 Depreciation and amortization 1,636,667 1,483,065 EBITDA $ (16,976,557) $ (14,375,116) Non-recurring legal fees 1,249,133 352,173 One-time employee expenses — 819,089 Contingent consideration - change in fair value 160,232 436,905 Contingent consideration - DVO acquisition 278,559 — Reduction in force costs 346,725 — One time business development expenses – 3,299,864 Impairment loss 258,492 2,660,934 Loss on settlement 1,500,000 – Retention incentive 1,242,000 – Stock-based compensation 2,199,046 2,571,785 Transaction costs 30,197 347,317 Adjusted EBITDA (non-GAAP) $ (9,712,173) $ (3,887,049) 32- BACKLOG Backlog is a financial measure that generally reflects the dollar value of revenue that the Company expects to realize in the future.
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Financing Activities: Net cash provided by financing activities was $2.7 million for the year ended December 31, 2024. Cash provided from financing activities during the year ended December 31, 2024 primarily relates to additions to notes payable for $8.1 million, partially offset by $5.2 million of payments made on notes payable.
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Although backlog is not a term recognized under U.S GAAP, it is a common measure used by companies operating in our industries. We report backlog for the following revenue categories: (i) Equipment Systems; (ii) Construction Design-Build; and (iii) Services.
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We define backlog for Equipment Systems and Services as signed contracts, with Equipment Systems contracts generally requiring receipt of a customer deposit prior to being included in backlog. Construction Design-Build backlog is comprised of construction projects once the contract is awarded and to the extent we believe funding is probable.
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Our Construction Design/Build backlog consists of uncompleted work on contracts in progress and contracts for which we have executed a contract but have not commenced the work.
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For uncompleted work on contracts in progress, we include (i) executed change orders, (ii) pending change orders for which we expect to receive confirmation in the ordinary course of business, and (iii) claims that we have made against our customers for which we have determined we have a legal basis under existing contractual arrangements and as to which we consider collection to be probable.
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Backlog for each of our revenue categories as of December 31, 2023 and December 31, 2022 is reflected in the following tables: December 31, 2023 CEA Commercial Total Relative Percentage (in millions) Equipment systems $ 1 $ — $ 1 1 % Services $ 3 $ 4 $ 7 6 % Construction design-build $ 73 $ 29 $ 102 93 % Total backlog $ 77 $ 33 $ 110 100 % Relative percentage 70 % 30 % 100 % Note: Percentages may not add up due to rounding.
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December 31, 2022 CEA Commercial Total Relative Percentage (in millions) Equipment systems $ 5 $ — $ 5 6 % Services $ 4 $ 2 $ 6 6 % Construction design-build (1) $ 67 $ 15 $ 82 88 % Total backlog $ 76 $ 17 $ 93 100 % Relative percentage 82 % 18 % 100 % Note: Percentages may not add up due to rounding.
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(1) Construction design-build revenue and backlog relate to the operations of Emerald, which was acquired by the Company on April 29, 2022. Historically, the majority of our Equipment Systems and Services backlog has been retired and converted into revenue within two quarters.
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At December 31, 2023, we expected approximately 57% of our Construction Design-Build backlog to be completed in the next 12 months. At December 31, 2023, three customers were each in excess of 10% of total backlog and in total they accounted for 74% of total backlog.
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At December 31, 2022, three customers were in excess of 10% of total backlog and in total they accounted for 81% of our total backlog. Certain Construction Design-Build contracts contain options that are exercisable at the discretion of our customer to award additional work to us, without requiring us to go through an additional competitive bidding process.
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In addition, some customer contracts also contain task orders that are signed under master contracts pursuant to which we perform work only when the customer awards specific task orders to us. Contracts in our Construction Design-Build backlog may be canceled or modified at the election of the customer.
Removed
Many Construction Design-Build projects are added to our contract backlog and completed within the same fiscal year and therefore may not be reflected in our beginning or quarter-end Construction Design-Build backlog amounts. 33- LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2023, we had negative working capital of $1.2 million, compared to positive working capital of $10.3 million as of December 31, 2022, a decrease of $11.5 million.
Removed
The reductions in customer deposits and prepaid expenses and other current assets corresponds to a reduction in customer orders for equipment systems which is reflected in the reduction in equipment systems backlog from December 31, 2022 to December 31, 2023 outlined in Backlog above.
Removed
Due to the acquisition of Emerald in 2022, the Company includes in working capital contract receivables and liabilities related to construction projects. These construction working capital balances are described in further detail in our consolidated financial statements, including the accompanying notes.
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This decrease in cash primarily relates to $4.4 million used in the repurchase of common stock and $1.0 million paid for acquisition related contingent consideration. Material Cash Requirements: Our material cash requirements include payments on the promissory note associated with the DVO acquisition and operating lease payments.
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These obligations are described in detail in our consolidated financial statements, including the accompanying notes. INFLATION Inflation has resulted in increased costs for our customers. In addition, the U.S. Government has responded to inflation by raising interest rates, which has increased the cost of capital for our customers.
Removed
We believe this has resulted in some customers delaying projects, reducing the scope of projects or potentially canceling projects, as well as increased costs of our operations, which has negatively impacted the results of our operations during the year ended December 31, 2023.
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We maintain strategies to mitigate the impact of higher material, energy and commodity costs, including cost reduction, alternative sourcing strategies, and passing along cost increase to customers, which may offset only a portion of the adverse impact.
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We believe the current inflationary environment has negatively impacted our customers which has led to delays in our customers starting projects, which in turn has delayed our customers from signing contracts with us.
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Please refer to Recently Issued Accounting Pronouncements in Note 2 – Summary of Significant Accounting Policies set forth immediately following the signature page of this Report for information on new authoritative accounting guidance.
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OFF-BALANCE SHEET ARRANGEMENTS We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors. ITEM 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide this information.

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