PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited Q1 2021 financials show total assets surged to **$58.0 million** and revenue grew **182%**, driven by a recent equity offering that also turned shareholders' equity positive [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The March 31, 2021 balance sheet shows total assets surged to **$58.0 million** and shareholders' equity turned positive to **$48.6 million**, driven by an equity offering Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $49,923 | $184 | +$49,739 | | Total current assets | $55,169 | $5,245 | +$49,924 | | **Total assets** | **$58,028** | **$8,161** | **+$49,867** | | **Liabilities & Equity** | | | | | Total current liabilities | $9,453 | $14,546 | -$5,093 | | **Total liabilities** | **$9,453** | **$15,567** | **-$6,114** | | **Total shareholders' equity (deficit)** | **$48,575** | **($7,406)** | **+$55,981** | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Q1 2021 total revenue surged **182%** to **$12.0 million** from equipment sales, but the company reported a net loss of **$1.6 million** due to non-operating expenses Q1 2021 vs Q1 2020 Statement of Operations (in thousands) | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$12,034** | **$4,261** | **+182%** | | Equipment systems | $11,345 | $3,307 | +243% | | Gross Profit | $2,641 | $1,113 | +137% | | *Gross Margin* | *21.9%* | *26.1%* | *-4.2 pts* | | Income (loss) from operations | $153 | ($1,415) | +$1,568 | | **Net Loss** | **($1,589)** | **($1,696)** | **+$107** | | **Net Loss Per Share** | **($0.20)** | **($0.36)** | **+$0.16** | [Unaudited Condensed Consolidated Statements of Shareholders' Equity (Deficit)](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Deficit)) Shareholders' equity dramatically improved from a **$7.4 million** deficit to a positive **$48.6 million** in Q1 2021, driven by a **$57.7 million** stock offering - Net proceeds from a stock offering were **$57.7 million**, after deducting offering costs of **$4.4 million**[20](index=20&type=chunk) - The company repurchased common stock for **$3.0 million** during the quarter[20](index=20&type=chunk) - Bridge financing notes were converted into **254,425 shares** of common stock, adding **$1.9 million** to equity[20](index=20&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2021 cash increased by **$49.7 million** to **$49.9 million**, primarily from **$49.4 million** in net financing cash, including **$58.2 million** from a stock issuance Q1 2021 vs Q1 2020 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Cash Provided By (Used In) Operating Activities | $298 | ($1,867) | | Net Cash Used In Investing Activities | $0 | ($47) | | Net Cash Provided by Financing Activities | $49,440 | $2,034 | | **Net Increase in Cash** | **$49,738** | **$121** | | **Cash at End of Period** | **$49,923** | **$570** | - Financing activities were dominated by **$58.2 million** in net proceeds from the issuance of common stock[22](index=22&type=chunk) - The company used cash from financing to repay **$5.8 million** in notes payable and repurchase **$3.0 million** of common stock[22](index=22&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's indoor horticulture engineering business, highlighting a **$62.1 million** equity offering that enabled debt repayment and noting customer concentration risk - The company is an engineering and design services company for the controlled environment agriculture (CEA) market, creating high-performance indoor cultivation facilities[23](index=23&type=chunk) - On February 17, 2021, the company completed an offering of **6,210,000 shares** at **$10.00 per share** for gross proceeds of **$62.1 million** and listed on the Nasdaq Capital Market under the symbol "UGRO"[60](index=60&type=chunk) - On February 17, 2021, the company repaid all outstanding amounts under its Credit Agreement and expensed the remaining unamortized debt issuance costs as a loss on extinguishment of debt[49](index=49&type=chunk) - In Q1 2021, one client represented **31% of total revenue**. At March 31, 2021, two clients represented **18%** and **16%** of total accounts receivable[51](index=51&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes **182%** Q1 2021 revenue growth to equipment sales, despite a gross margin decrease, with liquidity bolstered by a **$58.2 million** equity offering Q1 2021 vs Q1 2020 Key Operational Results (in millions) | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Revenues | $12.0 | $4.2 | +$7.8 (+182%) | | Gross Profit | $2.6 | $1.1 | +$1.5 (+137%) | | Net Loss | ($1.6) | ($1.7) | +$0.1 | | Adjusted EBITDA | $0.5 | ($0.9) | +$1.4 | - The increase in revenue was primarily due to an **$8.0 million** increase in cultivation equipment sales[71](index=71&type=chunk) - Gross profit as a percentage of revenue decreased from **26% to 22%** due to a revenue mix shift favoring equipment systems over higher-margin services and consumables[73](index=73&type=chunk) - The company's cash position increased by **$49.7 million**, primarily from net proceeds of **$58.2 million** from its February 2021 equity offering, offset by **$5.8 million** in debt repayment and **$3.0 million** in treasury stock purchases[80](index=80&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is a smaller reporting company and, as such, is not required to provide the information requested under this item - As a smaller reporting company, urban-gro, Inc. is not required to provide disclosures about market risk[87](index=87&type=chunk) [Controls and Procedures](index=22&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2021 - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[90](index=90&type=chunk) - No changes in internal control over financial reporting occurred during the first quarter of 2021 that have materially affected, or are reasonably likely to materially affect, internal controls[92](index=92&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=23&type=section&id=Item%201.%20Legal%20Proceedings) According to management's knowledge, there are no material legal claims that have been brought against the company, nor have any been threatened - There are no material claims brought against the company or threatened[94](index=94&type=chunk) [Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is therefore not required to provide the information under this item - As a smaller reporting company, urban-gro, Inc. is not required to provide risk factor disclosures in its Form 10-Q[95](index=95&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=23&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[96](index=96&type=chunk) [Defaults Upon Senior Securities](index=23&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[97](index=97&type=chunk) [Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[98](index=98&type=chunk) [Other Information](index=23&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - None[99](index=99&type=chunk) [Exhibits](index=23&type=section&id=Item%206.%20Exhibits) The report lists several exhibits filed with the Form 10-Q, including amendments to loan agreements, CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL data files - Exhibits filed include the First Amendment to the Loan Agreement, CEO and CFO certifications, and XBRL instance documents[100](index=100&type=chunk)

PART I [Business](index=4&type=section&id=Item%201.%20Business) The company provides end-to-end engineering and design solutions for the Controlled Environment Agriculture market - urban-gro is an engineering and design services company for the Controlled Environment Agriculture (CEA) market, which includes indoor facilities, vertical farms, and greenhouses[16](index=16&type=chunk) - The company is expanding its focus from its historical base in cannabis cultivation to the **vertical farming sub-segment** for crops like leafy greens, herbs, and strawberries[16](index=16&type=chunk)[17](index=17&type=chunk)[50](index=50&type=chunk) - Services are offered in three main phases: Cultivation Space Programming (CSP), Integrated Cultivation Design (ICD), and full-facility Mechanical, Electrical, and Plumbing (MEP) engineering[22](index=22&type=chunk)[24](index=24&type=chunk) - The company has key strategic vendor relationships, including an exclusive two-year global System Integrator Agreement with **Fluence (lighting)** and a multi-year agreement with **Argus (automated control systems)**[37](index=37&type=chunk)[38](index=38&type=chunk) Targeted Gross Profit Margins by Category | Category | Gross Profit Margin | | :--- | :--- | | Engineering design services | 30% - 60% | | Customized equipment systems | Mid-teens% - Mid-30s% | | Consumable products | High-teens% - High-20s% | - Growth strategy is based on three pillars: expanding 'Expertise as a Service', geographical expansion into Europe, and market expansion into the commercial vertical farming segment[64](index=64&type=chunk)[65](index=65&type=chunk)[70](index=70&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from its history of net losses, supplier and client concentration, and cannabis industry regulations - The **COVID-19 pandemic** has caused project delays and could materially adversely affect business, financial condition, and operations[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) - The company has a history of net losses, including a **$5.1 million loss in 2020** and an **$8.3 million loss in 2019**, with negative operating cash flow in both years[114](index=114&type=chunk)[115](index=115&type=chunk)[118](index=118&type=chunk) - There is a significant dependency on third-party suppliers; sales of **Fluence's LED lighting systems accounted for 33% of consolidated revenue** for the year ended December 31, 2020[124](index=124&type=chunk) - The company has high client concentration risk; in 2020, **two clients represented 25% and 13% of total revenue**, respectively[126](index=126&type=chunk) - A majority of historical revenues are from clients in the legal cannabis industry, which is **illegal under U.S. federal law**, posing significant financial and legal risks[82](index=82&type=chunk)[133](index=133&type=chunk)[142](index=142&type=chunk) - The company **does not anticipate paying any cash dividends** on its common stock in the foreseeable future, intending to retain earnings for business growth[164](index=164&type=chunk) [Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[183](index=183&type=chunk) [Properties](index=36&type=section&id=Item%202.%20Properties) The company's principal place of business is a leased facility in Lafayette, Colorado - The principal place of business is a leased **10,000 sq. ft. facility** in Lafayette, CO, with a monthly rent of $12,000 and a lease expiring in August 2021[184](index=184&type=chunk) [Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) There are no material legal proceedings involving the company - There are no material legal proceedings involving the company[185](index=185&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[186](index=186&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%20and%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company listed on Nasdaq in February 2021 via a public offering and does not plan to issue dividends - Completed a public offering on February 17, 2021, selling 6,210,000 shares at $10.00 per share for **gross proceeds of $62.1 million**[188](index=188&type=chunk) - The company's common stock was listed on the Nasdaq Capital Market under the symbol **'UGRO'** in connection with the February 2021 offering[188](index=188&type=chunk) - The company has never paid dividends and does not anticipate paying them in the foreseeable future, retaining earnings for business development[194](index=194&type=chunk) - As of March 26, 2021, there were **6,846 holders of record** for the Common Stock[193](index=193&type=chunk) [Selected Financial Data](index=39&type=section&id=Item%206.%20Selected%20Financial%20Data) As a smaller reporting company, this information is not required - The company is not required to provide this information as it qualifies as a smaller reporting company[198](index=198&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew 7% in 2020, but a shift to lower-margin equipment sales caused a net loss of $5.1 million Comparison of Operations (2020 vs. 2019) | Metric | 2020 | 2019 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $25.8M | $24.2M | +$1.6M | +7% | | Gross Profit | $5.7M | $6.6M | -$0.9M | -14% | | Gross Margin | 22% | 27% | -5 p.p. | - | | Operating Expenses | $8.5M | $12.5M | -$4.0M | -32% | | Net Loss | ($5.1M) | ($8.4M) | +$3.3M | -39% | | Net Loss Per Share | ($1.06) | ($1.90) | +$0.84 | - | - The decrease in gross profit margin was due to a revenue mix shift toward **lower-margin equipment systems sales** and away from higher-margin services revenue[210](index=210&type=chunk)[211](index=211&type=chunk) Adjusted EBITDA Reconciliation (Non-GAAP) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net Loss | ($5,073,695) | ($8,350,573) | | **Adjusted EBITDA** | **($652,091)** | **($3,277,577)** | - As of Dec 31, 2020, the company had a **working capital deficit of $9.3 million**, but management believes the February 2021 IPO alleviated going concern doubts[220](index=220&type=chunk) Cash Flow Summary | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($3.6M) | ($2.5M) | | Net Cash Used in Investing Activities | ($0.2M) | ($2.9M) | | Net Cash Provided by Financing Activities | $3.5M | $2.9M | [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, this information is not required - The company is not required to provide this information as it qualifies as a smaller reporting company[238](index=238&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The required financial statements and supplementary data are included following the signature page of the report - The financial statements required by this item are set forth following the signature page of the report[239](index=239&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=46&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no disagreements with its accountants - None reported[240](index=240&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective as of year-end 2020 - Management concluded that **disclosure controls and procedures were effective** as of December 31, 2020[242](index=242&type=chunk) - Management assessed **internal control over financial reporting as effective** as of December 31, 2020, based on the COSO framework[247](index=247&type=chunk) - **No material changes** in internal control over financial reporting occurred during the fiscal year ended December 31, 2020[244](index=244&type=chunk) [Other Information](index=47&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[249](index=249&type=chunk) PART III [Directors, Executive Officers, Corporate Governance, Compensation, and Related Party Transactions](index=47&type=section&id=Item%2010-14) Required information is incorporated by reference from the company's forthcoming 2021 proxy statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the Registrant's definitive proxy statement, to be filed within 120 days after fiscal year-end[251](index=251&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=48&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section provides an index of all exhibits filed as part of the Form 10-K - A list of financial statements is set forth on page F-1; financial statement schedules are omitted as they are not required or applicable[257](index=257&type=chunk) - The Exhibit Index lists all filed documents, including corporate governance documents, material contracts, and SEC certifications[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk) Financial Statements [Consolidated Financial Statements](index=54&type=section&id=Consolidated%20Financial%20Statements) The company's 2020 financials show a net loss of $5.1 million and a stockholders' deficit of $7.4 million Consolidated Balance Sheet Summary (As of Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Total Current Assets | $5.2M | $4.0M | | Total Assets | $8.2M | $7.4M | | Total Current Liabilities | $14.5M | $12.3M | | Total Liabilities | $15.6M | $12.4M | | Total Stockholders' Deficit | ($7.4M) | ($5.0M) | Consolidated Statement of Operations Summary (Year Ended Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Total Revenue | $25.8M | $24.2M | | Gross Profit | $5.7M | $6.6M | | Loss from Operations | ($2.7M) | ($5.9M) | | Net Loss | ($5.1M) | ($8.4M) | | Net Loss Per Share | ($1.06) | ($1.90) | Consolidated Statement of Cash Flows Summary (Year Ended Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Cash from Operating Activities | ($3.6M) | ($2.5M) | | Cash from Investing Activities | ($0.2M) | ($1.1M) | | Cash from Financing Activities | $3.5M | $2.9M | | Net (Decrease) in Cash | ($0.3M) | ($0.7M) | | Cash at End of Period | $0.2M | $0.4M | [Notes to Consolidated Financial Statements](index=58&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail significant concentration risks, related-party transactions, and the impact of the 2021 IPO - The February 2021 IPO, which raised **gross proceeds of $62.1 million**, alleviated conditions that had previously raised substantial doubt about the company's ability to continue as a going concern[294](index=294&type=chunk)[391](index=391&type=chunk) - The company has significant related-party transactions, including a **$1 million note payable** to an entity owned by a director, which was converted into a bridge financing note[334](index=334&type=chunk)[338](index=338&type=chunk) - In February 2020, the company entered into a credit agreement for a **C$2.7M term loan and a C$5.4M revolving facility**, which was fully repaid post-IPO in February 2021[353](index=353&type=chunk)[360](index=360&type=chunk) - Significant concentration risk exists; for 2020, **two customers represented 38% of total revenue** and one vendor accounted for 33% of total purchases[366](index=366&type=chunk)[367](index=367&type=chunk) - As of December 31, 2020, the company had approximately **$11.4 million of U.S. federal net operating loss (NOL) carryforwards** to offset future taxable income[386](index=386&type=chunk)[392](index=392&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________. Commission File Number: 000-52898 urban-gro, Inc. (Exact name of registrant as specified in its charter) Delaware 46-5158469 ( ...

Table of Contents U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________. Commission File Number: 000-52898 1751 Panorama Point Unit G Lafayette, CO 80026 (Address of principal executive offices)(Zip Code) (720) 39 ...

Table of Contents (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-52898 urban-gro, Inc. (Exact nam ...

Table of Contents U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark one) Commission File Number: 000-52898 URBAN-GRO, INC. (Exact name of registrant as specified in its charter) Colorado 46-5158469 (State or other jurisdiction of incorporation or organization) 1751 Panorama Point Unit G Lafayette, CO 80026 (720) 390-3880 (Address of principal executive office) (Zip Code) (Registrant's telephone number, Including area code) Securities registered pursuant to Section 12(b) of the A ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for Q3 2019 show asset and liability growth, revenue increase, but a wider net loss due to rising operating expenses, with a going concern warning [Unaudited Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) Total assets increased to **$10.1 million** and liabilities to **$15.4 million** by Sep 30, 2019, worsening the shareholders' deficit to **-$5.3 million** Consolidated Balance Sheet Highlights (as of Sep 30, 2019 vs. Dec 31, 2018) | Metric | Sep 30, 2019 | Dec 31, 2018 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$10,141,839** | **$5,744,764** | **+76.5%** | | Cash | $3,505,636 | $1,178,852 | +197.4% | | Goodwill | $871,230 | $– | N/A | | **Total Liabilities** | **$15,407,311** | **$9,571,315** | **+61.0%** | | Customer Deposits | $4,224,531 | $3,298,609 | +28.1% | | Notes Payable | $4,150,000 | $3,478,869 | +19.3% | | Convertible Debentures, net | $1,762,969 | $– | N/A | | **Total Shareholders' Deficit** | **($5,265,472)** | **($3,826,551)** | **+37.6%** | [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) Nine-month revenue grew **16%** to **$17.1 million** with improved gross margins, but a **50%** surge in operating expenses led to a net loss of **$5.7 million** Nine Months Ended September 30, 2019 vs 2018 | Metric | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Revenue | $17,056,737 | $14,680,295 | +16.2% | | Gross Profit | $5,527,289 | $4,304,732 | +28.4% | | *Gross Margin* | *32.4%* | *29.3%* | *+3.1 pts* | | Loss from Operations | ($4,054,086) | ($2,083,560) | +94.6% | | Net Loss | ($5,719,404) | ($2,128,506) | +168.7% | | Net Loss Per Share | ($0.22) | ($0.09) | +144.4% | Three Months Ended September 30, 2019 vs 2018 | Metric | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Revenue | $5,583,064 | $5,336,631 | +4.6% | | Gross Profit | $1,932,099 | $1,634,376 | +18.2% | | *Gross Margin* | *34.6%* | *30.6%* | *+4.0 pts* | | Loss from Operations | ($1,392,822) | ($839,998) | +65.8% | | Net Loss | ($2,809,530) | ($846,808) | +231.8% | | Net Loss Per Share | ($0.11) | ($0.03) | +266.7% | [Unaudited Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow improved to a **$86,299** use, while financing activities provided **$3.3 million**, resulting in a **$2.3 million** increase in cash for the nine months Cash Flow Summary (Nine Months Ended September 30) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash (Used In) / Provided By Operating Activities | ($86,299) | $195,681 | | Net Cash Used In Investing Activities | ($894,168) | ($1,073,300) | | Net Cash Provided by Financing Activities | $3,307,251 | $72,000 | | **Net Increase (Decrease) in Cash** | **$2,326,784** | **($805,619)** | | **Cash at End of Period** | **$3,505,636** | **$851,172** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the company's cannabis industry business, the Impact Engineering acquisition, significant liquidity issues with a **$14.3 million** accumulated deficit, and the conversion of **$2.565 million** convertible debentures - The company is an end-to-end engineering design, equipment integration, and facility optimization company primarily serving commercial cannabis operators[19](index=19&type=chunk) - Acquired **100%** of Impact Engineering, Inc. on March 7, 2019, for **500,000 shares** of common stock, resulting in **$871,230** of goodwill[22](index=22&type=chunk) - The company has significant operating losses, an accumulated deficit of **$14.3 million**, and a working capital deficit of **$6.6 million**, which raises substantial doubt about its ability to continue as a going concern[25](index=25&type=chunk) - Recorded a **$506,000** write-down of its investment in TGH in anticipation of selling its ownership interest back to TGH[68](index=68&type=chunk) - Raised **$2,565,000** through an offering of convertible debentures and warrants. The debentures and accrued interest converted into **1,102,513 common shares** on October 16, 2019, following a liquidity event (OTCQX listing and effective registration statement)[74](index=74&type=chunk)[94](index=94&type=chunk) - For the nine months ended Sep 30, 2019, one vendor accounted for **15%** of total purchases and one customer represented **15%** of total revenue, indicating concentration risk[78](index=78&type=chunk)[80](index=80&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses **16%** revenue growth and improved gross margins, offset by a **50%** surge in operating expenses, leading to a larger net loss and a need for **$3.5 million** in additional funding [Results Of Operations](index=26&type=section&id=Results%20Of%20Operations) Nine-month revenue increased **16%** to **$17.1 million** with improved gross margins, but a **50%** rise in operating expenses led to a **$5.7 million** net loss, prompting cost reduction initiatives - Nine-month revenue increased by **$2.4 million (16%)** YoY, primarily from lighting (**$1.5M** increase) and environmental sciences (**$0.5M** increase)[106](index=106&type=chunk) - Gross profit margin for the nine-month period increased to **32%** in 2019 from **29%** in 2018 due to an increased focus on higher-margin services[109](index=109&type=chunk) - Nine-month operating expenses increased by **50%** YoY, primarily due to an expanding workforce and a **$960,053** increase in stock compensation expense[110](index=110&type=chunk) - Cost reduction initiatives implemented in August 2019 include reducing employees by **15** (expected savings of **$1.8M**), cutting marketing by **$500k**, and eliminating outsourced product development[115](index=115&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company needs an additional **$3.5 million** in funding, facing challenges in traditional banking due to the cannabis industry, and gross debt increased to **$6.7 million** - The company requires an aggregate of **$6,000,000** in total funding and has raised approximately **$2,500,000** to date, leaving a need for an additional **$3,500,000**[122](index=122&type=chunk) - The company is unable to establish traditional banking relationships for financing due to cannabis being a Schedule 1 controlled substance under federal law[123](index=123&type=chunk) - Net cash provided by financing activities was **$3.3 million** for the nine months ended Sep 30, 2019, primarily from **$2.565 million** in convertible debentures and a **$970,000** sale of future receivables[130](index=130&type=chunk) - Gross debt (excluding operating leases) increased by **$3.2 million** to **$6.7 million** as of September 30, 2019, compared to year-end 2018[132](index=132&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) As a smaller reporting company, the registrant is not required to provide market risk disclosures - As a smaller reporting company, the registrant is not required to provide the information requested under this item[136](index=136&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal controls - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2019[139](index=139&type=chunk) - There were no changes in internal control over financial reporting during the period that have materially affected, or are reasonably likely to materially affect, internal controls[141](index=141&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) No material legal claims have been brought against the company, nor have any been threatened - There are no material claims brought against the company or threatened[143](index=143&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, urban-gro, Inc. is not required to provide risk factor information - The company is a smaller reporting company and is not required to provide risk factor information[144](index=144&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued **1,751,633** common shares as employee grants during the nine months ended September 30, 2019, under Section 4(a)(2) exemption - Issued **1,751,633 shares** of Common Stock in the nine months ended September 30, 2019, as part of employee grants[145](index=145&type=chunk) [Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - None[146](index=146&type=chunk) [Other Information](index=32&type=section&id=Item%205.%20Other%20Information) No other material information was reported - None[148](index=148&type=chunk) [Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO and CFO certifications (Section 302 and 906) and XBRL interactive data files[149](index=149&type=chunk)[150](index=150&type=chunk)

Form 10-Q Quarterly Report Under the Securities Exchange Act of 1934 For the Quarterly Period Ended: June 30, 2019 Commission File Number: 000-52898 Table of Contents U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (720) 390-3880 (Issuer's Telephone Number) urban-gro, Inc. (Exact name of small business issuer as specified in its charter) Colorado 46-5158469 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1751 Panorama Point Unit G Lafayette, ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201%2E%20Financial%20Statements) The company reported significant revenue growth alongside a widening net loss, a substantial working capital deficit, and doubt about its ability to continue as a going concern [Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Consolidated%20Balance%20Sheets%20Unaudited) As of March 31, 2019, total assets increased to $8.0 million from $5.7 million at year-end 2018, driven by an acquisition, while a working capital deficit of $6.3 million persisted Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Current Assets** | $4,943,648 | $3,945,305 | | **Total Assets** | $7,973,042 | $5,744,764 | | **Total Current Liabilities** | $11,238,099 | $9,571,315 | | **Total Liabilities** | $11,453,587 | $9,571,315 | | **Total Shareholders' Deficit** | ($3,480,545) | ($3,826,551) | [Consolidated Statements of Operations (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)%20(Unaudited)) For Q1 2019, revenue grew 69% to $5.8 million, but a 76% rise in operating expenses led to a wider net loss of $1.48 million compared to the prior year Q1 2019 vs Q1 2018 Performance (Unaudited) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | **Revenue** | $5,834,016 | $3,446,364 | | **Gross Profit** | $1,744,176 | $1,003,871 | | **Loss from Operations** | ($1,382,008) | ($768,023) | | **Net Loss** | ($1,481,471) | ($782,649) | | **Net Loss Per Share** | ($0.06) | ($0.03) | [Consolidated Statements of Shareholders' Deficit (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Deficit%20(Unaudited)) The shareholders' deficit improved to ($3.48 million) from ($3.83 million), mainly due to non-cash stock issuance for an acquisition and stock-based compensation - The shareholders' deficit decreased to **$3,480,545** as of March 31, 2019, from **$3,826,551** as of January 1, 2019[14](index=14&type=chunk) - Key changes included a **$1,481,471 net loss**, offset by **$588,697 in stock-based compensation** and **$1,000,000 in stock issued for an acquisition**[14](index=14&type=chunk) [Consolidated Statements of Cash Flows (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) In Q1 2019, cash used in operations improved, but the overall cash position decreased by $0.29 million, ending the quarter with $0.89 million in cash Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | **Net Cash Used In Operating Activities** | ($418,405) | ($876,551) | | **Net Cash Used In Investing Activities** | ($241,133) | ($222,510) | | **Net Cash Provided by Financing Activities** | $369,534 | $76,000 | | **Net Decrease in Cash** | ($290,004) | ($1,023,061) | | **Cash at End of Period** | $888,848 | $633,730 | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes highlight the acquisition of Impact Engineering, substantial doubt about going concern status, and reliance on a new convertible debenture offering for liquidity - The company is an end-to-end agricultural solutions firm focused on cannabis growers, providing services and products for both capital expenditures (**CapEx**) and operating expenses (**OpEx**)[17](index=17&type=chunk) - On March 7, 2019, the company acquired 100% of Impact Engineering, Inc. by issuing 500,000 shares of common stock valued at **$1,000,000**[20](index=20&type=chunk) - The company has incurred operating losses since inception, had an accumulated deficit of **$10.0 million** and a working capital deficit of **$6.3 million** as of March 31, 2019, raising **substantial doubt about its ability to continue as a going concern**[22](index=22&type=chunk) - In Q1 2019, the company initiated a private placement offering of up to **$6,000,000** in convertible debentures and warrants, raising **$425,000** by March 31, 2019[74](index=74&type=chunk)[76](index=76&type=chunk) - **Concentration Risk**: In Q1 2019, one customer accounted for **27% of total revenue**, and one vendor accounted for **24% of total purchases**[78](index=78&type=chunk)[79](index=79&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong revenue growth driven by industry demand, offset by rising expenses, and outlines a plan to raise $4.5 million in capital to fund operations Q1 2019 vs Q1 2018 Operational Results | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | **Revenues** | $5,834,016 | $3,446,364 | | **Cost of Sales** | $4,089,840 | $2,442,493 | | **Operating Expenses** | $3,126,184 | $1,771,894 | | **Net Loss** | ($1,481,471) | ($782,649) | - Revenue growth of **69%** was primarily driven by a **163% increase in lighting sales** and a **63% increase in environmental sciences sales**[102](index=102&type=chunk) - Management estimates a need for up to an additional **$4,500,000** in capital for advanced inventory purchases ($2.5M) and expanding operations ($1.0M)[111](index=111&type=chunk) - To address capital needs, the company initiated an offering of up to **$6,000,000** in Units (convertible debentures and warrants), and as of May 20, 2019, it had accepted total subscriptions of **$1,735,000**[113](index=113&type=chunk)[114](index=114&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk%2E) As a smaller reporting company, urban-gro, Inc. is not required to provide information for this item - The company is a **smaller reporting company** and is not required to provide the information under this Item pursuant to Regulation S-K[118](index=118&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%204%2E%20Controls%20and%20Procedures%2E) Management concluded that the company's disclosure controls and procedures were effective as of the end of the quarter, with no material changes to internal controls - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2019[121](index=121&type=chunk) - There were **no changes in internal control over financial reporting** during the period that have materially affected, or are reasonably likely to materially affect, internal controls[123](index=123&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=25&type=section&id=Item%201%2E%20Legal%20Proceedings) The company reports that there are no material legal claims that have been brought against it, nor are there any known threatened claims - To the best of management's knowledge, there are **no material claims** brought against the company nor have there been any claims threatened[125](index=125&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A%2E%20Risk%20Factors) As a smaller reporting company, urban-gro, Inc. is not required to provide information for this item - The company is a **smaller reporting company** and is not required to provide the information under this item pursuant to Regulation S-K[126](index=126&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details unregistered stock issuances for an acquisition and employee grants, and an ongoing $6 million convertible debenture offering to raise capital - In Q1 2019, **500,000 shares of Common Stock** were issued for the acquisition of Impact Engineering, Inc., and **20,000 shares** were issued to employees under the Stock Grant program[127](index=127&type=chunk) - The company initiated an offering of up to **$6,000,000** in Units, consisting of convertible debentures and warrants, and as of May 20, 2019, it had accepted subscriptions totaling **$1,735,000**[129](index=129&type=chunk)[130](index=130&type=chunk) [Defaults Upon Senior Securities](index=26&type=section&id=Item%203%2E%20Defaults%20Upon%20Senior%20Securities) None reported - None[132](index=132&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures) Not applicable - Not Applicable[133](index=133&type=chunk) [Other Information](index=26&type=section&id=Item%205%2E%20Other%20Information) None reported - None[134](index=134&type=chunk) [Exhibits](index=26&type=section&id=Item%206%2E%20Exhibits) This section lists the exhibits filed with the report, including Sarbanes-Oxley Act certifications and XBRL interactive data files - Filed exhibits include **CEO and CFO certifications** pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002, and XBRL Instance Documents[135](index=135&type=chunk) [Signatures](index=27&type=section&id=Signatures) The report was duly signed on May 20, 2019, by the Principal Executive Officer and Principal Financial Officer

Table of Contents U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark one) Commission File Number: 000-52898 URBAN-GRO, INC. (Exact name of registrant as specified in its charter) Colorado 46-5158469 (State or other jurisdiction of incorporation or organization) 1751 Panorama Point Unit G Lafayette, CO 80026 (720) 390-3880 (Address of principal executive office) (Zip Code) (Registrant's telephone number, Including area code) Securities registered pursuant to Section 12(b) of the A ...