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 ...