Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and with the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

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. 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. On February 12, 2021, we completed an uplisting to the Nasdaq Capital Market ("Nasdaq") under the ticker symbol "UGRO." On February 9, 2026, we effected a 1-for-25 reverse stock split with respect to our common stock. All information in this Report gives effect to these reverse stock splits, including restating prior period reported amounts.

On February 17, 2026, the Company completed its merger (the "Merger") with Flash Sports and Media, Inc. ("Flash"), a Delaware corporation, pursuant to an Agreement and Plan of Merger dated February 17, 2026 (the "Merger Agreement"), by and among the Company, UGRO Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("Merger Sub"), and Flash. As a result of the Merger, Merger Sub merged with and into Flash, with Flash surviving as a wholly owned subsidiary of the Company. Following the closing of the Merger, the Company began operating as a diversified sports, media, and experiential marketing platform under the Flash Sports & Media brand. The Company intends to change its name to Flash Sports & Media Holdings, Inc. or a similar name, subject to receipt of stockholder approval, which the Company intends to seek as soon as reasonably practicable.

Overview

Following the completion of the Merger, the Company is a diversified sports, media, and experiential marketing platform focused on the creation, production, and monetization of live events, original content, and branded fan experiences. The Company operates across multiple sports and entertainment verticals, leveraging proprietary intellectual property, strategic partnerships, and high-impact experiential activations to engage global audiences and deliver measurable value for brands, sponsors, and media partners. The Company's platform integrates content creation, event execution, and media distribution to build scalable businesses within the global sports and entertainment ecosystem. Flash Sports & Media maintains corporate offices in the United Arab Emirates (headquarters), India, the United States, South Africa, and Singapore.

Through its subsidiaries, the Company holds exclusive commercial and media rights to professional cricket leagues, produces international-standard broadcast content, manages franchise operations, and monetizes sponsorship, ticketing, and digital media opportunities across multiple geographies. The Company's core operating subsidiary, Innovative Production Group FZ LLC ("IPG"), founded in 2015 and headquartered in Fujairah, United Arab Emirates, is a global sports marketing, league management, ground sponsorship, and production company with more than 30 years of collective cricket industry experience and deep expertise in international cricket properties and sports media. IPG is headquartered in the UAE with branch offices in Sri Lanka, Singapore, India, Malaysia, and Zimbabwe, and has executed projects across 14 countries, including the United States, Ireland, Scotland, South Africa, Saudi Arabia, Pakistan, Hong Kong, and Afghanistan. IPG has produced more than 5,000 hours of live sporting event broadcasts over the past seven years and has established working relationships with numerous national cricket boards, including Cricket South Africa, the Pakistan Cricket Board, Cricket Ireland, Sri Lanka Cricket, the Afghanistan Cricket Board, Zimbabwe Cricket, Cricket Scotland, the Emirates Cricket Board, Abu Dhabi Cricket, Malaysia Cricket, Kuwait Cricket, and the Asian Cricket Council. IPG is the exclusive Event Rights Partner for the Lanka Premier League ("LPL") under a Master Event Rights Agreement with Sri Lanka Cricket ("SLC") dated October 14, 2020.

Flash Business and Revenue Streams

The Company derives revenue from multiple streams, primarily related to the production, commercialization, and management of professional cricket leagues and international cricket events. The Company's significant revenue streams are described below:

Production Fee Income. Production income represents revenue earned from providing end-to-end live broadcast production services for cricket events, including international bilateral series and T20 tournaments. Services include pre-event planning, live camera operations (utilizing a minimum of 26 cameras per match, including Hawk-Eye DRS, super slow-motion, spider cam, drone, and 6 DOF robotic "Buggy Cam" technology), broadcasting infrastructure, technical staffing, satellite uplink and SNG distribution, and post-production. For the year ended December 31, 2024, production fee income represented approximately 42% of IPG's total revenue, or approximately $5.1 million.

Franchise Fees. The Company enters into agreements with third-party franchisees that operate individual teams in the LPL. The LPL currently features five franchise teams, each of which pays franchise fees in exchange for team ownership and naming rights, jersey sponsorship rights, merchandising and local sponsorship rights, stadium activation rights, and additional commercial and promotional rights including dugout branding, mascot rights, post-match ceremony participation, big screen branding, and perimeter board branding. Each team features a squad of up to 16 players, including a maximum of six international players from ICC Full/Associate Member Countries. For the year ended December 31, 2024, franchise fees represented approximately 29% of IPG's total revenue, or approximately $3.5 million.

Sponsorship Fees. The Company generates sponsorship income through agreements with corporate sponsors who receive brand visibility across LPL events, including on-field signage, jersey placements, digital promotions, and title/associate sponsorship designations. Sponsorship categories include Title, Powered By, Present By, League Partner, Associate, and Umpire Partner tiers, as well as official brand partners and on-ground stall activations. IPG has secured sponsorships from a range of major global and regional brands, including Dream11, My11Circle, Daraz, Coca-Cola, Dettol, Red Bull, Pepsi, LG, Nippon Paint, Valvoline, Dialog, AIA, and others. For the year ended December 31, 2024, sponsorship fees represented approximately 20% of IPG's total revenue, or approximately $2.4 million.

Broadcast and Streaming Rights. The Company earns licensing fees by granting third-party broadcasters and digital platforms the right to air or stream live cricket content. The Company's international media rights cover television, radio, digital, pay television, betting, gaming, in-flight, mobile, and internet rights on an exclusive basis throughout the world excluding Sri Lanka, where terrestrial media rights are granted on an exclusive basis. For the year ended December 31, 2024, broadcast rights represented approximately 5% of IPG's total revenue, or approximately $608,000.

Betting Data Rights. The Company licenses exclusive rights to collect and distribute real-time match data for betting purposes, including delivery of live, ball-by-ball statistical feeds for LPL tournaments, subject to compliance with applicable laws including ICC guidelines and regulations and the laws of the countries in which the broadcast takes place.

Other Revenue. The Company also earns revenue from team jersey sponsorship sales, ticketing income from the sale of match tickets to spectators attending live events, franchisee box catering, ground branding and on-ground sales at match venues, and reimbursement income. For the year ended December 31, 2024, other revenue collectively represented approximately 4% of IPG's total revenue.

The Lanka Premier League

The Lanka Premier League is a professional franchise T20 cricket league established in 2020 in Sri Lanka, bringing together top Sri Lankan cricketers and leading international stars. The LPL is intellectual property owned by Sri Lanka Cricket; IPG holds the exclusive global commercial and media rights (excluding certain Sri Lankan domestic rights reserved by SLC) under the Master Event Rights Agreement dated October 14, 2020 (the "Event Rights Agreement"). Matches are played in the Twenty20 format by five franchise teams named after Sri Lankan cities: the Colombo Strikers, Dambulla Sixers, Jaffna Kings, Galle Marvels, and Kandy Falcons. Each team features a squad of up to 100 local and 50 international players selected through an annual player auction process. As of the completion of the 2024 season, there have been five editions of the tournament.

Since its inaugural season in 2020, the LPL has demonstrated consistent growth in audience reach and sponsorship media valuation. Season 1 (2020) achieved a TV audience of approximately 155 million, a digital audience of approximately 218 million, and a sponsorship media valuation of approximately $54.5 million. Season 2 (2021) grew to a TV audience of approximately 168 million, a digital audience of approximately 228 million, and a sponsorship media valuation of approximately $82.5 million. Season 3 (2022) reached a TV audience of approximately 212 million, a digital audience of approximately 261 million, and a sponsorship media valuation of approximately $114.7 million. Season 4 (2023) expanded to a TV audience of approximately 315 million, a digital audience of approximately 282 million, and a sponsorship media valuation of approximately $149.5 million. The most recent completed season, Season 5 (2024), achieved a TV audience of approximately 380 million, a digital audience of approximately 293 million, and a total sponsorship media valuation of approximately $176.5 million, representing year-over-year growth of approximately 18%. The cumulative sponsorship media valuation across all five LPL seasons from 2020 through 2024 was approximately $510.2 million. For Season 5 (2024), the sponsorship media valuation was comprised of approximately $100.9 million attributable to TV, $37.8 million to OTT/digital platforms, $26.2 million to social media, and $11.6 million to press coverage. LPL content has been distributed through major global broadcasters including Star Sports, Sony LIV, Sony Pictures Networks, A Sports HD, Kayo, Willow Live, Fox Sports, T Sports, Ten Cricket, beIN Sports, Free Sports, SportsMax, and Sony Six, among others.

The sixth edition of the LPL was staged from December 1 to December 23, 2025, across three premier venues in Sri Lanka - Colombo, Dambulla, and Kandy - featuring 24 matches over 24 days with five competing franchises. All match venues are International Cricket stadia owned by SLC.

Under the Event Rights Agreement, IPG holds four categories of exclusive rights: (A) Team Franchise / Team Ownership Rights - the right to select, engage, and manage franchise team owners for the LPL; (B) International Media Rights and Terrestrial Media Rights - exclusive rights to license television, radio, digital, pay television, betting, gaming, in-flight, mobile, and internet broadcasting of LPL matches globally; (C) Ground Sponsorship Rights - rights to manage and sell in-venue branding, including LED boards, boundary signage, stump branding, presentation ceremonies, and related activations; and (D) AV Production Rights - the right and obligation to produce all live and highlights content for LPL matches to internationally recognized ICC standards.

The Event Rights Agreement has an initial term of five annual tournaments commencing in 2020, with automatic one-year renewals subject to the timely payment of the Event Rights Fee or provision of a bank guarantee to SLC. The Company's rights must be secured annually through the payment of an Event Rights Fee or the furnishing of an Irrevocable Unconditional Bank Guarantee by March 15 of each year. Failure to make timely payment or furnish the required guarantee could result in termination of the Company's rights for that year. IPG also holds a first right of refusal to extend the agreement for an additional five-year term (through 2029), subject to mutually agreed terms.

In consideration for the Event Rights, IPG pays SLC a minimum guaranteed annual Event Rights Fee. The minimum guaranteed fee for the launch year was USD 1,500,000 for a 13-match format and USD 1,925,000 for a 23-match format. The Event Rights Fee escalates at approximately 10.5% to 11% per year for years two through five. For the addition of teams beyond the initial five teams, an additional fee of USD 300,000 per team is payable. Additionally, SLC is entitled to a revenue share of 10% of ground sponsorship and international media rights revenue during the first two years of the agreement, increasing to 20% for years three through five. SLC also receives USD 20,000 per year in consideration for terrestrial media rights. The Event Rights Fee is payable net of all taxes, withholdings, and bank charges.

SLC is responsible for all costs related to the Match Control Team including per diems, catering for match officials and staff, cricket balls, venue costs, security, janitorial and marketing communications costs, certain administrative expenses, and a component of the prize money. SLC releases to the Event Rights Partner the entirety of the ticket sales revenue generated from all LPL matches during the term of the agreement. The Event Rights Partner bears all costs and responsibility for printing, marketing, and the sale of tickets, subject to SLC's prior approval of ticket design. SLC reserves the President's and Minister's Boxes, a VIP Box, 100 grand stand tickets, and 50 complimentary tickets on each tier, at no cost to SLC.

Geographic Expansion

In addition to the LPL in Sri Lanka, IPG holds or has secured exclusive league management and commercial rights for several additional cricket properties in various stages of development. IPG holds exclusive 10-year rights to the Singapore T10 League, awarded by the Singapore Cricket Association, which encompasses TV and digital broadcasting rights, production rights, franchise sales rights, and league management rights for what is expected to be the first T10 cricket league featuring both men's and women's competitions, with six teams in the initial year expanding to eight from the third year. IPG holds exclusive 10-year rights to the Malaysian T20 League under a long-term agreement with the Malaysian Cricket Association on an exclusive basis, covering linear TV, digital, operations, marketing, and commercial rights. IPG holds exclusive 20-year rights to the Zimbabwe T20 Cricket League under an agreement with Zimbabwe Cricket, encompassing full league management, broadcasting, sponsorship, and franchise rights. IPG also holds exclusive 20-year rights to Kuwait's T20 League, T10 League, and Legends League under an agreement with Kuwait Cricket. These expansion initiatives are in various stages of development and are expected to extend the Company's footprint across high-growth emerging cricket markets. There can be no assurance that any of these expansion initiatives will be completed on the terms anticipated, or at all, or that they will generate the revenue or returns expected. For the year ended December 31, 2024, approximately 82% of IPG's total revenue was generated from customers based in Sri Lanka, with the remaining 18% derived from Zimbabwe.

Technology and Live Production Capabilities

The Company operates at the intersection of cutting-edge broadcast engineering and experiential digital entertainment. Our infrastructure enables seamless content delivery across television, live streaming, and in-person activations from international cricket stadia and other venues. For purposes of ensuring that the production quality conforms to internationally recognized standards in keeping with ICC regulations as well as ensuring the brand image of SLC and of the LPL is duly maintained and built, the Company and its sub-licensees are required to meet minimum audio-visual production standards as set out in the Event Rights Agreement.

Key production capabilities include: live broadcast engineering utilizing 26 cameras per match (including 6 DOF robotic dolly Buggy Cam, Hawk-Eye DRS with minimum specifications, super slow-motion cameras (Sony HDC-4300 4K / LDX86 or similar), ultra-slow-motion cameras (NAC or similar), stump cameras with Zing LED technology, spider cam, drone, and standard Sony HDC 2500/3500 / HDK97 cameras); Grass Valley Kayak HD 3.5 M/E vision mixing; EVS XT3 8/12-channel replay systems; Canon/Fujinon Super Wide lens arrays; satellite uplink and SNG distribution capabilities; and Hotspot technology for Decision Review System at the discretion of SLC. The Company is required to commit to broadcast/stream the feed live in full, covering every ball of each game, and to deliver a Clean Feed in High Definition in 16:9 aspect ratio, fully edited, completed, titled and synchronized as to dialogue, music and effects.

The Company also maintains studio and event production capabilities for the production of multiplatform content, branded formats, and digital programming, including comprehensive studio shows aired before, during, and after each day's play. IPG's broadcast technology platform includes Hawkeye DRS, spider cameras, drone cameras, buggy cameras, 3D HD cameras, and AR/VR graphics capabilities. IPG partners with leading cricket graphics solution providers, including aegraphics.tv and wTVision, which maintain long-standing working relationships with many of the world's leading broadcasters, production houses, and sports governing bodies. IPG's production crew includes experienced and world-renowned directors, skilled producers, cameramen, EVS operators, and broadcast engineers. Recent live broadcast productions (2023-2025) include the Bangladesh Tour of Sri Lanka, the West Indies Tour of Sri Lanka, the India Tour of Sri Lanka, LPL Seasons 4 and 5, the Legends Cricket Trophy, the Afghanistan Tour of Sri Lanka, the Zimbabwe Tour of Sri Lanka, ACC Men's Under 19 Asia Cup, and the Ireland Tour of Zimbabwe, among others. These capabilities have also been applied to production for international cricket bilateral series across multiple continents since 2015.

Growth Strategy - Planned Verticals and Strategic Initiatives

Beyond the core IPG cricket operations, the Company is evaluating and pursuing a number of strategic initiatives to expand the Flash Sports & Media platform into adjacent verticals. These initiatives are in early stages and are subject to the negotiation and execution of definitive agreements, regulatory approvals, and the availability of sufficient capital. There can be no assurance that any of these initiatives will be consummated on the terms described below, or at all.

Our Competition

The Company operates in a competitive landscape that includes other sports media, event management, and rights-holding companies. In the T20 cricket league space, the Company competes for viewership, sponsorship, and franchise investment with established leagues including the Indian Premier League (IPL), Big Bash League (BBL), Caribbean Premier League (CPL), Pakistan Super League (PSL), and SA20, among others. In the broader sports media and experiential marketing space, we compete with global sports marketing agencies, broadcast production houses, and digital entertainment companies. Many of our competitors have significantly greater financial, technical, marketing, and other resources than we do. We believe our competitive advantages include our exclusive long-term contractual rights to the LPL and multiple other emerging cricket leagues, our vertically integrated model spanning rights ownership, production, franchise management, sponsorship sales, and media distribution, our track record of more than 5,000 hours of live broadcast production and established relationships with numerous national cricket boards, our demonstrated ability to grow the LPL's sponsorship media valuation from approximately $54.5 million in Season 1 to approximately $176.5 million in Season 5, our global footprint with offices in six countries and operational experience across 14 countries, and our multi-market expansion strategy targeting high-growth emerging cricket markets.

Our Clients

The Company's clients and commercial counterparties include franchise team owners, corporate sponsors, broadcasters and digital streaming platforms, sports governing bodies, and media distribution agencies. IPG maintains working relationships with leading sports media agencies, including Sunset+Vine, ITW, and IMG Reliance, which facilitate the distribution and monetization of IPG's broadcast and media content globally. In 2023, sales to four customers individually exceeded 10% of the Company's total revenue. Collectively, these customers represented approximately 53% of total revenue. The Company's reliance on these major customers presents a concentration risk. The loss of any of these customers or a significant reduction in their orders could have a material adverse effect on the Company's financial performance. The Company continues to focus on efforts to diversify its customer base and geographic reach to mitigate such risks.

Recent Developments

Flash Merger

On February 17, 2026, we completed the Merger with Flash, pursuant to the Agreement and Plan of Merger dated February 17, 2026. Total consideration transferred consisted of $423,217 in common stock (131,027 shares at approximately $3.23 per share) and $176,076,783 in Series B Non-Voting Convertible Preferred Stock, for total Step 2 consideration of $176,500,000. Combined with $15,630,251 of Step 1 consideration transferred directly to the former IPG sellers ($5,000,000 cash and $10,630,251 contingent earn-out), total consideration transferred under ASC 805-30-30-7 is $192,130,251. The Series B Preferred Stock will convert into approximately 54.6 million shares of common stock upon stockholder approval, which has not been obtained as of the date of this report.

Reverse Stock Split

On February 9, 2026, we effected a 1-for-25 reverse stock split of our issued and outstanding common stock to regain compliance with the Nasdaq minimum bid price requirement. All share and per share amounts in this report have been retroactively adjusted for the reverse stock split.

Debt Restructuring

During the first quarter, we restructured a substantial portion of our debt obligations. Specifically: (i) we entered into a Forbearance Agreement with Agile Capital that increased the principal balance from $972,200 to $1,380,524, recognizing a loss on debt extinguishment of $408,324; (ii) we settled the increased Agile balance through eight debt-for-equity exchanges with Hudson Global Ventures, issuing 331,640 shares of common stock; and (iii) we entered into a $1,395,000 convertible note facility with Agile Hudson Partners LLC (purchase price $1,260,000), drawing the first tranche of $420,000 on March 23, 2026.

Equity Line of Credit

On February 4, 2026, we entered into an Equity Line of Credit Agreement with Hudson Global Ventures LLC providing for up to $25,000,000 in equity financing, subject to market conditions and SEC registration.

Results of Operations

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Continuing Operations

Revenue for the three months ended March 31, 2026 was $0. The Company's continuing operations, conducted through Flash and IPG, commenced upon the closing of the Merger on February 17, 2026; however, no revenue was recognized during the partial period from the acquisition date through March 31, 2026, as IPG's principal revenue source (the Lanka Premier League) is seasonal and no league season occurred during the quarter. We had no revenue from continuing operations for the three months ended March 31, 2025, as our continuing operations did not exist in their current form prior to the Merger.

Total operating expenses for the three months ended March 31, 2026 were $2,125,236, consisting of: (i) $407,188 in general and administrative expenses; and (ii) $1,718,048 in amortization of acquired intangibles. The amortization expense reflects approximately six weeks of amortization (from February 17, 2026 through March 31, 2026).

Total non-operating expense for the three months ended March 31, 2026 was $224,337, consisting of: (i) $18,063 in interest expense; (ii) $208,658 loss on issuance of derivatives (relating to the Day-1 fair value of the conversion feature embedded in the AHP Note); and (iii) a $2,384 gain from the change in fair value of derivative liabilities. We had no non-operating activity from continuing operations for the three months ended March 31, 2025. The gain on settlement related to the Agile Forbearance Agreement is reported within the loss from discontinued operations.

Loss from continuing operations was $2,349,573 for the three months ended March 31, 2026, compared to $618,901 for the three months ended March 31, 2025.

Discontinued Operations

Loss from discontinued operations was $952,121 for the three months ended March 31, 2026, compared to $3,415,011 for the three months ended March 31, 2025. The decrease reflects the substantially complete wind-down of the Legacy CEA Operations during 2025, including the August 2025 disposal of the Services segment and the September 2025 foreclosure of UG Construction assets.

Net Loss

Net loss for the three months ended March 31, 2026 was $3,301,694, of which $76,110 was attributable to non-controlling interest and $3,225,584 was attributable to urban-gro, Inc. common stockholders. Net loss for the three months ended March 31, 2025 was $4,033,912, all attributable to urban-gro, Inc. common stockholders (no non-controlling interest existed prior to the Merger).

Liquidity and Capital Resources

As of March 31, 2026, we had cash of $305,139 and a working capital deficiency. Our principal sources of liquidity during the quarter consisted of (i) cash acquired in the Merger, (ii) proceeds from the AHP convertible note ($420,000), (iii) proceeds from the Agile forbearance ($110,000), and (iv) proceeds from the One Eyed Jack private placement ($100,000).

We anticipate that our cash needs over the next twelve months will be funded through: (i) revenue from IPG cricket league operations, principally LPL Season 7 (scheduled for late 2026); (ii) additional draws under the AHP convertible note facility (remaining commitment of $975,000, representing the $1,395,000 facility less the $420,000 first tranche drawn during Q1 2026); (iii) draws on the Hudson Global ELOC ($25,000,000 capacity, subject to market conditions and SEC registration); (iv) the working capital commitment to IPG ($10,000,000 over twelve months); and (v) other equity or debt financings.

There is substantial doubt about our ability to continue as a going concern within one year after the date these financial statements are issued. See Note 3 - Going Concern.

Critical Accounting Estimates

Our critical accounting estimates have not changed materially from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, except as follows:

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Business Combination Accounting: The Merger required us to allocate the purchase price to the identifiable assets acquired and liabilities assumed at fair value. Significant estimates were used in determining the fair values of identifiable intangible assets ($138,031,000) and the contingent consideration liability ($10,630,000). Goodwill of $122,778,022 represents the excess of consideration transferred over the fair value of net identifiable assets acquired.

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Derivative Liabilities: The conversion option embedded in the AHP Note and the related warrants are classified as derivative liabilities and measured at fair value at each reporting date using Black-Scholes option pricing models with significant unobservable inputs (Level 3). During Q1 2026, the Company recognized a $208,658 loss on issuance of derivatives (Day-1 fair value of the conversion feature embedded in the AHP Note), a $2,384 gain from subsequent re-measurement of the conversion feature derivative liability, and a $488 gain from re-measurement of the AHP Warrant liability.

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Going Concern: We have evaluated the Company's ability to continue as a going concern under ASC 205-40 and concluded that substantial doubt exists. See Note 3 - Going Concern.