urban-gro(UGRO) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (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 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) 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) 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] - The company repurchased common stock for $3.0 million during the quarter[20] - Bridge financing notes were converted into 254,425 shares of common stock, adding $1.9 million to equity[20] Unaudited Condensed Consolidated Statements of Cash Flows 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] - The company used cash from financing to repay $5.8 million in notes payable and repurchase $3.0 million of common stock[22] Notes to Unaudited Condensed Consolidated Financial Statements 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] - 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] - 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] - 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] Management's Discussion and Analysis of Financial Condition and Results of Operations 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] - 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] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[96] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[97] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[98] Other Information The company reported no other information for this item - None[99] Exhibits 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]