urban-gro(UGRO) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited financial statements and management's analysis for the first quarter of 2024 Financial Statements (Unaudited) The company reported a reduced net loss of $2.1 million in Q1 2024, driven by improved gross margin and lower operating expenses despite a 7% revenue decline Unaudited Condensed Consolidated Balance Sheets Total assets decreased to $56.1 million and liabilities to $37.5 million as of March 31, 2024, primarily due to changes in accounts receivable and contract liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $33,229 | $40,952 | | Total Assets | $56,130 | $64,379 | | Total Current Liabilities | $35,483 | $42,111 | | Total Liabilities | $37,545 | $44,308 | | Total Stockholders' Equity | $18,586 | $20,071 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss Q1 2024 revenues decreased 7% to $15.5 million, but improved gross margin and reduced operating expenses led to a net loss of $2.1 million, down from $5.1 million Q1 2024 vs Q1 2023 Statement of Operations (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $15,543 | $16,765 | | Gross Profit | $3,116 | $2,842 | | Gross Margin | 20.0% | 17.0% | | Loss from Operations | $(2,064) | $(5,047) | | Net Loss | $(2,142) | $(5,145) | | Net Loss per Share | $(0.18) | $(0.48) | Unaudited Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased to $18.6 million as of March 31, 2024, primarily due to the net loss, partially offset by stock-based compensation - The change in stockholders' equity during Q1 2024 was primarily driven by a net loss of $2.14 million and stock-based compensation of $0.66 million[18] Unaudited Condensed Consolidated Statements of Cash Flows Operating cash flow turned positive at $0.3 million in Q1 2024, a significant improvement from a $4.3 million use of cash in the prior year Q1 2024 vs Q1 2023 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $329 | $(4,273) | | Net cash provided by (used in) investing activities | $8 | $(134) | | Net cash used in financing activities | $(758) | $(274) | | Net change in cash | $(420) | $(4,681) | | Cash at end of period | $693 | $7,327 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, revenue recognition, debt facilities, and significant customer concentration, with the Commercial sector contributing 72% of Q1 2024 revenue - The company operates as an integrated professional services and design-build firm in the Controlled Environment Agriculture (CEA) and other commercial sectors[20] - In Q1 2024, the Commercial sector contributed 72% ($11.1 million) of total revenue, with the CEA sector contributing 28% ($4.4 million)[35] - One customer accounted for 42% of total revenues for the three months ended March 31, 2024[69] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 7% revenue decline to CEA market conditions, while improved gross margin and a 34% reduction in operating expenses significantly narrowed the net loss, with backlog decreasing to $99 million Q1 2024 vs Q1 2023 Key Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenues | $15.5 million | $16.8 million | | Gross Profit | $3.1 million | $2.8 million | | Gross Margin | 20% | 17% | | Operating Expenses | $5.2 million | $7.9 million | | Net Loss | $2.1 million | $5.1 million | - The decrease in operating expenses was primarily due to a $2.8 million reduction in general and administrative costs, including the elimination of an incentive retention plan[89] - Total backlog was $99 million as of March 31, 2024, a decrease from $110 million at year-end 2023, with construction design-build projects comprising 94%[95][96] - As of March 31, 2024, the company had negative working capital of $2.3 million and had drawn $2.0 million from its $10.0 million line of credit[100][101] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the registrant is not required to provide information for this item[105] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024[108] - No material changes in internal control over financial reporting occurred during the quarter[110] PART II. OTHER INFORMATION This section provides updates on legal proceedings, risk factors, equity sales, and other miscellaneous information Legal Proceedings No new material legal proceedings were initiated or terminated, nor were there material developments in ongoing proceedings during Q1 2024 - No new material legal proceedings were initiated or terminated during the period, and there were no material developments in ongoing proceedings[113] Risk Factors No material changes to risk factors were reported from those disclosed in the Annual Report on Form 10-K for fiscal year 2023 - There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023[114] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any of its equity securities during the first quarter of 2024 - The company did not repurchase any of its equity securities during the period covered by the report[116] Defaults Upon Senior Securities No defaults upon senior securities were reported - None[117] Mine Safety Disclosures This item is not applicable to the company's operations - Not Applicable[118] Other Information No other material information was reported - None[119] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and various Inline XBRL documents[121]