8-K

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

8-K

CURRENT

REPORT

Pursuant

to Section 13 or 15(d) of

the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 10, 2022

urban-gro,Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-39933	46-5158469
(State<br> or other jurisdiction<br><br> <br>of<br> incorporation)	(Commission<br><br> <br>File<br> Number)	(IRS<br> Employer<br><br> <br>Identification<br> No.)
1751 Panorama Point, Unit G<br><br> <br>Lafayette, Colorado	80026
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(Address of principal executive<br> offices)	(Zip Code)

Registrant’s telephone number, including area code: (720) 390-3880

n/a

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant<br> to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the<br> Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b)<br> under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c)<br> under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title<br> of Each Class	Trading<br> Symbol(s)	Name<br> of Each Exchange on Which Registered
Common stock, par value $0.001 per share	UGRO	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02.	Results of Operations and Financial Condition.

On November 10, 2022, urban-gro, Inc. issued a press release regarding its results of operations and financial condition for the third quarter ended September 30, 2022, as well as updated revenue and Adjusted EBITDA guidance. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information furnished pursuant to Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01.	Financial Statements and Exhibits.

(d) Exhibits.

Number	Exhibit
99.1	Press Release dated November 10, 2022
104	Cover<br> Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	URBAN-GRO, INC.
Date: November 10, 2022	By:	/s/ Bradley Nattrass
		Bradley Nattrass
		Chief Executive Officer

Exhibit 99.1

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urban-gro,Inc. Reports Third Quarter 2022 Financial Results and Signs Record Backlog Entering Fourth Quarter

●	Third quarter revenue of $12.4 million, as compared to guidance in the range of $10 to $11 million
●	Third quarter net loss of $8.7 million, which includes one-time operating expenses of $4.2 million and a $1.7 million impairment for the entirety of a previous investment
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●	Third quarter Adjusted EBITDA^1^ of $(2.3) million, as compared to guidance in the range of ($2.6) to ($2.4) million
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●	Record project backlog of $67 million as of September 30, 2022, a sequential increase of $45 million
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●	Strong balance sheet with $18.6 million in cash and no debt
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●	Provides fourth quarter consolidated revenue guidance of approximately $17 million and Adjusted EBITDA^1^guidance of approximately $(1.5) million.
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●	Company to host conference call and webcast today, November 10 at 4:30 PM ET
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LAFAYETTE,Colo. Nov. 10, 2022 — urban-gro, Inc. (Nasdaq: UGRO) (“urban-gro” or the “Company”), an integrated professional services and design-build firm offering solutions to the Controlled Environment Agriculture (“CEA”) and commercial sectors, today reported third quarter financial results.

Bradley Nattrass, Chairman and CEO, commented, “We are pleased that our third quarter performance exceeded our guidance, but I am most excited to see our strategic capability and sector diversification efforts materially benefit the business. While our third quarter results were impacted by the headwinds within the cannabis sector, we are extremely encouraged by the significant backlog we’ve been able to build in this subdued environment, which is a direct result of our strategic efforts to diversify our business, capabilities, and end-markets. We believe this is a clear indication that the services delivery model we’ve established over the last 18 months is working as intended.”

Mr. Nattrass added, “The demand for our professional services remains strong and combined with the increased demand for our construction design-build solutions within the commercial sector, we expect to see material sequential improvements in our fourth quarter top and bottom-line performance and for the momentum to continue in 2023. We have been investing in scaling to meet this demand, and we will be ready to service the new opportunities we are seeing emerge. We remain focused on continuing to drive efficiencies in our model, leveraging our professional staff, integrating and identifying cross-selling opportunities for our acquisitions, building backlog, and creating shareholder value.”

ThirdQuarter 2022 Financial Results

Revenue was $12.4 million in the third quarter of 2022, as compared to $18.3 million in the prior year period, representing a decrease of $5.9 million, or 32%. This decrease was driven by a decrease in cultivation equipment systems revenue of $12.6 million, primarily reflecting significantly reduced equipment demand in the U.S. cannabis market as a result of ongoing state-level regulatory delays in the license-awarding process, as well as the lack of movement on passing key industry financial support models such as the SAFE Banking Act. This decrease was partially offset by the accretive acquisition of Emerald Construction Management (“Emerald”) at the end of April 2022 with $5.4 million in construction design-build revenue, as well as incremental services revenue of $1.4 million associated with the acquisition of the 2WR entities (“2WR”) at the end of July 2021.

Gross profit was $2.6 million, or 21% of revenue, in the third quarter of 2022, as compared to $4.3 million, or 23% of revenue in the prior year period. The decrease in gross profit margin was primarily driven by the contribution of lower margin construction design-build revenue from the Emerald acquisition.

Operating expenses were $9.5 million in the third quarter of 2022 compared to $4.2 million in the prior year period, representing an increase of $5.3 million. Included in the third quarter operating expenses are one-time expenses including a previously disclosed $3.3 million business development expense attributable to assisting a key enterprise client with a negative situation with an international lighting manufacturer, $0.7 million in severance expenses, and $0.2 million in legal and transaction costs. The remaining increase in operating expenses was driven by increased headcount to support both current and future demand for the Company’s solutions and continued investment in European growth.

Net loss was $8.7 million, or $0.81 per share, in the third quarter of 2022, as compared to net income of $0.1 million, or breakeven on a per diluted share basis in the prior year period. This loss includes the $4.2 million of one-time operating expenses outlined above as well as a $1.7 million impairment for the entirety of our Edyza investment made in prior years.

Adjusted EBITDA^1^ was $(2.3) million in the third quarter of 2022, compared to $1.0 million in the prior year period. The decrease in Adjusted EBITDA^1^was driven by lower revenues and gross profit, as well as strategic investments in operating expenses to drive growth.

^1^Adjusted EBITDA is a non-GAAP financial measure. Please see the information under “Use of Non-GAAP Financial Information” below for a description of Adjusted EBITDA and the table at the end of this press release for a reconciliation of this non-GAAP financial information to GAAP results.

Cash position entering the fourth quarter was $18.6 million with no debt. Additionally, during the third quarter, the Company repurchased $183,270 of UGRO stock at an average price per share of $2.90.

SummaryFirst Nine Months 2022 Financial Results

Revenue was $49.7 million for the first nine months of 2022 compared to $43.2 million in the prior year period, representing an increase of $6.5 million, or 15%. This increase was driven by the acquisitions of 2WR in 2021 and Emerald in 2022, offset by decreases in equipment revenue for the reasons cited above.

Net loss was $11.1 million, or $1.05 per share, for the first nine months of 2022 compared to a net loss of $0.3 million, or $0.03 per share, in the prior year period. Included in this is $1.9 million of stock-based compensation, the one-time $5.9 million of operating expenses and impairment charges from Q3 mentioned above, as well as additional $0.4 million of one-time expenses from the first half of the year.

Adjusted EBITDA^1^ was $(2.2) million for the first nine months of 2022 compared to positive $2.1 million in the prior year period. The decrease in Adjusted EBITDA^1^ was primarily the result of increased general and administrative expenses associated with scaling headcount, investment in our European operations, and macroeconomic headwinds in the cannabis sector.

Backlogas of September 30, 2022

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Consolidated backlog is unrealized revenue represented by contractually committed construction design-build, equipment systems, and service orders. As of September 30, 2022, total backlog was approximately $67 million, comprised of $56 million in construction design-build, $5 million of equipment systems, and $6 million of professional services contracts.

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UpdatedRevenue and Adjusted EBITDA^1^ Guidance

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For the fourth quarter of 2022, the Company anticipates consolidated revenue of approximately $17 million and an Adjusted EBITDA^1^ of approximately $(1.5) million.

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ConferenceCall Details

urban-gro will host a conference call and live audio webcast to discuss the operational and financial results today, November 10, 2022 at 4:30 PM ET. Interested participants and investors may access the conference call by dialing 877-407-3982 (U.S.), 201-493-6780 (International). The live webcast will be accessible on the Events page of the Investors section of the urban-gro website, ir.urban-gro.com, and will be archived for 90 days following the event.

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Useof Non-GAAP Financial Information

We define Adjusted EBITDA as net income (loss) attributable to urban-gro, Inc., determined in accordance with GAAP, excluding the effects of certain operating and non-operating expenses including, but not limited to, interest income and expense, income taxes, depreciation of tangible assets, amortization of intangible assets, impairment of investments, unrealized exchange losses, debt forgiveness and extinguishment, stock-based compensation expense, one-time and non-recurring expenses, and acquisition costs that we do not believe reflect our core operating performance. We use Adjusted EBITDA as a measure of our operating performance. Adjusted EBITDA is a supplemental non-GAAP financial measure, and it is not a substitute for net income (loss), income (loss) from operations, cash flows from operating activities or any other measure prescribed by GAAP.

Our board of directors and management team focus on Adjusted EBITDA as a key performance and compensation measure. We believe that Adjusted EBITDA assists us in comparing our performance over various reporting periods because it removes from our operating results the impact of items that our management believes do not reflect our core operating performance.

There are limitations to using non-GAAP measures such as Adjusted EBITDA. Although we believe that Adjusted EBITDA can make an evaluation of our operating performance more consistent because it removes items that do not reflect our core operations, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA to compare the performance of those companies to our performance. Adjusted EBITDA should not be considered as a measure of the income generated by our business or discretionary cash available to us to invest in the growth of our business.

Abouturban-gro, Inc.

urban-gro, Inc.® (Nasdaq: UGRO) is an integrated professional services and design-build firm. We offer value-added architectural, engineering, and construction management solutions to the Controlled Environment Agriculture (“CEA”), industrial, healthcare, and other commercial sectors. Innovation, collaboration, and creativity drive our team to provide exceptional customer experiences. With offices across North American and in Europe, we deliver Your Vision – Built. Learn more by visiting www.urban-gro.com.

SafeHarbor Statement

Thispress release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934, as amended. When used in this release, terms such as “believes,” “will,”“expects,” “intends,” “anticipates,” “may,” “projects” and similar expressionsand variations as they relate to the Company or its management are intended to identify forward-looking statements. The forward-lookingstatements in this press release include, without limitation, financial projections, future events, business strategy, future performance,future operations, future demand, backlog, financial position, estimated revenues and losses, prospects, plans and objectives of management.These and other forward-looking statements are based on current expectations, forecasts, and assumptions that involve risks and uncertaintiesthat could cause actual outcomes and results to differ materially from those anticipated or expected, including, among others, our abilityto successfully manage and integrate acquisitions, our ability to accurately forecast revenues and costs, competition for projects inour markets, our ability to predict and respond to new laws and governmental regulatory actions,, our ability to successfully developnew and/or enhancements to our product offerings and develop a product mix to meet demand, risks related to adverse weather conditions,supply chain issues, rising interest rates, economic downturn or other factors that could cause delays or the cancellation of projectsin our backlog or our ability to secure future projects, our ability to maintain favorable relationships with suppliers, risks associatedwith reliance on key customers and suppliers, our ability to attract and retain key personnel, results of litigation and other claimsand insurance coverage issues, risks related to our information technology systems and infrastructure, our ability to maintain effectiveinternal controls, our ability to execute on our strategic plans, our ability to achieve and maintain cost savings, the sufficiency ofour liquidity and capital resources, and our ability to achieve our key initiatives for the remainder of 2022 and into 2023, particularlyour growth initiatives. A more detailed description of these and certain other factors that could affect actual results is included inthe Company’s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-lookingstatements, which speak only as of the date hereof. The Company undertakes no obligation to update any forward-looking statements toreflect events or circumstances after the date hereof, except as may be required by law.

urban-gro,Inc.

CONDENSEDCONSOLIDATED BALANCE SHEETS

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			December 31, <br><br>2021
Assets
Current assets:
Cash	18,605,182		$	34,592,190
Accounts receivable, net	12,234,400			13,125,685
Contract receivables	1,270,902			—
Inventories	310,996			514,756
Prepaid expenses and other current assets	4,852,262			11,248,266
Total current assets	37,273,742			59,480,897
Non-current assets:
Property and equipment, net	830,406			207,496
Operating lease right of use assets, net	1,193,161			689,704
Investments	2,546,574			4,210,358
Goodwill	12,127,124			7,992,121
Intangible assets, net	4,461,403			1,575,466
Total non-current assets	21,158,667			14,675,145
Total assets	58,432,410		$	74,156,042
Liabilities
Current liabilities:
Accounts payable	6,508,946		$	6,066,896
Contract liabilities	2,026,161			—
Accrued expenses	5,747,624			3,878,278
Customer deposits	1,929,829			13,345,451
Contingent consideration	2,400,771			1,563,000
Operating lease liabilities	354,403			152,459
Total current liabilities	18,967,734			25,006,084
Non-current liabilities:
Deferred tax liability	1,097,208			440,625
Operating lease liabilities	863,325			542,003
Total non-current liabilities	1,960,533			982,628
Total liabilities	20,928,267			25,988,712
Shareholders’ Equity
Preferred stock, 0.10 par value; 10,000,000 shares authorized; 0 and 0 shares issued and outstanding	—			—
Common stock, 0.001 par value; 100,000,000 shares authorized; 11,948,718 issued and 10,611,592 outstanding as of September 30, 2022, and 11,588,110 issued and 10,733,195 outstanding as of December 31, 2021	11,949			11,588
Additional paid in capital	83,068,423			78,679,220
Treasury shares, cost basis: 1,337,126 shares as of September 30, 2022 and 854,915 shares as of December 31, 2021	(11,639,937	)		(7,683,490	)
Accumulated deficit	(33,936,292	)		(22,839,988	)
Total shareholders’ equity	37,504,143			48,167,330
Total liabilities and shareholders’ equity	58,432,410		$	74,156,042

All values are in US Dollars.

urban-gro,Inc.

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	Three Months Ended<br> <br>September 30,						Nine Months Ended<br> <br>September 30,
	2022			2021			2022			2021
Revenue
Equipment systems	$	3,879,272		$	16,454,321		$	31,024,187		$	39,978,388
Services		2,839,338			1,461,041			9,505,396			2,009,961
Construction design-build		5,384,267			-			8,301,588			-
Consumable products		265,416			372,449			871,488			1,165,115
Total Revenue		12,368,293			18,287,811			49,702,659			43,153,464
Cost of Revenue		9,775,697			14,029,677			38,706,102			33,332,303
Gross profit		2,592,596			4,258,134			10,996,557			9,821,161
Operating expenses:
General and administrative		5,792,418			3,584,247			14,758,506			8,181,506
Intangible asset amortization		304,339			101,149			773,063			101,727
Business development		3,299,864			-			3,299,864			-
Stock-based compensation		96,767			506,034			1,860,767			1,096,441
Total operating expenses		9,493,388			4,191,430			20,692,200			9,379,674
Income (loss) from operations		(6,900,792	)		66,704			(9,695,643	)		441,487
Non-operating income (expenses):
Interest expense		(7,088	)		(4,331	)		(22,270	)		(326,397	)
Interest income		94,200			9,172			221,329			23,562
Write-down of investment		(1,710,358	)		-			(1,710,358	)		-
Interest expense – beneficial conversion of notes payable		-			-			-			(636,075	)
Loss on extinguishment of debt		-			-			-			(790,723	)
PPP Loan Forgiveness		-			-			-			1,032,316
Other income (expense)		(210,399	)		(11,889	)		(147,528	)		(15,652	)
Total non-operating income (expenses)		(1,833,645	)		(7,048	)		(1,658,827	)		(712,969	)
Income (loss) before income taxes		(8,734,437	)		59,656			(11,354,470	)		(271,482	)
Income tax expense (benefit)		(73,654	)		-			(258,166	)		-
Net income (loss)	$	(8,660,783	)	$	59,656		$	(11,096,304	)	$	(271,482	)
Comprehensive income (loss)	$	(8,660,783	)	$	59,656		$	(11,096,304	)	$	(271,482	)
Earnings (loss) per share:
Earnings (loss) per share - basic	$	(0.81	)	$	0.01		$	(1.05	)	$	(0.03	)
Earnings (loss) per share - dilutive	$	(0.81	)	$	0.00		$	(1.05	)	$	(0.03	)
Weighted average share - basic		10,674,796			11,440,255			10,577,453			10,177,482
Weighted average shares - dilutive		10,674,796			12,204,530			10,577,453			10,177,482

urban-gro,Inc.NON-GAAP ADJUSTED EBITDA RECONCILIATION TO NET INCOME (LOSS)

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	Three Months Ended<br> September 30,						Nine Months Ended <br> September 30,
	2022			2021			2022			2021
Net Income (Loss)	$	(8,660,783	)	$	59,656		$	(11,096,304	)	$	(271,482	)
Interest expense		7,088			4,331			22,270			326,397
Interest expense – BCF		–			–			–			636,075
Interest income		(94,200	)		(9,172	)		(221,329	)		(23,562	)
Income tax benefit		(73,654	)		–			(258,166	)
Depreciation and amortization		526,750			154,306			1,116,585			263,932
EBITDA		(8,294,799	)		209,121			(10,436,944	)		931,360
Impairment loss		1,710,358			–			1,710,358			–
Loss on extinguishment of debt		–			–			–			790,723
Stock-based compensation		96,767			506,034			1,860,767			1,096,441
Transaction costs		39,182			141,052			276,246			198,609
One-time employee expenses		670,095			125,000			787,691			125,000
Business development		3,299,864			–			3,299,864			–
Non-recurring legal fees		205,486			–			258,111
PPP loan forgiveness		–			–			–			(1,032,316	)
Adjusted EBITDA	$	(2,273,047	)	$	981,207		$	(2,243,907	)	$	2,109,817

InvestorContacts:

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Dan Droller - urban-gro, Inc.

EVP Corporate Development & Investor Relations

-or-

Jeff Sonnek – ICR, Inc.

(720) 730-8160

investors@urban-gro.com

MediaContact:

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Mark Sinclair – MATTIO Communications

(650) 269-9530

urbangro@mattio.com