Urban-gro revenues surge, but losses continue

LAFAYETTE — Cannabis company Urban-gro Inc. reported a 69 percent surge in revenue for the first quarter, but ongoing losses remain a concern for the Lafayette-based company. Revenue for Urban-gro totaled $5.8 million, up from $3.45 million for the same period a year ago. The company attributed the increase to expansion of the cannabis market in the United States and Canada, along with increased marketing efforts.

Despite the increase in revenue, Urban-gro’s net loss also grew, reaching $1.5 million, compared with $782,649 in the first quarter of 2018.

Urban-gro provides end-to-end agricultural solutions for cannabis and traditional agricultural producers.

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Urban-gro in November 2018 signed a letter of intent with Hydrofarm Holdings Group Inc., through which Hydrofarm agreed to acquire all of the company’s outstanding and issued common stock. The agreement valued Urban-gro at $65 million.

That deal has neither been consummated nor terminated, according to Urban-gro’s quarterly report filed with the U.S. Securities and Exchange Commission.

“Although the merger has not been abandoned and the LOI has not been terminated by either party, there are currently no discussions between the parties pertaining to the merger,” according to the filing.

Urban-gro in March spent $1 million to acquire Impact Engineering Inc., doing business as Grow2Guys, a provider of mechanical, electrical and plumbing engineering services focused on cannabis.

Urban-gro reported that it has incurred operating losses since its inception, accumulating a deficit of $10 million, a working-capital deficit of $6.3 million and negative shareholders’ equity of $3.48 million.

The company estimates that its cash flow over the next 12 months, including potential future financings, will be sufficient to fund the company’s operations. However, it stressed that future financings might not come to fruition.

“These facts and conditions raise substantial doubt about our ability to continue as a going concern,” the company said.