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ORGANIZATION, ACQUISITIONS, AND LIQUIDITY | 9 Months Ended
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Sep. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
ORGANIZATION, ACQUISITIONS, AND LIQUIDITY | NOTE 1 – ORGANIZATION, ACQUISITIONS, AND LIQUIDITY Organization urban-gro, Inc. (“we,” “us,” “our,” the “Company,” or “urban-gro”) 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 a commitment to sustainability drive our team to provide exceptional customer experiences. To serve our horticulture clients, we engineer, design and manage the construction of indoor CEA facilities and then integrate complex environmental equipment systems into those facilities. Through this work, we create high-performance indoor cultivation facilities for our clients to grow specialty crops, including leafy greens, vegetables, herbs, and plant-based medicines. Our custom-tailored approach to design, construction, procurement, and equipment integration provides a single point of accountability across all aspects of indoor growing operations. We also help our clients achieve operational efficiency and economic advantages through a full spectrum of professional services and programs focused on facility optimization and environmental health which establish facilities that allow clients to manage, operate and perform at the highest level throughout their entire cultivation lifecycle once they are up and running. We also serve a broad range of commercial and governmental entities, providing them with planning, consulting, architectural, engineering and construction design-build services for their facilities. We aim to work with our clients from inception of their project in a way that provides value throughout the life of their facility. We are a trusted partner and advisor to our clients and offer a complete set of engineering and managed services complemented by a vetted suite of select cultivation equipment systems. Acquisitions Emerald On April 29, 2022 (the “Emerald Closing Date”), the Company acquired all of the issued and outstanding capital stock (the “Emerald Acquisition”) of Emerald Construction Management, Inc. (“Emerald”) from its shareholders (collectively, the “Emerald Sellers”) through a forward merger into a wholly owned subsidiary of urban-gro, which has subsequently changed its name post-merger to Emerald Construction Management, Inc. The aggregate initial purchase price for the Emerald Acquisition was $7.8 million (the “Initial Emerald Purchase Price”), which represented $7.0 million in initial purchase price and an estimated $0.8 million in working capital adjustments. The Initial Emerald Purchase Price was payable as follows: $3.3 million in cash to the Emerald Sellers, net of satisfaction of Emerald’s outstanding debt of approximately $0.4 million; and 283,515 shares of the Company’s common stock valued at $2.5 million issued to the Emerald Sellers. The value of the shares of the Company’s common stock issued at closing was determined based upon the daily volume weighted average closing price (“VWAP”) of the Company’s common stock in the ten trading days prior to the signing date of the Emerald Acquisition Agreement. The Emerald Sellers may earn up to $2.0 million of contingent consideration (the “Emerald Contingent Consideration”) based on the performance of Emerald during the 2-year period following the Emerald Closing Date. The Emerald Contingent Consideration is payable quarterly in shares of the Company’s common stock for a two-year period and will be equal to 35% of Emerald’s Quarterly Gross Profit (as defined in the Emerald Acquisition Agreement). The value of such shares will be determined based upon the VWAP of the Company’s common stock in the ten trading days prior to the end of the applicable quarter the Quarterly Gross Profit is calculated. The Company accounted for the acquisition of Emerald as follows: SCHEDULE OF INITIAL ACQUISITION OF TARGET COMPANIES
Purchase Price |  | $ | 7,671,557 |
Allocation of Purchase Price: |  |  |  |
Cash |  | $ | 622,641 |
Accounts receivable |  | $ | 2,666,811 |
Contract receivable |  | $ | 494,456 |
Prepayments and other assets |  | $ | 38,086 |
Property and equipment |  | $ | 403,008 |
ROU asset |  | $ | 82,408 |
Goodwill |  | $ | 4,135,006 |
Intangible assets |  | $ | 3,659,000 |
Accrued expenses |  | $ | 2,361,302 |
Contract liabilities |  | $ | 1,071,399 |
ROU liability |  | $ | 82,408 |
Deferred tax liability |  | $ | 914,750 |
The following pro forma amounts reflect the Company’s results as if the acquisition of Emerald had occurred on January 1, 2021. These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of the acquisition to reflect the additional amortization of intangibles. SCHEDULE OF SUPPLEMENTAL INFORMATION ON UNAUDITED PRO-FORMA BASIC OF ACQUISITION
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenue |  |  | 12,368,293 |  |  |  | 25,911,249 |  |  |  | 61,384,107 |  |  |  | 58,974,083 |
Net Income (loss) |  |  | (8,597,133 | ) |  |  | 561,630 |  |  |  | (10,155,899 | ) |  |  | (15,053 | )
Acquired goodwill from Emerald represents the value expected to arise from organic growth and an opportunity to expand into a well-established market for the Company. 2WR On June 28, 2021, the Company’s wholly-owned subsidiary, urban-gro Architect Holdings, LLC (the “Buyer”), and the 2WRCO Shareholders, the 2WRGA Shareholders, the MJ12 Shareholders, and the 2WRMS Shareholders (collectively, the “2WR Sellers”), and Sam Andras, an individual entered into a Stock Purchase Agreement (the “2WR Purchase Agreement”), pursuant to which the Buyer would purchase all of the issued and outstanding capital stock of 2WR of Colorado, Inc., a Colorado corporation (“2WRCO”), 2WR of Georgia, Inc., a Georgia corporation (“2WRGA”), MJ12 Design Studio, Inc., a Colorado corporation (“MJ12”) (collectively, the “2WR Purchased Shares”) from the 2WR Sellers. In connection with the acquisition of the 2WR Purchased Shares, the Buyer entered into an affiliate relationship with 2WR of Mississippi, P.C., a Mississippi professional corporation (“2WRMS” and together with 2WRCO, 2WRGA and MJ12, the “2WR Entities”). The transaction closed on July 30, 2021. The aggregate initial purchase price for the 2WR Purchased Shares was $10.5 million (the “2WR Purchase Price”), which represented $9.1 million in purchase price and an estimated $1.4 million in working capital adjustments. The 2WR Purchased Shares were payable as follows: $6.5 million in cash, net of the satisfaction of 2WR’s outstanding debt of $0.5 million; and 202,066 shares of the Company’s common stock valued at $2.0 million issued to the 2WR Sellers (the “2WR Closing Payment Shares”). The value of the shares of the Company’s common stock issued at closing was determined based upon the daily VWAP of the Company’s common stock in the ten trading days prior to the signing date of the 2WR Purchase Agreement. The 2WR Purchase Agreement provides for additional earnout payments (“2WR Earnout Payments”) to the 2WR Sellers of up to an aggregate amount of $2.0 million, payable in cash or unregistered shares of the Company’s common stock in the Buyer’s sole discretion. The 2WR Earnout Payments are payable quarterly for a two-year period and will be equal to 20% of the 2WR Entities’ quarterly gross profit (as defined in the 2WR Purchase Agreement). The value of the 2WR Closing Payment Shares was determined based upon the VWAP of the Company’s common stock in the ten trading days prior to the issuance of such shares. If paid in shares, the value of 2WR Earnout Payments will be determined based upon the VWAP of the Company’s common stock in the ten trading days prior to the end of the applicable quarter. The Company accounted for the acquisition of the 2WR Entities as follows: SCHEDULE OF INITIAL ACQUISITION OF TARGET COMPANIES
Purchase Price |  | $ | 10,058,536 |
Allocation of Purchase Price: |  |  |  |
Cash |  | $ | 950,690 |
Accounts receivable |  | $ | 1,676,208 |
Prepayments and other assets |  | $ | 42,752 |
Property and equipment |  | $ | 9,351 |
Goodwill |  | $ | 7,090,054 |
Intangible assets |  | $ | 1,762,500 |
Accrued expenses |  | $ | 1,032,394 |
Deferred tax liability |  | $ | 440,625 |
The following pro forma amounts reflect the Company’s results as if the acquisition of the 2WR Entities had occurred on January 1, 2021. These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of the acquisition to reflect the additional amortization of intangibles. SCHEDULE OF SUPPLEMENTAL INFORMATION ON UNAUDITED PRO-FORMA BASIC OF ACQUISITION
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenue |  |  | 12,368,293 |  |  |  | 19,225,173 |  |  |  | 49,702,659 |  |  |  | 47,842,906 |
Net Income (loss) |  |  | (8,660,783 | ) |  |  | 389,217 |  |  |  | (11,096,304 | ) |  |  | 1,022,095 |
Acquired goodwill from the 2WR Entities represents the value expected to arise from organic growth and an opportunity to expand into a well-established market for the Company. Liquidity and Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are available to be issued.

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- Definition The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI https://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI https://asc.fasb.org/topic&trid=2197479 + Details
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