Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2020 | |
Cover [Abstract] | |
Entity Registrant Name | urban-gro, Inc. |
Entity Central Index Key | 0001706524 |
Document Type | S-1/A |
Amendment Flag | false |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth | true |
Entity Ex-transition period | false |
Entity Incorporation State Code | CO |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Current Assets | |||
Cash | $ 213,392 | $ 448,703 | $ 1,178,852 |
Accounts receivable, net | 853,585 | 1,564,969 | 501,191 |
Inventories, net | 775,064 | 676,175 | 1,214,224 |
Related party receivable | 9,772 | 49,658 | 122,356 |
Prepayments and advances | 2,734,382 | 1,258,700 | 928,682 |
Total current assets | 4,586,195 | 3,998,205 | 3,945,305 |
Non-current assets | |||
Property, plant, and equipment, net | 152,577 | 165,035 | 441,141 |
Operating lease right of use assets, net | 114,017 | 215,848 | 0 |
Investments | 1,710,358 | 2,020,358 | 1,261,649 |
Goodwill | 902,067 | 902,067 | 0 |
Other assets | 84,924 | 106,179 | 96,669 |
Total non-current assets | 2,963,943 | 3,409,487 | 1,799,459 |
Total assets | 7,550,138 | 7,407,692 | 5,744,764 |
Current liabilities | |||
Accounts payable | 1,132,020 | 3,753,862 | 1,630,893 |
Accrued expenses | 1,863,096 | 1,686,841 | 1,144,142 |
Related party payable | 0 | 24,972 | 18,802 |
Customer deposits | 4,087,592 | 2,915,406 | 3,298,609 |
Related party note payable | 0 | 1,000,000 | 1,000,000 |
Notes payable | 60,000 | 2,812,709 | 2,478,869 |
Revolving facility | 600,000 | ||
Term loan, net | 1,596,280 | ||
Operating lease liabilities | 80,339 | 123,395 | 0 |
Total current liabilities | 9,419,327 | 12,317,185 | 9,571,315 |
Non-current liabilities | |||
Revolving Facility | 2,676,493 | ||
Term Loan, net | 88,318 | ||
Related Party note payable | 1,000,000 | ||
Notes payable | 1,020,600 | ||
Operating lease liabilities | 49,347 | 98,841 | 0 |
Total non-current liabilities | 4,834,758 | 98,841 | 0 |
Total liabilities | 14,254,085 | 12,416,026 | 9,571,315 |
Commitments and contingencies, Note 11 | |||
Equity | |||
Preferred stock | 0 | 0 | 0 |
Common stock | 28,272 | 28,209 | 25,230 |
Additional Paid in Capital | 14,118,289 | 11,854,083 | 4,688,272 |
Accumulated deficit | (20,850,508) | (16,890,626) | (8,540,053) |
Total shareholders' deficit | (6,703,947) | (5,008,334) | (3,826,551) |
Total liabilities and shareholders' deficit | $ 7,550,138 | $ 7,407,692 | $ 5,744,764 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | |||
Preferred stock, par value | $ 0.10 | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 |
Common stock, shares outstanding | 28,272,285 | 28,209,312 | 25,229,833 |
Common stock, shares issued | 28,272,285 | 28,209,312 | 25,229,833 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Statement [Abstract] | ||
Revenue | $ 24,189,803 | $ 20,050,776 |
Cost of revenue | 17,563,594 | 13,892,025 |
Gross profit | 6,626,209 | 6,158,751 |
Operating expenses | ||
Marketing | 1,016,073 | 992,288 |
General and administrative | 9,207,737 | 7,721,221 |
General and administrative - amortization of broker issuing costs and broker warrants associated with convertible debentures | 432,578 | 0 |
Stock-based Compensation | 1,830,426 | 1,245,826 |
Total operating expenses | 12,486,814 | 9,959,335 |
Loss from operations | (5,860,605) | (3,800,584) |
Non-operating expenses: | ||
Interest expense | (704,230) | (119,961) |
Interest expense - amortization of warrants and conversion price associated with convertible debentures | (1,333,520) | 0 |
Write-down of investment | (505,766) | 0 |
Other income, net | 53,548 | 24,672 |
Total non-operating expenses | (2,489,968) | (95,289) |
Loss before income taxes and equity-method investments | (8,350,573) | (3,895,873) |
Income tax benefit | 0 | 0 |
Net income (loss) | (8,350,573) | (3,895,873) |
Comprehensive income (loss) | $ (8,350,573) | $ (3,895,873) |
Earnings (loss) per share | ||
Net loss per share - basic and diluted | $ (0.32) | $ (0.16) |
Weighted average outstanding shares | 26,318,059 | 24,848,239 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (Sept 2020 Note) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenue | ||||
Total Revenue | $ 8,359,422 | $ 5,583,064 | $ 16,625,688 | $ 17,056,737 |
Cost of revenue | 6,654,134 | 3,650,965 | 12,613,461 | 11,529,448 |
Gross profit | 1,705,288 | 1,932,099 | 4,012,227 | 5,527,289 |
Operating expenses | ||||
Marketing | 42,749 | 263,948 | 236,093 | 914,563 |
General and administrative | 1,411,821 | 2,383,920 | 4,874,383 | 6,892,623 |
General and administrative - amortization of broker issuing costs and broker warrants associated with convertible debentures | 0 | 167,834 | 0 | 167,834 |
Stock-based Compensation | 399,258 | 509,219 | 1,391,807 | 1,606,355 |
Total operating expenses | 1,853,828 | 3,324,921 | 6,502,283 | 9,581,375 |
Loss from operations | (148,540) | (1,392,822) | (2,490,056) | (4,054,086) |
Non-operating income (expenses): | ||||
Interest expense | (393,158) | (125,733) | (1,057,501) | (374,850) |
Interest expense - amortization of convertible debentures | 0 | (796,233) | 0 | (796,233) |
Contingent consideration | (155,000) | 0 | (155,000) | 0 |
Impairment of investment | 0 | (506,000) | (310,000) | (506,000) |
Other income | 2,417 | 11,258 | 52,675 | 11,765 |
Total other non-operating income (expenses), net | (545,741) | (1,416,708) | (1,469,826) | (1,665,318) |
Income (loss) before income taxes | (694,281) | (2,809,530) | (3,959,882) | (5,719,404) |
Income tax expense (benefit) | 0 | 0 | 0 | 0 |
Net income (loss) | (694,281) | (2,809,530) | (3,959,882) | (5,719,404) |
Comprehensive income (loss) | $ (694,281) | $ (2,809,530) | $ (3,959,882) | $ (5,719,404) |
Earnings (loss) per share | ||||
Net loss per share - basic and diluted | $ (0.02) | $ (0.11) | $ (0.14) | $ (0.22) |
Weighted average outstanding shares | 28,888,194 | 26,175,098 | 28,706,905 | 25,772,134 |
Product Sales [Member] | ||||
Revenue | ||||
Total Revenue | $ 7,910,540 | $ 4,633,974 | $ 15,135,472 | $ 14,469,616 |
Services [Member] | ||||
Revenue | ||||
Total Revenue | $ 448,882 | $ 949,090 | $ 1,490,216 | $ 2,587,121 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Deficit - USD ($) | Common Stock | Additional Paid-In Capital | Retained Earnings (deficits) | Total |
Beginning balance, shares at Dec. 31, 2017 | 25,046,000 | |||
Beginning balance, value at Dec. 31, 2017 | $ 25,036 | $ 3,258,116 | $ (4,644,180) | $ (1,361,028) |
Clawback of stock granted, shares | (375,000) | |||
Clawback of stock granted, value | $ (375) | 375 | ||
Payment of outstanding balance for PPM | 80,000 | 80,000 | ||
Stock Based Compensation | 1,345,825 | 1,345,825 | ||
Stock grant program vesting, shares | 558,833 | |||
Stock grant program vesting, value | $ 568 | (568) | ||
Warrants | 4,525 | 4,525 | ||
Net loss | (3,895,873) | (3,895,873) | ||
Ending balance, shares at Dec. 31, 2018 | 25,229,833 | |||
Ending balance, value at Dec. 31, 2018 | $ 25,230 | 4,688,272 | (8,540,053) | (3,826,551) |
Net loss | (5,719,404) | |||
Ending balance, shares at Sep. 30, 2019 | 26,981,466 | |||
Ending balance, value at Sep. 30, 2019 | $ 26,981 | 8,967,004 | (14,259,457) | (5,265,472) |
Beginning balance, shares at Dec. 31, 2018 | 25,229,833 | |||
Beginning balance, value at Dec. 31, 2018 | $ 25,230 | 4,688,272 | (8,540,053) | (3,826,551) |
Stock Based Compensation | 1,830,426 | 1,830,426 | ||
Stock Options Issued for loan term revisions, value | 37,829 | 37,829 | ||
Stock grants issued for loan term revisions, shares | 16,000 | |||
Stock grants issued for loan term revisions, value | $ 16 | 31,284 | 31,300 | |
Stock grant program vesting, shares | 1,360,966 | |||
Stock grant program vesting, value | $ 1,360 | (1,360) | ||
Warrants | 614,041 | 614,041 | ||
Stock issuance related to conversion of convertible debentures, shares | 1,102,513 | |||
Stock issuance related to conversion of convertible debentures, value | $ 1,103 | 2,655,934 | 2,657,037 | |
Stock issuance related to acquisition, shares | 500,000 | |||
Stock issuance related to acquisition, value | $ 500 | 999,500 | 1,000,000 | |
Equity value of exercise price associated with convertible debentures | 719,479 | 719,479 | ||
Broker warrants associated with issuance of convertible debentures | 278,678 | 278,678 | ||
Net loss | (8,350,573) | (8,350,573) | ||
Ending balance, shares at Dec. 31, 2019 | 28,209,312 | |||
Ending balance, value at Dec. 31, 2019 | $ 28,209 | 11,854,083 | (16,890,626) | (5,008,334) |
Beginning balance, shares at Jun. 30, 2019 | 25,820,633 | |||
Beginning balance, value at Jun. 30, 2019 | $ 25,821 | 8,438,943 | (11,449,927) | (2,985,163) |
Stock Based Compensation | 509,219 | 509,219 | ||
Stock Options Issued for loan term revisions, value | 20,002 | 20,002 | ||
Stock grant program vesting, shares | 1,160,833 | |||
Stock grant program vesting, value | $ 1,160 | (1,160) | ||
Net loss | (2,809,530) | (2,809,530) | ||
Ending balance, shares at Sep. 30, 2019 | 26,981,466 | |||
Ending balance, value at Sep. 30, 2019 | $ 26,981 | 8,967,004 | (14,259,457) | (5,265,472) |
Beginning balance, shares at Dec. 31, 2019 | 28,209,312 | |||
Beginning balance, value at Dec. 31, 2019 | $ 28,209 | 11,854,083 | (16,890,626) | (5,008,334) |
Net loss | (3,959,882) | |||
Ending balance, shares at Sep. 30, 2020 | 28,272,285 | |||
Ending balance, value at Sep. 30, 2020 | $ 28,272 | 14,118,289 | (20,850,508) | (6,703,947) |
Beginning balance, shares at Jun. 30, 2020 | 28,830,978 | |||
Beginning balance, value at Jun. 30, 2020 | $ 28,830 | 13,522,833 | (20,156,227) | (6,604,564) |
Clawback of stock granted, shares | (1,000,000) | |||
Clawback of stock granted, value | $ (1,000) | 1,000 | ||
Stock grant program vesting, shares | 131,667 | |||
Stock grant program vesting, value | $ 132 | (132) | ||
Stock issuance related to acquisition, shares | 250,000 | |||
Stock issuance related to acquisition, value | $ 250 | 154,750 | 155,000 | |
Stock grant to satisfy accounts payable, shares | 9,640 | |||
Stock grant to satisfy accounts payable, value | $ 10 | 9,630 | 9,640 | |
Stock issued for lease revision, shares | 50,000 | |||
Stock issued for lease revision, value | $ 50 | 30,950 | 31,000 | |
Net loss | (694,281) | (694,281) | ||
Ending balance, shares at Sep. 30, 2020 | 28,272,285 | |||
Ending balance, value at Sep. 30, 2020 | $ 28,272 | $ 14,118,289 | $ (20,850,508) | $ (6,703,947) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Cash Flows from Operating Activities | ||||
Net Loss | $ (3,959,882) | $ (5,719,404) | $ (8,350,573) | $ (3,895,873) |
Adjustment to reconcile net loss from operations: | ||||
Depreciation and amortization | 181,750 | 193,956 | 266,476 | 154,136 |
Amortization of convertible debenture components | 0 | 810,166 | 1,612,197 | 0 |
Amortization of deferred financing costs | 368,661 | 0 | ||
Stock-based compensation expense | 1,391,807 | 1,606,355 | 1,830,426 | 1,245,826 |
Contingent consideration expense | 155,000 | 0 | ||
Impairment of investment | 310,000 | 506,000 | 505,766 | 0 |
Warrant expense | 0 | 3,394 | ||
Inventory write-offs | 72,258 | 57,352 | 94,727 | 77,531 |
Bad debt expense | 43,849 | 12,252 | 67,633 | 106,464 |
Gain on disposal of assets | 3,468 | (9,572) | (72,416) | 0 |
Changes in Operating Assets and Liabilities: | ||||
Accounts receivable | 658,706 | (899,859) | (849,355) | (73,917) |
Inventory | (171,147) | 142,745 | 443,322 | (167,040) |
Prepayments and other assets | (784,210) | 123,376 | (324,273) | (88,684) |
Accounts payable and accrued expenses | (2,470,559) | 2,164,412 | 2,671,838 | 205,667 |
Customer deposits | 1,172,186 | 925,922 | (383,203) | 147,360 |
Net Cash Provided by (Used in) Operating Activities | (3,028,113) | (86,299) | (2,487,435) | (2,285,136) |
Cash Flows from Investing Activities | ||||
Purchase of investment | 0 | (572,250) | (1,085,975) | (861,649) |
Purchases of property and equipment | (122,817) | (387,160) | (192,954) | (369,480) |
Proceeds from sale of assets | 0 | 40,500 | 121,500 | 0 |
Cash acquired in acquisition | 0 | 49,742 | 49,742 | 0 |
Purchases of intangible assets | 0 | (25,000) | (40,255) | (33,674) |
Net Cash Used Provided By (Used In) Investing Activities | (122,817) | (894,168) | (1,147,942) | (1,264,803) |
Cash Flows from Financing Activities | ||||
Proceeds from issuance of Revolving Facility | 2,207,432 | |||
Proceeds from issuance of Term Loan | 2,000,000 | 0 | ||
Proceeds from Revolving Facilty advances | 1,069,061 | 0 | ||
Issuance of convertible debentures | 0 | 2,565,000 | 2,565,000 | 0 |
Issuance of capital stock | 0 | 80,000 | ||
Proceeds from notes payable | 1,020,600 | 970,000 | 970,000 | 1,992,000 |
Debt financing costs | (638,046) | 0 | ||
Repayment of notes payable | (2,743,428) | (227,749) | (629,772) | 0 |
Proceeds from related party loan | 0 | 1,000,000 | ||
Net Cash Provided by (Used In) Financing Activities | 2,915,619 | 3,307,251 | 2,905,228 | 3,072,000 |
Net Increase (Decrease) in Cash | (235,311) | 2,326,784 | (730,149) | (477,939) |
Cash at Beginning of Period | 448,703 | 1,178,852 | 1,178,852 | 1,656,791 |
Cash at End of Period | 213,392 | 3,505,636 | 448,703 | 1,178,852 |
Supplemental Cash Flow Information: | ||||
Interest Paid | 670,165 | 291,441 | 612,138 | 119,961 |
Income Tax Paid | 0 | 0 | 0 | 0 |
Supplemental disclosure of non-cash investing and financing activities: | ||||
Convertible debentures and accrued interest converted into common stock | 2,657,037 | 0 | ||
Stock issuance related to acquisition | 155,000 | 1,020,003 | 1,000,000 | 0 |
Common stock retired | 0 | 375 | ||
Operating lease right of use asset | 0 | 326,095 | $ 326,092 | $ 0 |
Debt financing costs booked in equity | $ 676,822 | $ 0 |
1. Organization and Acquisition
1. Organization and Acquisitions, Business Plan, and Liquidity | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Organization and Acquisitions, Business Plan, and Liquidity | NOTE 1 – ORGANIZATION AND ACQUISITIONS, LIQUIDITY AND GOING CONCERN Organization and Acquisitions urban-gro, Inc. (“we,” “us,” “our,” the “Company,” or “urban-gro”) is a leading engineering design and services company focused on the commercial indoor horticulture market. We engineer and design indoor controlled environment agriculture (“CEA”) facilities a clients to manage their entire cultivation lifecycle, establishing facilities that operate and perform at the highest level. Our indoor commercial cultivation solution offers an integrated suite of services and equipment systems that generally fall within the following categories: · Service Solutions: · Engineering Design Services – A comprehensive triad of services including: i. Cultivation Space Programming (“CSP”) ii. Integrated Cultivation Design (“ICD”) iii. Full-Facility Mechanical, Electrical, and Plumbing (“MEP”) · gro-care® - A recurring revenue subscription-based managed service offering including: i. Remote Monitoring, Reporting, Support, and Training Services ii. Facility and Equipment Commissioning & Audit Services iii. Environmental Sciences Groups’ (“ESG”) Compliance and Program Services · Integrated Equipment Solutions: · Design, Source, and Integration of Complex Environmental Equipment Systems Including Purpose-Built Heating, Ventilation, and Air Conditioning (“HVAC”) solutions, Environmental Controls, Fertigation, and Irrigation Distribution. · Value-Added Reselling (“VAR”) of Cultivation Equipment including a Complete line of Lighting and Rolling Benching Systems · Strategic Vendor Relationships with Premier Manufacturers Since commencing business in March 2014, we have introduced new equipment solutions, products and services to the CEA market, expanded our ongoing operations across North America, and most recently, we have entered into several engagements in Europe. Effective March 7, 2019, the Company acquired 100% of the stock of Impact Engineering, Inc. (d/b/a Grow2Guys) (“Impact”), a provider of mechanical electrical and plumbing (“MEP”) engineering services predominantly focused on the indoor commercial horticulture industry. The Company believes the acquisition of Impact will improve the Company’s ability to better serve its current and future client base by expanding on the fully integrated products and services offered by the Company. The Company initially issued 500,000 shares of Common Stock valued at $2.00 per share to effect the acquisition of Impact. The Company accounted for the initial acquisition of Impact as follows: Purchase Price $ 1,000,000 Allocation of Purchase Price: Cash $ 49,742 Accounts receivable, net $ 93,811 Goodwill $ 902,067 Accrued expenses $ 45,620 Under the terms of the agreement to acquire Impact, the Company was required to issue additional shares of Common Stock to the former Impact owner if the average closing price per share of the Company’s Common Stock was less than or equal to $2.00 per share for the 30-day period beginning on the date that was 150 days after the initial date of the listing of the Company’s Common Stock on a national securities exchange or quotation on the OTCQB or OTCQX (the “Valuation Period”). The Company’s Common Stock price was lower than $2.00 per share during the Valuation Period and the Company was required to issue additional shares of the Company’s Common Stock to the former Impact owner. In September 2020, however, the Company and the former Impact owner agreed to satisfy this provision of the agreement by the Company issuing 250,000 additional shares of Common Stock to the former Impact owner. The Company valued the issuance of these additional 250,000 shares at $0.62 per share of Common Stock based on the market price of our shares on the date of the agreement and recorded the additional issuance of shares as contingent consideration in the statements of operations and comprehensive income (loss). Liquidity and Going Concern Since inception, the Company has incurred significant operating losses and has funded its operations primarily through the issuance of equity securities, debt, and operating revenue. As of September 30, 2020, the Company had an accumulated deficit of $20,850,508, a working capital deficit of $4,833,132, and negative stockholders’ equity of $6,703,947. These facts and conditions raise substantial doubt about the Company’s ability to continue as a going concern, within one year after the date that these financial statements are issued. The Company continually evaluates opportunities to raise equity and debt financing and has also sought to implement cost reduction and revenue enhancing measures to help achieve profitability and continue operations. There can, however, be no assurances that the Company will be able to raise equity or debt financing in sufficient amounts, when and if needed, on acceptable terms or at all, nor can there be any assurances that the Company will be able to implement cost reduction and revenue enhancing measures that will enable the Company to achieve profitable operations going forward. The accompanying financial statements have been prepared on a going concern basis. Pursuant to Accounting Standards Codification (“ASC”) 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, | NOTE 1 – ORGANIZATION AND ACQUISITIONS, BUSINESS PLAN, AND LIQUIDITY Organization and Acquisitions urban-gro, Inc. (“we,” “us,” our” or the “Company”) is a leading engineering design services company that integrates complex environmental equipment systems to create high performance indoor cultivation facilities for the global commercial horticulture market. Our custom tailored, plant-centric approach to design, procurement, and integration provides a single point of accountability across all aspects of indoor cultivation operations. Our solution offers functionality that helps customers manage the entire cultivation lifecycle, from facility engineering and design to operation and day-to-day management. We offer a full range of custom services that are integrated with select cultivation equipment and product solutions, which we primarily source from third party technology and manufacturing partners but also develop in-house. Our service offerings include full facility programming, engineering and design services, start-up commissioning services, facility optimization services and IPM planning and strategy services. Complementing these services, we work with customers to source an integrated suite of select cultivation equipment systems and crop management products, which include: (1) environmental controls, fertigation, and irrigation distribution systems; (2) freshwater, wastewater, and condensation treatment systems; (3) light emitting diode (“LED”), high-pressure sodium (“HPS”) and ceramic metal halide (“CMH”) lighting systems; (4) rolltop, multi-tier, and automated container benching systems; (5) odor mitigation & microbial reduction systems; (6) air flow systems; (7) industrial spray applicators; (8) pesticides and bio-controls; (9) plant nutrition products; (10) substrate and coco bag solutions; and (11) our Soleil® technology data analytics platform that includes wireless environmental & substrate sensing and remote monitoring and support. In June 2018, the Company formed urban-gro Canada Technologies, Inc. as a wholly owned Canadian subsidiary which it currently utilizes for its Canadian sales operations. Effective March 7, 2019, the Company acquired 100% of the stock of Impact Engineering, Inc. (d/b/a Grow2Guys) (“Impact”), a provider of mechanical electrical and plumbing (“MEP”) engineering services predominantly focused on the cannabis industry. Management believes the acquisition of Impact will improve the Company’s ability to better serve its current and future customer base by expanding on the fully integrated products and services offered by the Company. The Company issued 500,000 shares of Common Stock (“Common Stock”) valued at $2.00 per share to effect the acquisition of Impact. The Company has initially accounted for the acquisition of Impact as follows: Purchase Price $ 1,000,000 Allocation of Purchase Price: Cash $ 49,742 Accounts receivable, net $ 93,811 Goodwill $ 902,067 Accrued expenses $ 45,620 Basis of Presentation These consolidated financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Liquidity and Going Concern Since inception, the Company has incurred significant operating losses and has funded its operations primarily through issuance of equity securities, debt, and operating revenue. As of December 31, 2019, the Company had an accumulated deficit of $16,890,626, a working capital deficit of $7,318,980, and negative stockholders’ equity of $5,008,334. These facts and conditions raise substantial doubt about the Company’s ability to continue as a going concern, within one year after the date that the financial statements are issued. The Company continually evaluates opportunities to raise equity and debt financing as well as implementing cost reduction and revenue enhancing measures that will allow it to increase profitability and continue operations. There can, however, be no assurances that the Company will be able to raise equity or debt financing in sufficient amounts, when and if needed, on acceptable terms or at all, nor can there be any assurances that the Company will be able to implement cost reduction and revenue enhancing measures that will enable the Company to achieve profitable operations going forward. The accompanying financial statements have been prepared on a going concern basis. Pursuant to Accounting Standards Codification (“ASC”) 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | ||
Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unaudited Condensed Consolidated Financial Statements The Company has prepared the accompanying condensed consolidated financial statements pursuant to the rules and regulations of the SEC for condensed financial reporting. The condensed consolidated financial statements are unaudited and, in the Company’s opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of the Company’s condensed consolidated balance sheets, condensed consolidated statements of operations and comprehensive income (loss), condensed consolidated statements of shareholders’ deficit and condensed consolidated statements of cash flows for the periods presented. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Significant Accounting Policies For a detailed discussion about the Company’s significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in the Company’s consolidated financial statements included in the Company’s 2019 Form 10-K. During the nine months ended September 30, 2020, there were no material changes made to the Company’s significant accounting policies. Use of Estimates In preparing condensed consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the condensed consolidated financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of long-lived assets and goodwill, inventory write offs, allowance for deferred tax assets, and allowance for bad debt. Reclassification Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Recently Issued Accounting Pronouncements From time to time, the Financial Accounting Standards Board (the “FASB”) or other standards setting bodies issue new accounting pronouncements. The FASB issues updates to new accounting pronouncements through the issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, the Company believes that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on the Company’s financial statements upon adoption. | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates In preparing consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of long-lived assets and goodwill, inventory write offs, allowance for deferred tax assets, and allowance for bad debt. Basis of Presentation and Principles of Consolidation These consolidated financial statements are presented in United States dollars and they include the accounts of urban-gro, Inc. and its wholly-owned subsidiaries. The financial results of Impact have been included in the Company’s consolidated financial statements from the date of acquisition on March 7, 2019 and all intercompany transactions have been eliminated. Recently Issued Accounting Pronouncements From time to time, the Financial Accounting Standards Board (the “FASB”) or other standards setting bodies issue new accounting pronouncements. The FASB issues updates to new accounting pronouncements through the issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, the Company believes that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on the Company’s financial statements upon adoption. Functional and reporting currency and foreign currency translation The functional and reporting currency of the Company and its subsidiaries is US dollars. All transactions in currencies other than US dollars are translated into US dollars on the date of the transaction. Any exchange gains and losses related to these transactions are recognized in the current period’s earnings as other income (expense). Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, notes payable and other current assets and liabilities. We value our financial assets and liabilities using fair value measurements. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows: Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated with observable market data. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs. The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities in our consolidated financial statements approximates fair value because of the short-term nature of the instruments. Investments in non-marketable equity securities are carried at cost less other-than-temporary impairments. The carrying amount of our notes payable and convertible debt at December 31, 2019 and December 31, 2018 approximates their fair values based on our incremental borrowing rates. There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the years ended December 31, 2019 and 2018. Cash and Cash Equivalents The Company considers all highly liquid short-term cash investments with an original maturity of three months or less to be cash equivalents. As of December 31, 2019 and 2018, the Company did not maintain any cash equivalents. The Company maintains cash with financial institutions that may from time to time exceed federally-insured limits. The Company has not experienced any losses related to these balances and believes the risk to be minimal. There are no restricted or compensating cash balances as of December 31, 2019. Accounts Receivable, Net Trade accounts receivables are carried at the original invoiced amounts less an allowance for doubtful accounts. As of December 31, 2019 and 2018, the balance of allowance for doubtful accounts was $18,920. The allowances for doubtful accounts are calculated based on a detailed review of certain individual customer accounts and an estimation of the overall economic conditions affecting the Company's customer base. The Company reviews a customer's credit history before extending credit to the customer. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additions to the allowance would be required. A provision is made against accounts receivable to the extent they are considered unlikely to be collected. Occasionally the Company will write off bad debt directly to the bad debt expense account when the balance is determined to be uncollectable. Bad debt expense for the years ended December 31, 2019 and 2018 was $67,633 and $106,464, respectively. Inventories Inventories, consisting entirely of finished goods, are stated at the lower of cost or net realizable value, with cost determined using the weighted average cost method. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold at the realization of change in value. Once written down, inventories are carried at this lower basis until sold or scrapped. Property and Equipment Property and equipment is stated at cost less accumulated depreciation and impairment. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. No impairment charges were recorded for the years ended December 31, 2019 and 2018. The estimated useful lives for significant property and equipment categories are as follows: Computer and Technology Equipment 3 years Furniture and Equipment 5 years Leasehold Improvements Lease term Vehicles 3 years Other Equipment 3 or 5 years Software 3 years Operating Lease Right of Use Assets Operating lease right of use assets are stated at cost less accumulated depreciation, amortization and impairment. The Company has two operating leases with an imputed annual interest rate of 8%. The terms of the first lease are 24 months commencing on September 1, 2018 and ending on August 31, 2020. The terms of the second lease are 28 months commencing on September 1, 2019 and ending December 31, 2021. Operating lease right of use asset costs incurred in 2019 were $123,563. Convertible Notes The Company accounts for its convertible notes at issuance by allocating the proceeds received from a convertible note among freestanding instruments according to ASC 470, Debt, based upon their relative fair values. The fair value of debt and common stock is determined based on the closing price of the common stock on the date of the transaction, and the fair value of warrants, if any, is determined using the Black-Scholes option-pricing model. Convertible notes are subsequently carried at amortized cost. The fair value of the warrants is recorded as additional paid-in capital, with a corresponding as a debt discount from the face amount of the convertible note. Each convertible note is analyzed for the existence of a beneficial conversion feature (“BCF”), defined as the fair value of the common stock at the commitment date for the convertible note, less the effective conversion price. Beneficial conversion features are recognized at their intrinsic value, and recorded as an increase to additional paid-in capital, with a corresponding reduction in the carrying amount of the convertible note (as a debt discount from the face amount of the convertible note). The discounts on the convertible notes, consisting of amounts ascribed to warrants and beneficial conversion features, are amortized to interest expense, using the effective interest method, over the terms of the related convertible notes. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved. Intangible Assets The Company’s intangible assets, consisting of legal fees for application of patents and trademarks and license fees paid for inspection services, are recorded at cost. Patents and trademarks, once approved, will be amortized using the straight-line method over an estimated life, generally 5 years for patents and 10 to 20 years for trademarks. License fees are amortized over 10 years. Intangible assets are included in “other assets” on the balance sheets. The net balance of intangible assets for December 31, 2019 and 2018 was $86,151 and $63,755, respectively. Amortization expense totaled $1,879 and $974 for the years ended December 31, 2019 and 2018, respectively. Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment annually as of December 31st and at any time when events or circumstances suggest impairment may have occurred. The testing for impairment consists of a comparison of the fair value of with its carrying amount. If the carrying amount of the reporting unit, including goodwill, exceeds the fair value, an impairment will be recognized equal to the difference between the carrying value of the reporting unit goodwill and the implied fair value of the goodwill. In testing goodwill for impairment, we determine the estimated fair value of our reporting units based upon a discounted future cash flow analysis. Goodwill is our only indefinite-lived intangible asset. Definite-lived intangible assets are amortized using the straight line method over the shorter of their contractual term or estimated useful lives. Investments Investments without readily determinable fair values and for which the Company does not have the ability to exercise significant influence are accounted for at cost with adjustments for observable changes in prices or impairments. Impairment of Long-lived Assets The Company evaluates potential impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. An impairment will be recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value. Revenue Recognition The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, Our service and product revenues arise from contracts with customers. Service revenues include full facility programming, engineering and design services, start-up commissioning services, facility optimization services and IPM planning and strategy services. Product revenues include an integrated suite of select cultivation equipment systems and crop management products. We enter into separate contracts for the service and product revenues we provide to our customers so to clarify our obligations under the terms of the contracts. New contracts are entered into if the services to be performed or products to be delivered need to be modified. Service revenues are satisfied when services are rendered or completed in accordance with the terms of the contract. Product revenues are satisfied when control of the products is transferred to the customer. Revenues for services and products for the year ended December 31, 2019 were $3,167,237 and 21,022,566, respectively. Revenues for services and products for the year ended December 31, 2018 were $928,063 and $19,122,713, respectively. Customer Deposits The Company’s policy is to collect deposits from customers at the beginning of the contract. The customer payments received are recorded as a customer deposit liability on the balance sheet. When the contract is complete and meets all the criteria for revenue recognition, the customer is billed for the entire contract amount and the deposit is recorded against the customer’s receivable balance. In certain situations when the customer has paid the deposit and services have been performed but the customer chooses not to proceed with the contract, the Company may keep the deposit and recognize revenue. Of the outstanding customer deposit balance of $3,298,609 at December 31, 2018, $2,678,565 was recognized as revenue in the year ended December 31, 2019. At December 31, 2017, the entire customer deposit balance of $3,151,250 was recognized as revenue in the year ended December 31, 2018. Cost of Revenue The Company’s policy is to recognize cost of revenues in the same manner as, and in conjunction with, revenue recognition. The Company’s cost of revenues includes the costs directly attributable to revenue recognized and includes expenses related to the purchasing of products and providing services, fees for third-party commissions and shipping costs. Total shipping costs included in the cost of goods sold for the years ended December 31, 2019 and 2018 was $679,911 and $490,526, respectively. Advertising Costs The Company expenses advertisings costs in the periods the costs are incurred. Prepayments made under contracts are included in prepaid expenses and expensed when the advertisement is run. Total advertising expense incurred for the years ended December 31, 2019 and 2018 was $159,728 and $153,878, respectively. Warrants The Company accounts for its warrants issued in accordance with the GAAP accounting guidance under ASC 480, “Distinguishing Liabilities from Equity”. The Company estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes option pricing based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term, risk-free interest rate, and expected volatility of the price of the underlying common stock. There is a moderate degree of subjectivity involved when using option pricing models to estimate the warrants and the assumptions used in the Black-Scholes option-pricing model are moderately judgmental. Stock-Based Compensation The Company periodically issue shares of its common stock to employees and consultants in non-capital raising transactions for fees and services. The Company accounts for stock issued to non-employees with the value of the stock compensation based upon the measurement date as determined at the grant date of the award. The Company accounts for stock grants issued and vesting to employees with the award being measured at its fair value at the date of grant and amortized ratably over the vesting period. The Company also estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from its estimates. Income Taxes The Company files income federal tax returns in the United States and Canada and state and local tax return in applicable jurisdictions. Provisions for current income tax liabilities, if any, would be calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income taxes reported in earnings, if any, would also include deferred income tax provisions. Deferred income tax assets and liabilities, if any, would be computed on differences between the financial statement bases of assets and liabilities at the enacted tax rates. Changes in deferred income tax assets and liabilities would be included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates would be charged or credited to income tax expense in the period of enactment. Valuation allowances would be established for certain deferred tax assets when realization is not likely. Assets and liabilities would be established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in the judgement of the Company, do not meet a more-likely-than-not threshold based on the technical merits of the positions. Valuation allowances would be established for certain deferred tax assets when realization is not likely. Loss Per Share The Company computes net loss per share by dividing net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share would be computed by dividing net loss by the weighted-average of all potentially dilutive shares of common stock that were outstanding during the periods presented. The diluted earnings per share calculation is not presented as it results in an anti-dilutive calculation of net loss per share. The treasury stock method would be used to calculate diluted earnings per share for potentially dilutive stock options and share purchase warrants. This method assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants would be used to purchase common shares at the average market price for the period. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued an Accounting Standards Update (“ASU”) amending the accounting for leases. The new guidance requires the recognition of lease assets and liabilities for operating leases with terms of more than 12 months, in addition to those currently recorded, on the Company’s consolidated balance sheets. Presentation of leases within the consolidated statements of operations and comprehensive loss and consolidated cash flows will be generally consistent with the prior lease accounting guidance. The ASU was effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company adopted the ASU effective January 1, 2019 under the modified retrospective method with respect to lease contracts in effect as of the adoption date. The adoption of the ASU increased our assets and liabilities by $326,095 in 2019 due to the recognition of right of use assets and lease liabilities with respect to operating leases. |
3. Related Party Transactions
3. Related Party Transactions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Related Party Transactions [Abstract] | ||
Related Party Transactions | NOTE 3 – RELATED PARTY TRANSACTIONS The Company previously purchased certain cultivation products from Bravo Lighting, LLC (d/b/a Bravo Enterprises) (“Bravo”) and Enviro-Glo, LLC (“Enviro-Glo”), manufacturers and distributors of commercial building lighting and other product solutions with common control by the Company’s two major shareholders, Bradley Nattrass and Octavio Gutierrez. Purchases from Bravo and Enviro-Glo totaled $0 and $43,912 for the nine months ended September 30, 2020 and 2019, respectively, and $0 and $7,442 for the three months ended September 30, 2020 and 2019, respectively. There were no outstanding receivables from Bravo and Enviro-Glo as of September 30, 2020 and December 31, 2019. Net outstanding payables incurred for purchases of inventory and other services to Bravo and Enviro-Glo as of September 30, 2020 and December 31, 2019 were $0 and $8,570, respectively. The Company has made payments to Cloud 9 Support, LLC (“Cloud 9”), a company owned by James Lowe, a director, shareholder, and debt holder. Payments to Cloud 9 were $0 and $75,617 during the nine months ended September 30, 2020 and 2019, respectively, and $0 and $24,368 during the three months ended September 30, 2020 and 2019, respectively. Cloud 9 also purchases materials from the Company. Total sales to Cloud 9 from the Company were $359,562 and $229,688 during the nine months ended September 30, 2020 and 2019, respectively, and $112,405 and $103,088 during the three months ended September 30, 2020 and 2019, respectively. Outstanding receivables from Cloud 9 as of September 30, 2020 and December 31, 2019 totaled $9,772 and $49,659, respectively. Net outstanding payables to Cloud 9 as of September 30, 2020 and December 31, 2019 were $0 and $16,402, respectively. In October 2018, the Company received a $1,000,000, unsecured, interest only, promissory note (the “Promissory Note”) from Cloud 9. The Promissory Note was originally due April 30, 2019. The Promissory Note is personally guaranteed by the Company’s largest shareholders, Bradley Nattrass, who is the Company’s Chairman and Chief Executive Officer, and Octavio Gutierrez, a former officer and director of the Company. The Promissory Note includes additional consideration of 30,000 options at an exercise price of $1.20 per share. Under the initial terms of the Promissory Note, the interest rate was 12.0% per year with interest payable monthly. In May 2019, the due date of the Promissory Note was extended to December 31, 2019 and the interest rate was decreased to 9.0% per year payable monthly. In connection with the execution of the Credit Agreement (see Note 9 – Debt) on February 21, 2020, the Company entered into an agreement to amend the Promissory Note (the “Amending Agreement”). Pursuant to the Amending Agreement, Cloud 9 agreed to extend the maturity date of the Promissory Note from December 31, 2019 to the date which is the earlier of 60 days following the date: (a) on which demand for repayment is made by the Lender under the Credit Agreement; or (b) which is the maturity date of the Credit Agreement. As part of the Amending Agreement, the Company issued 100,000 shares of Common Stock to James Lowe as designee of Cloud 9. | NOTE 3 – RELATED PARTY TRANSACTIONS In October 2018, the Company received a $1,000,000, unsecured, interest only, promissory note (the “Promissory Note”) from Cloud9 Support Inc. (“Cloud9”), an entity owned 100% by James Lowe, a director of the Company. The Promissory Note was originally due April 30, 2019. The Promissory Note is personally guaranteed by the Company’s two majority shareholders, Bradley Nattrass, who is the Company’s Chairman and Chief Executive Officer, and Octavio Gutierrez, a director and former officer of the Company. The Promissory Note includes additional consideration of 30,000 options at an exercise price of $1.20 per share. Under the initial terms of the Promissory Note, the interest rate was 12.0% per year with interest payable monthly. In May 2019, the due date of the Promissory Note was extended to December 31, 2019 and the interest rate was decreased to 9.0% per year payable monthly. In connection with the execution of the Credit Agreement (see Note 17), on February 21, 2020, the Company entered into an agreement to amend the Promissory Note (the “Amending Agreement”). Pursuant to the Amending Agreement, Cloud9 agreed to extend the maturity date of the Promissory Note from December 31, 2019 to the date which is the earlier of 60 days following the date: (a) on which demand for repayment is made by the Lender under the Credit Agreement; or (b) which is the Maturity Date of the Credit Agreement. The Company purchases some cultivation products from Bravo Lighting, LLC (d/b/a Bravo Enterprises) (“Bravo”) and Enviro-Glo, LLC (“Enviro-Glo”), manufacturers and distributors of commercial building lighting and other product solutions with common control by the Company’s two major shareholders, Bradley Nattrass and Octavio Gutierrez. Purchases from Bravo and Enviro-Glo totaled $45,129 and $276,443 for the years ended 2019 and 2018, respectively. Outstanding receivables from Bravo and Enviro-Glo for the years ended 2019 and 2018 totaled $0 and $43,120, respectively. Net outstanding payables incurred for purchases of inventory and other services to Bravo and Enviro-Glo as of December 31, 2019 and 2018, was $8,570 and $5,562, respectively. The Company has purchased goods from Cloud 9 Support, LLC (“Cloud 9”), a company owned by James Lowe, a director, shareholder, and debt holder. Purchases from Cloud 9 were $97,329 and $84,746 during the years ended 2019 and 2018, respectively. Cloud 9 also purchases materials from the Company for use with their customers. Total sales to Cloud 9 from the Company were $392,963 and $273,760 during the years ended 2019 and 2018, respectively. Outstanding receivables from Cloud 9 as of December 31, 2019 and 2018 totaled $49,659 and $79,235, respectively. Net outstanding payables for purchases of inventory and other services to Cloud 9 as of December 31, 2019 and 2018, totaled $16,402 and $13,240, respectively. |
4. Prepayments and Advances
4. Prepayments and Advances | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepayments and Advances | NOTE 4 – PREPAYMENTS AND OTHER ASSETS Prepayments and other assets are comprised of prepayments paid to vendors to initiate orders and prepaid services and fees. The prepaid balances are summarized as follows: September 30, December 31, 2020 2019 Vendor prepayments $ 1,828,531 $ 1,070,788 Prepaid services and fees 268,655 187,912 Deferred financing asset (See Note 9 - Debt) 630,805 – Other assets 6,391 20,028 Prepayments and other assets $ 2,734,382 $ 1,278,728 | NOTE 4 – PREPAYMENTS & ADVANCES Prepayments and advances are comprised of prepayments paid to vendors to initiate orders and prepaid services and fees. The prepaid balances are summarized as follows: December 31, December 31, 2019 2018 Vendor Prepayments $ 1,070,788 $ 776,478 Prepaid Services and Fees 187,912 152,204 Prepayments and Advances $ 1,258,700 $ 928,682 |
5. Property Plant and Equipment
5. Property Plant and Equipment, net | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property Plant and Equipment, net | NOTE 5 - PROPERTY PLANT & EQUIPMENT, NET Property Plant and Equipment balances are summarized as follows: December 31, December 31, 2019 2018 Computers & Technology Equip $ 87,300 $ 61,910 Furniture and Fixtures 42,518 30,162 Leasehold Improvements 164,072 143,215 Vehicles 57,414 132,875 Software 142,721 233,783 R&D Assets 3,031 84,031 Other Equipment 38,355 65,140 Accumulated depreciation (370,376 ) (309,975 ) Property plant and equipment, net $ 165,035 $ 441,141 Depreciation expense for the years ended December 31, 2019 and 2018 totaled $264,597 and $153,162, respectively. |
6. Investments
6. Investments | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Equity Method Investments and Joint Ventures [Abstract] | ||
Investments | NOTE 5 – INVESTMENTS The components of investments are summarized as follows: September 30, 2020 December 31, Investment in Edyza $ 1,710,358 $ 1,710,358 Investment in TGH – 310,000 $ 1,710,358 $ 2,020,358 On January 24, 2020, the Company entered into a Membership Interest Redemption Agreement (the “Redemption Agreement”) with Total Grow Holdings LLC (d/b/a Total Grow Control, LLC) (“TGH”), whereby the Company agreed to sell the Company’s 24.4% membership interests in TGH back to TGH for total consideration of $370,000. As a result of TGH’s failure to perform its obligations under the Redemption Agreement, the Company initiated a lawsuit against TGH seeking damages (the “Lawsuit”), and subsequently fully impaired the remaining investment in TGH during the three months ended June 30, 2020. On September 24, 2020, the Company and TGH entered into a Settlement Agreement (the “Settlement Agreement”), pursuant to which the parties agreed to settle all claims brought in the Lawsuit. Pursuant to the Settlement Agreement, TGH agreed to pay the Company a total of $61,919 in six equal installments. TGH’s first payment was due by October 4, 2020. TGH also agreed to reimburse the Company for up to $25,000 of its attorney’s fees related to the Lawsuit and the Settlement Agreement. In consideration of the foregoing and subject to TGH satisfying its payment obligations, the Company agreed to release any and all claims related to the Lawsuit. The Settlement Agreement also provides for a mutual release between the parties. On September 24, 2020, in connection with the Settlement Agreement, the Company also entered into an agreement (the “Pullar Agreement”) by and between the Company and George R. Pullar, a former director of the Company and the Company’s former chief financial officer and the current chief financial officer of TGH. Pursuant to the Pullar Agreement, in exchange for Mr. Pullar relinquishing all right, title and interest in and to 1,000,000 shares of the Company’s common stock, the Company agreed to (i) execute the Settlement Agreement, (ii) transfer, sell and assign to Mr. Pullar the Company’s 24.4% membership interest in TGH pursuant to the Settlement Agreement and (iii) issue Mr. Pullar a fully vested warrant, to purchase 400,000 shares of Common Stock at an exercise price of $1.00 per share which expires five years from the date of issuance. The Pullar Agreement also provides for a mutual release between the Company and Mr. Pullar. | NOTE 6 – INVESTMENTS The changes in the components of the Investments for the years ended December 31, 2019 and 2018 are summarized as follows: Year Ended December 31, 2019 Edyza TGH Total Beginning Balances as of 1/1/2019 $ 812,883 $ 448,766 $ 1,261,649 Purchase of additional shares under SPOA 897,475 – 897,475 Initial purchase of Membership interest – 367,000 367,000 Additional Membership interest purchased with first option – – – Impairment of investment – (505,766 ) (505,766 ) Legal fees – – – Ending Balances as of 12/31/2019 $ 1,710,358 $ 310,000 $ 2,020,358 Year Ended December 31, 2018 Edyza TGH Total Beginning Balances as of 1/1/2018 $ 400,000 $ – $ 400,000 Purchase of additional shares under SPOA, including $75,000 reflected in Accrued Expenses 400,000 – 400,000 Initial purchase of Membership Interest – 125,000 125,000 Additional Membership interest purchased with first option – 150,000 150,000 Additional Membership interest purchased with second option – 158,000 158,000 Legal fees 12,883 15,766 28,649 Ending Balances as of 12/31/2018 $ 812,883 $ 448,766 $ 1,261,649 Edyza In August 2017, the Company entered into a Simple Agreement for Future Equity (“SAFE”) with Edyza, Inc. (“Edyza”), a developer of wireless sensor technology, to provide the Company with the right to obtain an ownership interest in Edyza to be issued when Edyza engaged in a priced round of investment. The Company paid Edyza $400,000 for the SAFE. In August 2018, the Company and Edyza entered into a Stock Purchase and Option Agreement (“SPOA”) whereby the Company and Edyza agreed to terminate the SAFE in exchange for Edyza issuing the Company 442,685 shares of Edyza Common Stock at $0.903577 per share, or $400,000 in the aggregate. In connection with the SPOA, the Company agreed to pay Edyza an additional $400,000 in six monthly installments ($50,000 a month in August and September 2018 and $75,000 a month from October 2018 thru January 2019) in exchange for Edyza issuing the Company an additional 442,685 shares of Edyza Common Stock at $0.903577 per share. As of December 31, 2018, the Company had paid $325,000 of the additional $400,000 to Edyza under this installment payment plan. The remaining installment payment of $75,000 is included in Accrued Expenses on the Company’s Balance Sheet as of December 31, 2018 and was paid to Edyza in January 2019. During 2019, the Company acquired an additional 827,018 shares for $897,475. The Company has capitalized an additional $12,883 in legal fees associated with the purchases of the Edyza Common Stock. The Company measures this investment at cost, less any impairment changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. TGH In February 2018, the Company entered into a Membership Interest and Purchase Agreement (“MIPA”) with Total Grow Holdings, LLC (d/b/a/ Total Grow Control, LLC) (“TGH”), a developer of environmental controls and fertigation/irrigation distribution products, to purchase 5% of TGH’s membership interests on a fully diluted basis for $125,000. The MIPA also contained two separate options for the Company to purchase additional membership interests in TGH and a purchase right for the Company to acquire all of the outstanding membership interests in TGH. The first option was exercisable from July 1, 2018 thru August 31, 2018 and allowed the Company to acquire an additional 5% of TGH’s membership interests on a fully diluted basis for $150,000. The second option was initially exercisable from February 15, 2019 thru May 15, 2019 and allowed the Company to acquire an additional 15% of TGH’s membership interests on a fully diluted basis for $600,000. The purchase right is exercisable from May 15, 2019 thru February 15, 2020 and allows the Company to acquire all of the outstanding membership interests in TGH based on a total valuation of TGH of $7,500,000. In July 2018, the Company exercised its initial option and purchased an additional 5% of TGH’s fully diluted membership interests for $150,000. As of December 31, 2018, the Company owned 10% of the membership interests in TGH. In January 2019, the Company and TGH renegotiated the terms of the second option, accelerating the beginning of the exercise period to January 2019 from February 15, 2019, and reducing the purchase price for the additional 15% of TGH’s membership interests on a fully diluted basis from $600,000 to $525,000. In January 2019, the Company elected to exercise this renegotiated second option and purchased an additional 15% of TGH’s fully diluted membership interests for $525,000. Prior to December 31, 2018, the Company had advanced TGH $158,000 for equipment orders the Company had placed with TGH. TGH agreed to apply this $158,000 in equipment advances toward the second option membership interest purchase price of $525,000, and the Company has reflected this $158,000 as an investment in TGH as of December 31, 2018. The remaining balance of $367,000 for the second option membership interest was due in installments of $35,000 every two weeks through May 2019. As of March 31, 2019, the Company had made total payments of $336,000. The Company capitalized an additional $15,766 in legal fees associated with the purchases of the TGH membership interests. As of December 31, 2018, the Company’s fully diluted ownership interest in TGH was less than 20% and, the Company measured these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. As of December 31, 2018, the Company determined that no impairment of its investment in TGH was necessary given the recent valuations and no change in qualitative factors. The Company also made the remaining $367,000 in additional payments to TGH under the renegotiated agreement reached in January 2019 to acquire additional Membership Interests in TGH. When the payment plan was completed in May 2019, the Company was issued the additional ownership interest in TGH resulting in the Company owning 24% of TGH’s membership interest. The Company believed that this ownership interest in TGH resulted in the Company being able to exercise significant influence over TGH and that the Company should begin to account for its investment in TGH under the equity method beginning in July 2019 since the operations of TGH were insignificant in June 2019. In September 2019, the Company decided that it should remain independent with regard to any investments in environmental controls and fertigation/irrigation distribution entities and decided it should divest itself of the ownership interest in TGH. The Company entered into preliminary negotiations with TGH to sell its ownership interest in TGH back to TGH. In connection with those negotiations, the Company determined it should not record any equity interests in TGH and the Company recorded a $505,766 write-down of its investment in TGH to an amount the Company anticipates receiving in proceeds from the sale of the TGH investment back to TGH. In January 2020, the Company and TGH entered into an agreement whereby TGH agreed to purchase the Company’s remaining investment in TGH in consideration for a short-term note due April 24, 2020 in the amount of $200,000 and a long-term note due in a lump sum on January 27, 2025 in the amount of $110,000 with interest of 4.0% payable annually in arrears. Per the terms of the agreement, the Company retains its ownership interest in TGH until the $200,000 short-term note is repaid. As of the date of this report, TGH has not made any payments on the $200,000 short-term note and the Company has retained its ownership interest in TGH. The Company does not have the ability to exert significant influence on TGH and therefore has recorded the investment at its adjusted cost basis. |
7. Other Assets
7. Other Assets | 12 Months Ended |
Dec. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets | NOTE 7 – OTHER ASSETS Included in other assets are the following intangible assets: · Patents, consisting of legal costs paid to third parties to establish a patent, which are capitalized until such time that the patents are approved and issued or rejected. If approved, capitalized costs are amortized using the straight-line method over the estimated lives of the patents, generally five years. The Company has two issued patents as of December 31, 2019 and had no issued patents at December 31, 2018. · License fees, which consist of fees paid to have the Company’s products certified by a nationally recognized organization. License fees are amortized over ten years. The net balance of intangible assets as of December 31, 2019 and December 31, 2018 was $86,151 and $63,755, respectively. Amortization expense totaled $1,879 and $974 for the years ended December 31, 2019 and 2018, respectively. |
8. Accrued Expenses
8. Accrued Expenses | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Payables and Accruals [Abstract] | ||
Accrued Expenses | NOTE 7 – ACCRUED EXPENSES Accrued expenses are summarized as follows: September 30, December 31, 2020 2019 Accrued operating expenses $ 798,752 $ 854,056 Accrued wages and related expenses 402,710 487,327 Accrued interest expense 44,635 – Accrued sales tax payable 616,999 345,458 $ 1,863,096 $ 1,686,841 Accrued sales tax payable is comprised of amounts due to various states and Canadian provinces for 2015 through 2020. | NOTE 8 – ACCRUED EXPENSES Accrued expenses are summarized as follows: December 31, December 31, 2019 2018 Accrued operating expenses $ 854,056 $ 240,941 Accrued wages and related expenses 487,327 490,961 Accrued interest expense – 10,958 Accrued sales tax payable 345,458 401,282 $ 1,686,841 $ 1,144,142 Accrued sales tax payable is comprised of prior period sales tax payable to various states for 2015 through 2019. The Company has set up payment plans with the various taxing agencies to relieve the obligation. The payment plans require monthly payments in various amounts over a period of 12 months. |
9. Notes Payable
9. Notes Payable | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Debt Disclosure [Abstract] | ||
Notes Payable | NOTE 8 – NOTES PAYABLE The following is a summary of notes payable excluding related party notes payable: September 30, December 31, 2020 2019 Unsecured, interest only, note payable with Chris Parkes originally due December 31, 2018. Initial interest payments due monthly at an annual rate of 20.4%. Note payable revised in December 2018 extending the maturity date to March 31, 2019. During August 2019, the maturity date was extended to March 31, 2020 and the interest rate was decreased to an annual rate of 9%. In consideration for extending the due date of the note and reducing the interest rate, the Company issued the holder 3,000 shares of Common Stock. Beginning in April 2020, the Company is making monthly principal payments in the amount of $10,000. $ 20,000 $ 80,000 Unsecured, interest only, note payable with David Parkes originally due December 31, 2018. Initial interest payments due monthly at an annual rate of 18.0%. Note payable revised in December 2018 extending the maturity date to March 31, 2019. During August 2019, the maturity date was extended to March 31, 2020 and the interest rate was decreased to an annual rate of 9%. In consideration for extending the due date of the note and reducing the interest rate, the Company issued the holder 3,000 shares of Common Stock. Beginning in April 2020, the Company is making monthly principal payments in the amount of $10,000. 40,000 100,000 Note payable with Hydrofarm Holdings Group, Inc. (“Hydrofarm”), secured by all currently existing and future assets. Interest accrues at 8.0% per year and is paid quarterly. The note matures on the earlier of: (a) 90 days’ notice from Hydrofarm; (b) acceleration of the note payable due to the Company being in default; or (c) December 2023. The note was repaid in full on February 27, 2020. – 2,000,000 Secured agreement to sell future receivables to GCF Resources, LLC, net of $30,000 in closing fees. The agreement requires 32 weekly payments of $42,190 totaling $1,350,000. The agreement matured on May 7, 2020 but is repayable prior to maturity for less than the $1,350,000 in total payments. The note was repaid in full on February 27, 2020. – 632,709 Paycheck Protection Program (“PPP”) loan entered into on April 16, 2020. Interest rate of 1.0% per annum. Payments of principal and interest are deferred until August 1, 2021 (the “Deferral Period”). The PPP loan may be forgiven in part or fully depending on the Company meeting certain PPP loan forgiveness guidelines. The Company has not yet determined if any of the PPP loan is subject to forgiveness and has therefore continued to present the entire PPP loan as an obligation on its financial statements. Any unforgiven portion of the PPP loan is payable over a two-year term, with payments deferred during the Deferral Period. The Company may prepay the unforgiven loan balance at any time without payment of any premium. 1,020,600 – Total 1,080,600 2,812,709 Less current maturities (60,00 ) (2,812,709 ) Long Term $ 1,020,600 $ – | NOTE 9 – NOTES PAYABLE Notes payable balances totaled $2,812,709 and $2,478,869 at December 31, 2019 and December 31, 2018, respectively. Interest expense incurred on the notes payable was $596,075 and $119,961 for the years ended December 31, 2019 and 2018, respectively. The following is a summary of notes payable: December 31, December 31, 2019 2018 Unsecured, interest only, note payable with Chris Parkes originally due December 31, 2018. Interest payments due monthly at an annual rate of 20.4%. Note payable revised in December 2018 extending the maturity date to March 31, 2020. During August 2019, the maturity date was extended to March 31, 2020 and the interest rate was decreased to an annual rate of 9%. In consideration for extending the due date of the Note and reducing the interest rate, the Company issued the Holder 3,000 shares of Common Stock. Beginning of March 31, 2020, the Company has made monthly payments in the amount of $10,000. $ 80,000 $ 80,000 Unsecured, interest only, note payable with David Parkes originally due December 31, 2018. Interest payments due monthly at an annual rate of 18.0%. Note payable revised in December 2018 extending the maturity date to March 31, 2020. During August 2019, the maturity date was extended to March 31, 2020 and the interest rate was decreased to an annual rate of 9%. In consideration for extending the due date of the Note and reducing the interest rate, the Company issued the Holder 3,000 shares of Common Stock. Beginning of March 31, 2020, the Company has made monthly payments in the amount of $10,000 100,000 100,000 Unsecured, interest only, note payable with Michael S. Bank originally due April 30, 2019. Interest at 19.8% per year is paid twice per month. The note contains a demand re-payment provision that can be executed by Mr. Bank at any time by providing a one-time notice. The Company may re-pay any part or the entire principal sum at any time with penalty and abatement of interest expense from date of early payment. The note includes six thousand warrants, each exercisable to purchase one share of the Company's Common Stock at a price of $1.00 per share. In March 2019, the Company repaid $35,000 of the principal and extended the maturity date to April 30, 2019. The note was repaid in full on April 30, 2019. – 298,869 Note payable with Hydrofarm Holdings Group, Inc. (“Hydrofarm”), secured by all currently existing and future assets. Interest accrues at 8.0% per year and is paid quarterly. The note matures on the earlier of: (a) 90 days’ notice from Hydrofarm; (b) acceleration of the note payable due to the Company being in default; or (c) December 2023. 2,000,000 2,000,000 Secured agreement to sell future receivables to GCF Resources, LLC, net of $30,000 in closing fees. The agreement requires 32 weekly payments of $42,190 totaling $1,350,000. The agreement matures on May 7, 2020 but is repayable prior to maturity for less than the $1,350,000 in total payments. 632,709 – Total 2,812,709 2,478,869 Less current maturities (2,812,709 ) (2,478,869 ) Long term $ – $ – Effective November 20, 2018, the Company entered into a letter of intent (“LOI”) with Hydrofarm Holdings Group, Inc. (“Hydrofarm”) whereby Hydrofarm agreed to acquire all of the Company’s issued and outstanding common stock (the “Merger”). Pursuant to the terms of the LOI, Hydrofarm extended to the Company a secured, interest only note in the principal amount of $2 million. The note was secured by all of our currently existing and future assets. In connection with the execution of the Credit Agreement (see Note 17), the Company repaid the note and the Merger was abandoned. |
10. Unit Offering
10. Unit Offering | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Debt Disclosure [Abstract] | ||
Unit Offering | NOTE 10 – UNIT OFFERING Effective January 9, 2019, the Company executed a letter agreement with an exclusive placement agent in connection with a private placement offering. Beginning in March 2019, the placement agent initiated an offering (the “Offering”) of up to $6,000,000 from the sale of Units, with each Unit consisting of a $1,000 Convertible Debenture (the “Debentures” or a “Debenture”) and Common Stock Purchase Warrants (the “Warrants”) exercisable to purchase 207.46 shares of Common Stock at $3.00 per share for a period of two years from the purchase date. The Debentures were due May 31, 2021 and bore interest at 8%, compounded annually, with interest due at maturity. The Debentures, plus any accrued but unpaid interest, were to automatically convert for no additional consideration into Common Shares at a conversion price of $2.41 per share upon the occurrence of a liquidity event. A liquidity event was defined as: (a) the date on which the Company’s Common Stock is listed for trading on a recognized stock exchange in either Canada or the United States; and (b) securities issued pursuant to the Offering, including the Common Stock underlying both the conversion right included in the Debentures and underlying the Warrants, have been duly qualified by a registration statement in the United States, allowing the securities to be freely tradeable pursuant to the U.S. securities laws, or a prospectus in Canada. The Company filed a registration statement with the SEC on September 17, 2019, to register the securities in connection with the Offering. That registration statement was declared effective October 16, 2019, triggering the liquidity event indicated above and the $2,565,000 in Debentures plus $92,037 in accrued interest were converted into 1,102,513 Common Shares at $2.41 per share. The Warrants contain a mandatory exercise provision if the weighted average share price of the Company’s Common Stock exceeds $5.00 per share for a period of five consecutive days. As of September 30, 2020, no Warrants had been exercised. | NOTE 10 – UNIT OFFERING Effective January 9, 2019, the Company executed a letter agreement with 4Front Capital Partners, Inc., Toronto, Canada (“4Front”), whereby 4Front agreed to act as the Company’s exclusive placement agent in connection with a private placement offering. Beginning in March 2019, 4Front initiated an offering (the “Offering”) of up to $6,000,000 from the sale of Units, with each Unit consisting of a $1,000 Convertible Debenture (the “Debentures” or a “Debenture”) and Common Stock Purchase Warrants (the “Warrants”) exercisable to purchase 207.46 shares of Common Stock at $3.00 per share for a period of two years from the purchase date. The Debentures are due May 31, 2021 and bear interest at 8%, compounded annually, with interest due at maturity. The Debentures, plus any accrued but unpaid interest, will automatically convert for no additional consideration into Common Shares at a conversion price of $2.41 per share upon the occurrence of a liquidity event. A liquidity event means: (a) the date on which the Company’s Common Stock is listed for trading on a recognized stock exchange in either Canada or the United States; and (b) securities issued pursuant to the Offering, including the Common Stock underlying both the conversion right included in the Debentures and underlying the Warrants, have been duly qualified by a registration statement in the United States, allowing the securities to be freely tradeable pursuant to the U.S. securities laws, or a prospectus in Canada. The Company filed a registration statement with the SEC on September 17, 2019, to register the securities in connection with the Offering. That registration statement was declared effective October 16, 2019, triggering the liquidity event indicated above and the $2,565,000 in Debentures plus $92,037 in accrued interest were converted into 1,102,513 Common Shares at $2.41 per share. The Warrants contain a mandatory exercise provision if the weighted average share price of the Company’s Common Stock exceeds $5.00 per share for a period of five consecutive days. |
11. Operating Lease Liabilities
11. Operating Lease Liabilities & Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 11 – OPERATING LEASE LIABILITIES & COMMITMENTS AND CONTINGENCIES The Company has two operating leases with an imputed annual interest rate of 8%. The terms of the first lease are 24 months commencing on September 1, 2018 and ending on August 31, 2020. The terms of the second lease are 28 months commencing on September 1, 2019 and ending December 31, 2021. The following is a summary of operating lease liabilities: December 31, December 31, Operating lease liabilities related to right of use assets. $ 222,236 $ – Less current portion (123,395 ) – Long term $ 98,841 $ – The following is a schedule showing future minimum lease payments: Year ending Total Minimum December 31, Lease Payments 2020 177,688 2021 91,688 From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no legal proceedings for which management believes the ultimate outcome would have a material adverse effect on the Company’s results of operations and cash flows. |
12. Risks and Uncertainties
12. Risks and Uncertainties | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Risks and Uncertainties [Abstract] | ||
Risks and Uncertainties | NOTE 11 – RISKS AND UNCERTAINTIES Concentration Risk During the nine months ended September 30, 2020 and 2019, one client represented 26% and 15% of total revenue, respectively. During the three months ended September 30, 2020 and 2019, one client represented 51% and 17% of total revenue, respectively. At September 30, 2020 one client represented 26% of total outstanding receivables. At December 31, 2019, one client represented 15% and another represented 11% of total outstanding accounts receivables. During the nine months ended September 30, 2020, 27% of the Company’s total purchases were from one vendor. During the nine months ended September 30, 2019, 15% of the Company’s total purchases were from one vendor. During the three months ended September 30, 2020, 48% of the Company’s total purchases were from one vendor. During the three months ended September 30, 2019, 20% of the Company’s total purchases were from one vendor. Coronavirus Pandemic The outbreak of COVID-19, a novel strain of coronavirus first identified in China, which has spread across the globe including the U.S., has had an adverse impact on our operations and financial condition. The response to this coronavirus by federal, state and local governments in the U.S. has resulted in significant market and business disruptions across many industries and affecting businesses of all sizes. This pandemic has also caused significant stock market volatility and further tightened capital access for most businesses. Given that the COVID-19 pandemic and its disruptions are of an unknown duration, they could have an adverse effect on our liquidity and profitability. As a result of these events, we assessed our near-term operations, working capital, finances and capital formation opportunities, and implemented, in late March 2020, a downsizing of our operations and workforce to preserve cash resources and focus our operations on client-centric sales and project management activities. The duration and likelihood of success of this workforce reduction are uncertain; however, we have since rehired several employees who were impacted by the downsizing effort. If this downsizing effort does not meet our expectations, or additional capital is not available, we may not be able to continue our operations. The pandemic and its effects resulted in temporary delays in our projects, however, work on all such projects has resumed. Other factors that will affect our ability to continue operations include the market demand for our products and services, our ability to service the needs of our clients and prospects with a reduced workforce, potential contract cancellations, project scope reductions and project delays, our ability to fulfill our current backlog, management of our working capital, the availability of cash to fund our operations, and the continuation of normal payment terms and conditions for purchase of our products. In light of these extenuating circumstances, there is no assurance that we will be successful in growing and maintaining our business with our clients. If our clients or prospects are unable to obtain project financing and we are unable to increase revenues, or otherwise generate cash flows from operations, we will not be able to successfully execute on the various strategies and initiatives we have set forth in this Report to grow our business. The ultimate magnitude of COVID-19, including the extent of its impact on our financial and operational results, which could be material, will depend on the length of time that the pandemic continues, its effect on the demand for our products and our supply chain, the effect of governmental regulations imposed in response to the pandemic, as well as uncertainty regarding all of the foregoing. We cannot at this time predict the full impact of the COVID-19 pandemic, but it could have a larger material adverse effect on our business, financial condition, results of operations and cash flows beyond what is discussed within this Report. | NOTE 12 – RISKS AND UNCERTAINTIES Concentration Risk During the year ended December 31, 2019, one vendor composed 24% of total purchases. During the year ended December 31, 2018, two unrelated vendors composed 18% and 11% of total purchases. The Company’s primary suppliers of automated environmental controls and fertigation represented 3% and 46% of total accounts payable outstanding as of December 31, 2019 and 2018, respectively. During the year ended December 31, 2019, one customer represented 21% of total revenue. During the year ended December 31, 2018, one customer represented 14% of total revenue. At December 31, 2019, one customer represented 15% and another represented 11% of total outstanding accounts receivables. At December 31, 2018, one customer represented 19% and another represented 13% of total outstanding receivables. Coronavirus Pandemic In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China. In January 2020, this coronavirus spread to other countries, including the United States, and efforts to contain the spread of this coronavirus intensified. In March 2020, the World Health Organization declared the outbreak of the coronavirus a pandemic. We are a business that supplies other Essential Businesses with support and supplies necessary to operate and we therefore are an Essential Business and allowed to continue operating under Stay-At-Home Orders issued by many states and cities. However, the extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact. The outbreak and any preventative or protective actions that governments or we may take in respect of this coronavirus may result in a period of business disruption, reduced customer business and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but may materially affect our business, financial condition, results of operations, and cash flows. Effects from the COVID-19 pandemic began in the latter portion of the first quarter of 2020; therefore, there was no impact to our 2019 results of operations, financial condition and cash flows. |
13. Stock-Based Compensation
13. Stock-Based Compensation | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | ||
Stock-Based Compensation | NOTE 12 – STOCK-BASED COMPENSATION Stock-based compensation expense for the nine months ended September 30, 2020 and 2019 was $1,391,807 and $1,606,355, respectively, based on the vesting schedule of the stock grants and options. Stock based compensation expense for the three months ended September 30, 2020 and 2019 was $399,258 and $509,219, respectively, based on the vesting schedule of the stock grants and options. No cash flow effects are anticipated for stock grants. In January 2017, the Company began granting Common Stock to attract, retain, and reward employees. In January 2018, the Company implemented an equity incentive plan to reward and attract employees and directors and compensate vendors for services when applicable. In May 2019, the Company adopted a new equity incentive plan, authorizing an aggregate of 3,500,000 shares of Common Stock for issuance thereunder. This equity incentive plan was approved by the Company’s shareholders on May 23, 2019. Stock grants under the equity incentive plans are valued at the price of the stock on the date of grant. The fair value of stock options granted under the equity incentive plans is calculated using the Black-Scholes pricing model based on the estimated market value of the underlying stock at the valuation measurement date, the remaining contractual term of the stock options, risk-free interest rate, and expected volatility of the underlying Common Stock. There is a moderate degree of subjectivity involved when estimating the value of stock options with the Black-Scholes option pricing model as the assumptions used are moderately judgmental. Stock grants and stock options are sometimes offered as part of an employment offer package, to ensure continuity of service or as a reward for performance. Stock grants and stock options typically require a 1 to 3 year period of continued employment or service performance before the stock grant or stock option vests. Stock Grants: The following table shows stock grant activity for the nine months ended September 30, 2020: Grants outstanding as of December 31, 2019 412,501 Grants awarded 794,166 Forfeiture/Cancelled (200,000 ) Grants vested (253,333 ) Grants outstanding as of September 30, 2020 753,334 As of September 30, 2020, the Company has $393,215 in unrecognized share-based compensation expense related to these stock grants. Stock Options: The following table shows stock option activity for the nine months ended September 30, 2020: Number of Weighted Weighted Stock options outstanding as of December 31, 2019 1,702,167 9.21 $ 1.21 Issued 2,425,000 9.49 $ 1.00 Exercised – – – Expired (297,501 ) 9.19 $ 1.21 Stock options outstanding at September 30, 2020 3,829,666 9.35 $ 1.05 Stock options exercisable at September 30, 2020 1,437,578 8.88 $ 1.12 As of September 30, 2020, the Company has $1,919,523 in unrecognized share-based compensation expense related to these stock options. | NOTE 13 – STOCK-BASED COMPENSATION Stock-based compensation expense for the years ended December 31, 2019 and 2018 was $1,830,426 and $1,245,826, respectively based on the vesting schedule of the stock grants and options. During the year ended December 31, 2019, 1,361,966 shares vested and were issued to employees. No cash flow affects are anticipated for stock grants. In January 2017, the Company began granting stock to attract, retain, and reward employees with Common Stock. Stock grants are offered as part of the employment offer package, to ensure continuity of employment or as a reward for performance. Each of these grants requires a specific tenure of employment before the grant vests with typical vesting periods of 1 to 3 years of employment. In January 2018, the Company implemented an equity incentive plan to reward and attract employees and compensate vendors for services when applicable. Stock options are offered as part of an employment offer package, to ensure continuity of service or as a reward for performance. The stock option plan authorizes 3,000,000 shares of common stock. 1,995,499 options have been awarded under the Plan as of December 31, 2019 and 1,259,000 options were awarded as of December 31, 2018. In May 2019, the Company adopted a new equity incentive plan, authorizing an aggregate of 3,500,000 shares of Common Stock for issuance thereunder. Stock grants under the equity incentive programs are valued at the price of the stock on the date of grant. The fair value of the options is calculated using the Black-Scholes pricing model based on the estimated market value of the underlying common stock at the valuation measurement date $0.90, the remaining contractual term of the options of 10 years, risk-free interest rate of 2.75% and expected volatility of the price of the underlying common stock of 100%. There is a moderate degree of subjectivity involved when using option pricing models to estimate the options and the assumptions used in the Black Scholes option-pricing model are moderately judgmental. Stock options and stock grants are sometimes offered as part of an employment offer package, to ensure continuity of service or as a reward for performance. The following schedule shows stock grant activity for the year ended December 31, 2019: Grants outstanding as of December 31, 2018 1,802,667 Grants awarded 41,800 Forfeiture/Cancelled (70,000 ) Grants vested (1,361,966 ) Grants outstanding as of December 31, 2019 412,501 The following table summarizes stock grant vesting periods. Number of Unrecognized stock compensation Year Ending Shares expense December 31, 264,167 $ 142,552 2020 148,334 34,775 2021 412,501 $ 177,327 The following schedule shows stock option activity for the year ended December 31, 2019. Number of Weighted Average Remaining Weighted Average Stock options outstanding as of December 31, 2018 1,184,000 9.68 $ 1.15 Issued 736,499 9.20 $ 1.38 Exercised – – – Expired 218,332 9.12 $ 1.33 Stock options outstanding at December 31, 2019 1,702,167 9.21 $ 1.21 Stock options exercisable at December 31, 2019 703,538 8.89 $ 1.17 The following table summarizes stock option vesting periods under the two stock options plans. Number of Unrecognized stock compensation Year Ending Shares expense December 31, 540,998 $ 359,521 2020 408,964 120,015 2021 48,667 10,400 2022 998,629 $ 489,936 |
14. Shareholder's Equity
14. Shareholder's Equity | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Equity [Abstract] | ||
Shareholder's Equity | NOTE 13 – SHAREHOLDERS’ EQUITY In March 2020, an executive left the Company and returned 100,000 common shares as part of the related separation agreement. The Company retired the shares and reduced its issued and outstanding stock by 100,000 shares. In September 2020, a former executive who had the right to receive 1,000,000 shares of Common Stock per the terms of his separation agreement that was reached in September 2019, entered into an agreement with the Company to exchange the right to receive those 1,000,000 shares of Common Stock for the Company’s ownership interest in TGH (see Note 5 – Investments) and a warrant to purchase 400,000 shares of the Company’s Common Stock at $1.00 per share. The Company retired the shares and reduced its issued and outstanding stock by 1,000,000 shares. | NOTE 14 – SHAREHOLDERS’ EQUITY In 2018, an executive left the Company and returned 375,000 common shares as part of the related separation agreement. The Company retired the shares and reduced its issued and outstanding stock by 375,000 shares. |
15. Income Taxes
15. Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 15 - INCOME TAXES The Company accounts for income taxes in accordance with the asset and liability method prescribed in ASC 740, “Accounting for Income Taxes”. The Company has adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income tax returns that were considered to be uncertain. The Company determined the valuation allowances are established when management determines is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company files income federal tax returns in the United States and Canada and state and local tax return in applicable jurisdictions The Company has experienced substantial losses for both book and tax purposes since inception and has no tax provision for the years ended December 31, 2019 and 2018. The potential future recovery of any tax assets that the Company may be entitled to due to these accumulated losses is uncertain and these tax assets are fully reserved based on management’s current estimates. The Company’s estimated operating loss carryforwards and expiration dates for tax purposes are as follows: 2016 - $1,618,386 expiring in 2036 2017 - $2,182,354 expiring in 2037 2018 - $3,060,443 no expiration 2019 - $6,819,954 no expiration Realization of operating loss carryforwards to offset future operating income for tax purposes are subject to various limitations including change of ownership and current year taxable income percentage limitations. The Company has no credit carryforwards for tax purposes. The Company’s tax returns since inception are subject to examination by taxing jurisdictions in the United States and Canada. |
16. Warrants
16. Warrants | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Warrants | NOTE 14 – WARRANTS Warrants are immediately exercisable upon issuance. The following table shows warrant activity for the nine months ended September 30, 2020. Number of shares Weighted Warrants outstanding as of December 31, 2019 692,034 $ 2.88 Issued in conjunction with debt 124,481 $ 2.41 Issued in conjunction with agreement with former executive (see Note 13 – Shareholders’ Equity) 400,000 $ 1.00 Warrants outstanding as of September 30, 2020 1,216,515 $ 2.21 Warrants exercisable as of September 30, 2020 1,216,515 $ 2.21 The weighted-average life of the warrants is 2.5 years. The aggregate intrinsic value of the warrants outstanding and exercisable at September 30, 2020 is $0. | NOTE 16 – WARRANTS The following table shows warrant activity for the years ended December 31, 2019 and 2018. December 31, 2019 Number of shares Weighted Average Exercise Price Warrants outstanding as of December 31, 2018 6,000 $ 1.00 Warrants issued in connection with convertible debenture offering (see Note 10): Issued to convertible debenture holders 532,134 $ 3.00 Issued to 4Front as part of compensation 153,900 $ 2.41 Warrants outstanding as of December 31, 2019 692,034 $ 2.88 Warrants exercisable as of December 31, 2019 692,034 $ 2.88 The warrants issued to convertible debenture holders expire June 24, 2021. The warrants issued to 4Front as part of compensation expire May 31, 2021. Warrants issued to Mr. Lowe in 2018 expire March 31, 2023. The aggregate intrinsic value of the warrants outstanding and exercisable at December 31, 2019 is $0. |
17. Subsequent Events
17. Subsequent Events | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Subsequent Events [Abstract] | ||
Subsequent Events | NOTE 15 – SUBSEQUENT EVENTS Management has assessed and determined that no significant subsequent events are to be disclosed according to ASC 855. | NOTE 17 – SUBSEQUENT EVENTS Credit Agreement On February 21, 2020, we entered into a letter agreement (the “Credit Agreement”) by and among the Company, as borrower, urban-gro Canada Technologies Inc. and Impact Engineering, Inc., as guarantors, the lenders party thereto (the “Lenders”), and Bridging Finance Inc., as administrative agent for the Lenders (the “Agent”). The Credit Agreement, which is denominated in Canadian dollars (C$), is comprised of (i) a 12-month senior secured demand term loan facility in the amount of C$2.7 million ($2.0 million), which was funded in its entirety on the closing date (the “Term Loan”); and (ii) a 12-month demand revolving credit facility of up to C$5.4 million ($4.0 million), which may be drawn from time to time, subject to the terms and conditions set forth in the Credit Agreement and described further below (the “Revolving Facility,” and together with the Term Loan, “the Facilities”). The final maturity date of the Facilities will be the earlier of (i) demand, and (ii) the date that is 12 months after the closing date, with a potential extension to the date that is 24 months after the closing date (the “Maturity Date”). The Facilities will bear interest at the annual rate established and designated by the Bank of Nova Scotia as the prime rate, plus 11% per annum. Accrued interest on the outstanding principal amount of the Facilities will be due and payable monthly in arrears, on the last business day of each month, and on the Maturity Date. The Revolving Facility may be borrowed and re-borrowed on a revolving basis by us during the term of the Facilities, provided that borrowings under the Revolving Facility will be limited by a loan availability formula equal to the sum of (i) 90% of insured accounts receivable, (ii) 85% of investment grade receivables, (iii) 75% of other accounts receivable, (iv) 50% of eligible inventory, and (v) the lesser of C$4.05 million ($3.0 million) and (A) 75% of uncollected amounts on eligible signed equipment orders for equipment systems contracts and (B) 85% of uncollected amounts on eligible signed professional services order forms for design contracts. The Revolving Facility may be prepaid in part or in full without a penalty at any time during the term of the Facilities, and the Term Loan may be prepaid in full or in part without penalty subject to 60 days prior notice in each case subject to certain customary conditions. As of April 30, 2020, C$0.4 million ($0.3 million) of the Revolving Facility was available for future borrowings. The Company utilized a portion of the proceeds from the Term Loan to refinance existing indebtedness, including a $2.0 million loan with Hydrofarm. The Company terminated the Hydrofarm loan concurrently with the closing of the transactions contemplated by the Credit Agreement. Remaining proceeds from the Facilities are expected to be used (i) to pay down existing debt obligations and (ii) for general working capital purposes. The obligations of the Company under the Facilities will be secured on a first lien basis (subject to certain permitted liens as set forth in the Credit Agreement) by substantially all of the assets of the Company and certain wholly-owned subsidiaries of the Company, as well as a limited recourse personal guarantee of Bradley Nattrass, the Chief Executive Officer of the Company. The Credit Agreement also contains customary provisions, representations, warranties and events of default for facilities of this nature and affirmative and negative covenants, including without limitation, covenants relating to maintenance of collateral, reorganization and change of control transactions, creation of liens and incurrence of indebtedness. Amendment of Promissory Note and Subordination Agreement In connection with the execution of the Credit Agreement, the Company entered into an agreement to amend the promissory note (the “Promissory Note”) dated October 18, 2018, as amended on May 20, 2019, between the Company and Cloud9 Support Inc., an entity owned 100% by James Lowe, a director of the Company (the “Amending Agreement”). Pursuant to the Amending Agreement, Mr. Lowe agreed to extend the maturity date of the promissory note from December 31, 2019 to the date which is the earlier of 60 days following the date: (a) on which demand for repayment is made by the Lender under the Credit Agreement; or (b) which is the Maturity Date of the Credit Agreement. |
6. Goodwill (Sept 2020 Note)
6. Goodwill (Sept 2020 Note) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | NOTE 6 – GOODWILL The Company recorded goodwill in conjunction with the initial acquisition of Impact on March 7, 2019. The goodwill balance as of September 30, 2020 and December 31, 2019 was $902,067. Goodwill is not amortized. There is no goodwill for income tax purposes. The Company did not record any impairment charges related to goodwill for the periods ended September 30, 2020 and 2019. |
9. Debt (Sept 2020 Note)
9. Debt (Sept 2020 Note) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Debt | NOTE 9 – DEBT The Company's borrowings as of September 30, 2020 and December 31, 2019 consisted of the following: September 30, December 31, 2020 2019 Revolving Facility $ 3,276,493 $ – Term Loan, net of $315,402 unamortized debt issuance costs 1,684,598 – Total 4,961,091 – Less current debt due within one year (2,196,280 ) – Total long-term debt $ 2,764,811 $ – On February 21, 2020, we entered into a letter agreement (the “Credit Agreement”) by and among the Company, as borrower, urban-gro Canada Technologies Inc. and Impact., as guarantors, the lenders party thereto (the “Lenders”), and Bridging Finance Inc., as administrative agent for the Lenders (the “Agent”). The Credit Agreement, which is denominated in Canadian dollars (C$), is comprised of (i) a 12-month senior secured demand term loan facility in the amount of C$2.7 million ($2.0 million), which was funded in its entirety on the closing date (the “Term Loan”); and (ii) a 12-month demand revolving credit facility of up to C$5.4 million ($4.0 million), which may be drawn from time to time, subject to the terms and conditions set forth in the Credit Agreement and described further below (the “Revolving Facility,” and together with the Term Loan, the “Facilities”). The Credit Agreement is personally guaranteed by the Company’s CEO and Chairman, Brad Nattrass, and was to be in place for the original term of the Credit Agreement (1 year) plus a 1-year extension period at the discretion of the Lender as provided in the Credit Agreement. The final maturity date of the Facilities was initially stipulated in the Credit Agreement as the earlier of (i) demand, and (ii) the date that is 12 months after the closing date, with a potential extension to the date that is 24 months after the closing date (the “Initial Maturity Date”). The Facilities bore interest at the annual rate established and designated by the Bank of Nova Scotia as the prime rate, plus 11% per annum. Accrued interest on the outstanding principal amount of the Facilities is due and payable monthly in arrears, on the last business day of each month, and on the Initial Maturity Date. The Revolving Facility could initially be borrowed and re-borrowed on a revolving basis by the Company during the term of the Facilities, provided that borrowings under the Revolving Facility were limited by a loan availability formula equal to the sum of (i) 90% of insured accounts receivable, (ii) 85% of investment grade receivables, (iii) 75% of other accounts receivable, (iv) 50% of eligible inventory, and (v) the lesser of C$4.05 million ($3.0 million) and (A) 75% of uncollected amounts on eligible signed equipment orders for equipment systems contracts and (B) 85% of uncollected amounts on eligible signed professional services order forms for design contracts. The Revolving Facility may be prepaid in part or in full without a penalty at any time during the term of the Facilities, and the Term Loan may be prepaid in full or in part without penalty subject to 60 days prior notice in each case subject to certain customary conditions. On September 4, 2020, the Company executed an amendment to the Credit Agreement (the “First Amendment”) whereas the Facilities described above are now due on December 31, 2021 (the “Revised Maturity Date”). The First Amendment also increased the rate at which the Facilities will bear interest to the annual rate established and designated by the Bank of Nova Scotia as the prime rate, plus 12% per annum (14.5% as of September 30, 2020). As a result of the First Amendment, the Company is required to prepay, on or before January 31, 2021, $1,000,000 of the balance of the Term Loan and begin making monthly payments of $100,000 on the balance on the Term Loan starting on March 1, 2021. Additionally, the Company is required to make monthly payments of $50,000 on the balance under the Revolving Facility beginning October 1, 2020 and can make no more draws under the Revolving Facility. The Company incurred $1,314,868 of debt issuance costs in connection with these Facilities, of which $676,822 was non-cash in the form of Common Stock and warrant issuances. The Company estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes option pricing based on the market value of the underlying Common Stock at the valuation measurement date of $1.00, the remaining contractual terms of the warrants of 5 years, risk free interest rate of 1.14% an expected volatility of the price of the underlying Common Stock of 100%. The Company recorded the debt issuance costs as either a deferred financing asset or a direct reduction of the loan obligation based on the pro-rata value of the Revolving Facility and Term Loan, respectively, on the closing date. The debt issuance costs are amortized as interest expense over the life of the Facilities, until the Revised Maturity Date. As of September 30, 2020, there were $630,805 and $315,402 of unamortized debt issuance costs remaining related to the Revolving Facility and Term Loan, respectively. The Company recorded interest expense of $1,057,501 in the nine months ended September 30, 2020, of which $368,661 related to the amortization of debt issuance costs on the Credit Agreement. Excluding interest expense related to the amortization of convertible debentures of $796,233, the Company recorded interest expense of $374,850 in the nine months ended September 30, 2019. The Company recorded interest expense of $393,158 in the three months ended September 30, 2020, of which $164,941 related to the amortization of debt issuance costs on the Credit Agreement. Excluding interest expense related to the amortization of convertible debentures of $796,233, the Company recorded interest expense of $125,733 in the three months ended September 30, 2019. |
2. Summary of Significant Acc_2
2. Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | ||
Unaudited Condensed Consolidated Financial Statements | Unaudited Condensed Consolidated Financial Statements The Company has prepared the accompanying condensed consolidated financial statements pursuant to the rules and regulations of the SEC for condensed financial reporting. The condensed consolidated financial statements are unaudited and, in the Company’s opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of the Company’s condensed consolidated balance sheets, condensed consolidated statements of operations and comprehensive income (loss), condensed consolidated statements of shareholders’ deficit and condensed consolidated statements of cash flows for the periods presented. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. | |
Significant Accounting Policies | Significant Accounting Policies For a detailed discussion about the Company’s significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in the Company’s consolidated financial statements included in the Company’s 2019 Form 10-K. During the nine months ended September 30, 2020, there were no material changes made to the Company’s significant accounting policies. | |
Use of Estimates | Use of Estimates In preparing condensed consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the condensed consolidated financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of long-lived assets and goodwill, inventory write offs, allowance for deferred tax assets, and allowance for bad debt. | Use of Estimates In preparing consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of long-lived assets and goodwill, inventory write offs, allowance for deferred tax assets, and allowance for bad debt. |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation These consolidated financial statements are presented in United States dollars and they include the accounts of urban-gro, Inc. and its wholly-owned subsidiaries. The financial results of Impact have been included in the Company’s consolidated financial statements from the date of acquisition on March 7, 2019 and all intercompany transactions have been eliminated. | |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements From time to time, the Financial Accounting Standards Board (the “FASB”) or other standards setting bodies issue new accounting pronouncements. The FASB issues updates to new accounting pronouncements through the issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, the Company believes that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on the Company’s financial statements upon adoption. | |
Functional and reporting currency and foreign currency translation | Functional and reporting currency and foreign currency translation The functional and reporting currency of the Company and its subsidiaries is US dollars. All transactions in currencies other than US dollars are translated into US dollars on the date of the transaction. Any exchange gains and losses related to these transactions are recognized in the current period’s earnings as other income (expense). | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, notes payable and other current assets and liabilities. We value our financial assets and liabilities using fair value measurements. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows: Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated with observable market data. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs. The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities in our consolidated financial statements approximates fair value because of the short-term nature of the instruments. Investments in non-marketable equity securities are carried at cost less other-than-temporary impairments. The carrying amount of our notes payable and convertible debt at December 31, 2019 and December 31, 2018 approximates their fair values based on our incremental borrowing rates. There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the years ended December 31, 2019 and 2018. | |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid short-term cash investments with an original maturity of three months or less to be cash equivalents. As of December 31, 2019 and 2018, the Company did not maintain any cash equivalents. The Company maintains cash with financial institutions that may from time to time exceed federally-insured limits. The Company has not experienced any losses related to these balances and believes the risk to be minimal. There are no restricted or compensating cash balances as of December 31, 2019. | |
Accounts Receivable, Net | Accounts Receivable, Net Trade accounts receivables are carried at the original invoiced amounts less an allowance for doubtful accounts. As of December 31, 2019 and 2018, the balance of allowance for doubtful accounts was $18,920. The allowances for doubtful accounts are calculated based on a detailed review of certain individual customer accounts and an estimation of the overall economic conditions affecting the Company's customer base. The Company reviews a customer's credit history before extending credit to the customer. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additions to the allowance would be required. A provision is made against accounts receivable to the extent they are considered unlikely to be collected. Occasionally the Company will write off bad debt directly to the bad debt expense account when the balance is determined to be uncollectable. Bad debt expense for the years ended December 31, 2019 and 2018 was $67,633 and $106,464, respectively. | |
Inventories | Inventories Inventories, consisting entirely of finished goods, are stated at the lower of cost or net realizable value, with cost determined using the weighted average cost method. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold at the realization of change in value. Once written down, inventories are carried at this lower basis until sold or scrapped. | |
Property and Equipment | Property and Equipment Property and equipment is stated at cost less accumulated depreciation and impairment. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. No impairment charges were recorded for the years ended December 31, 2019 and 2018. The estimated useful lives for significant property and equipment categories are as follows: Computer and Technology Equipment 3 years Furniture and Equipment 5 years Leasehold Improvements Lease term Vehicles 3 years Other Equipment 3 or 5 years Software 3 years | |
Operating Lease Right of Use Assets | Operating Lease Right of Use Assets Operating lease right of use assets are stated at cost less accumulated depreciation, amortization and impairment. The Company has two operating leases with an imputed annual interest rate of 8%. The terms of the first lease are 24 months commencing on September 1, 2018 and ending on August 31, 2020. The terms of the second lease are 28 months commencing on September 1, 2019 and ending December 31, 2021. Operating lease right of use asset costs incurred in 2019 were $123,563. | |
Convertible Notes | Convertible Notes The Company accounts for its convertible notes at issuance by allocating the proceeds received from a convertible note among freestanding instruments according to ASC 470, Debt, based upon their relative fair values. The fair value of debt and common stock is determined based on the closing price of the common stock on the date of the transaction, and the fair value of warrants, if any, is determined using the Black-Scholes option-pricing model. Convertible notes are subsequently carried at amortized cost. The fair value of the warrants is recorded as additional paid-in capital, with a corresponding as a debt discount from the face amount of the convertible note. Each convertible note is analyzed for the existence of a beneficial conversion feature (“BCF”), defined as the fair value of the common stock at the commitment date for the convertible note, less the effective conversion price. Beneficial conversion features are recognized at their intrinsic value, and recorded as an increase to additional paid-in capital, with a corresponding reduction in the carrying amount of the convertible note (as a debt discount from the face amount of the convertible note). The discounts on the convertible notes, consisting of amounts ascribed to warrants and beneficial conversion features, are amortized to interest expense, using the effective interest method, over the terms of the related convertible notes. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved. | |
Intangible Assets | Intangible Assets The Company’s intangible assets, consisting of legal fees for application of patents and trademarks and license fees paid for inspection services, are recorded at cost. Patents and trademarks, once approved, will be amortized using the straight-line method over an estimated life, generally 5 years for patents and 10 to 20 years for trademarks. License fees are amortized over 10 years. Intangible assets are included in “other assets” on the balance sheets. The net balance of intangible assets for December 31, 2019 and 2018 was $86,151 and $63,755, respectively. Amortization expense totaled $1,879 and $974 for the years ended December 31, 2019 and 2018, respectively. | |
Goodwill | Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment annually as of December 31st and at any time when events or circumstances suggest impairment may have occurred. The testing for impairment consists of a comparison of the fair value of with its carrying amount. If the carrying amount of the reporting unit, including goodwill, exceeds the fair value, an impairment will be recognized equal to the difference between the carrying value of the reporting unit goodwill and the implied fair value of the goodwill. In testing goodwill for impairment, we determine the estimated fair value of our reporting units based upon a discounted future cash flow analysis. Goodwill is our only indefinite-lived intangible asset. Definite-lived intangible assets are amortized using the straight line method over the shorter of their contractual term or estimated useful lives. | |
Impairment of Long-lived Assets | Impairment of Long-lived Assets The Company evaluates potential impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. An impairment will be recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value. | |
Investments | Investments Investments without readily determinable fair values and for which the Company does not have the ability to exercise significant influence are accounted for at cost with adjustments for observable changes in prices or impairments. | |
Revenue Recognition | Revenue Recognition The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, Our service and product revenues arise from contracts with customers. Service revenues include full facility programming, engineering and design services, start-up commissioning services, facility optimization services and IPM planning and strategy services. Product revenues include an integrated suite of select cultivation equipment systems and crop management products. We enter into separate contracts for the service and product revenues we provide to our customers so to clarify our obligations under the terms of the contracts. New contracts are entered into if the services to be performed or products to be delivered need to be modified. Service revenues are satisfied when services are rendered or completed in accordance with the terms of the contract. Product revenues are satisfied when control of the products is transferred to the customer. Revenues for services and products for the year ended December 31, 2019 were $3,167,237 and 21,022,566, respectively. Revenues for services and products for the year ended December 31, 2018 were $928,063 and $19,122,713, respectively. | |
Customer Deposits | Customer Deposits The Company’s policy is to collect deposits from customers at the beginning of the contract. The customer payments received are recorded as a customer deposit liability on the balance sheet. When the contract is complete and meets all the criteria for revenue recognition, the customer is billed for the entire contract amount and the deposit is recorded against the customer’s receivable balance. In certain situations when the customer has paid the deposit and services have been performed but the customer chooses not to proceed with the contract, the Company may keep the deposit and recognize revenue. Of the outstanding customer deposit balance of $3,298,609 at December 31, 2018, $2,678,565 was recognized as revenue in the year ended December 31, 2019. At December 31, 2017, the entire customer deposit balance of $3,151,250 was recognized as revenue in the year ended December 31, 2018. | |
Cost of Revenue | Cost of Revenue The Company’s policy is to recognize cost of revenues in the same manner as, and in conjunction with, revenue recognition. The Company’s cost of revenues includes the costs directly attributable to revenue recognized and includes expenses related to the purchasing of products and providing services, fees for third-party commissions and shipping costs. Total shipping costs included in the cost of goods sold for the years ended December 31, 2019 and 2018 was $679,911 and $490,526, respectively. | |
Advertising Costs | Advertising Costs The Company expenses advertisings costs in the periods the costs are incurred. Prepayments made under contracts are included in prepaid expenses and expensed when the advertisement is run. Total advertising expense incurred for the years ended December 31, 2019 and 2018 was $159,728 and $153,878, respectively. | |
Warrants | Warrants The Company accounts for its warrants issued in accordance with the GAAP accounting guidance under ASC 480, “Distinguishing Liabilities from Equity”. The Company estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes option pricing based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term, risk-free interest rate, and expected volatility of the price of the underlying common stock. There is a moderate degree of subjectivity involved when using option pricing models to estimate the warrants and the assumptions used in the Black-Scholes option-pricing model are moderately judgmental. | |
Stock-Based Compensation | Stock-Based Compensation The Company periodically issue shares of its common stock to employees and consultants in non-capital raising transactions for fees and services. The Company accounts for stock issued to non-employees with the value of the stock compensation based upon the measurement date as determined at the grant date of the award. The Company accounts for stock grants issued and vesting to employees with the award being measured at its fair value at the date of grant and amortized ratably over the vesting period. The Company also estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from its estimates. | |
Income Taxes | Income Taxes The Company files income federal tax returns in the United States and Canada and state and local tax return in applicable jurisdictions. Provisions for current income tax liabilities, if any, would be calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income taxes reported in earnings, if any, would also include deferred income tax provisions. Deferred income tax assets and liabilities, if any, would be computed on differences between the financial statement bases of assets and liabilities at the enacted tax rates. Changes in deferred income tax assets and liabilities would be included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates would be charged or credited to income tax expense in the period of enactment. Valuation allowances would be established for certain deferred tax assets when realization is not likely. Assets and liabilities would be established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in the judgement of the Company, do not meet a more-likely-than-not threshold based on the technical merits of the positions. Valuation allowances would be established for certain deferred tax assets when realization is not likely. | |
Loss Per Share | Loss Per Share The Company computes net loss per share by dividing net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share would be computed by dividing net loss by the weighted-average of all potentially dilutive shares of common stock that were outstanding during the periods presented. The diluted earnings per share calculation is not presented as it results in an anti-dilutive calculation of net loss per share. The treasury stock method would be used to calculate diluted earnings per share for potentially dilutive stock options and share purchase warrants. This method assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants would be used to purchase common shares at the average market price for the period. | |
Reclassification | Reclassification Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. | |
Recently Adopted Accounting Pronoucements | Recently Issued Accounting Pronouncements From time to time, the Financial Accounting Standards Board (the “FASB”) or other standards setting bodies issue new accounting pronouncements. The FASB issues updates to new accounting pronouncements through the issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, the Company believes that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on the Company’s financial statements upon adoption. | Recently Adopted Accounting Pronouncements In February 2016, the FASB issued an Accounting Standards Update (“ASU”) amending the accounting for leases. The new guidance requires the recognition of lease assets and liabilities for operating leases with terms of more than 12 months, in addition to those currently recorded, on the Company’s consolidated balance sheets. Presentation of leases within the consolidated statements of operations and comprehensive loss and consolidated cash flows will be generally consistent with the prior lease accounting guidance. The ASU was effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company adopted the ASU effective January 1, 2019 under the modified retrospective method with respect to lease contracts in effect as of the adoption date. The adoption of the ASU increased our assets and liabilities by $326,095 in 2019 due to the recognition of right of use assets and lease liabilities with respect to operating leases. |
1. Organization and Acquisiti_2
1. Organization and Acquisitions, Business Plan, and Liquidity (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Acquisition of Impact Engineering | The Company has accounted for the initial acquisition of Impact as follows: Purchase Price $ 1,000,000 Allocation of Purchase Price: Cash $ 49,742 Accounts receivable, net $ 93,811 Goodwill $ 902,067 Accrued expenses $ 45,620 | The Company has initially accounted for the acquisition of Impact as follows: Purchase Price $ 1,000,000 Allocation of Purchase Price: Cash $ 49,742 Accounts receivable, net $ 93,811 Goodwill $ 902,067 Accrued expenses $ 45,620 |
2. Summary of Significant Acc_3
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Property, plant and equipment useful lives | The estimated useful lives for significant property and equipment categories are as follows: Computer and Technology Equipment 3 years Furniture and Equipment 5 years Leasehold Improvements Lease term Vehicles 3 years Other Equipment 3 or 5 years Software 3 years |
4. Prepayments and Advances (Ta
4. Prepayments and Advances (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Schedule of prepaid balances | The prepaid balances are summarized as follows: September 30, December 31, 2020 2019 Vendor prepayments $ 1,828,531 $ 1,070,788 Prepaid services and fees 268,655 187,912 Deferred financing asset (See Note 9 - Debt) 630,805 – Other assets 6,391 20,028 Prepayments and other assets $ 2,734,382 $ 1,278,728 | The prepaid balances are summarized as follows: December 31, December 31, 2019 2018 Vendor Prepayments $ 1,070,788 $ 776,478 Prepaid Services and Fees 187,912 152,204 Prepayments and Advances $ 1,258,700 $ 928,682 |
5. Property Plant and Equipme_2
5. Property Plant and Equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property, plant and equipment | Property Plant and Equipment balances are summarized as follows: December 31, December 31, 2019 2018 Computers & Technology Equip $ 87,300 $ 61,910 Furniture and Fixtures 42,518 30,162 Leasehold Improvements 164,072 143,215 Vehicles 57,414 132,875 Software 142,721 233,783 R&D Assets 3,031 84,031 Other Equipment 38,355 65,140 Accumulated depreciation (370,376 ) (309,975 ) Property plant and equipment, net $ 165,035 $ 441,141 |
6. Investments (Tables)
6. Investments (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | ||
Cost Method Investments | The components of investments are summarized as follows: September 30, 2020 December 31, Investment in Edyza $ 1,710,358 $ 1,710,358 Investment in TGH – 310,000 $ 1,710,358 $ 2,020,358 | The changes in the components of the Investments for the years ended December 31, 2019 and 2018 are summarized as follows: Year Ended December 31, 2019 Edyza TGH Total Beginning Balances as of 1/1/2019 $ 812,883 $ 448,766 $ 1,261,649 Purchase of additional shares under SPOA 897,475 – 897,475 Initial purchase of Membership interest – 367,000 367,000 Additional Membership interest purchased with first option – – – Impairment of investment – (505,766 ) (505,766 ) Legal fees – – – Ending Balances as of 12/31/2019 $ 1,710,358 $ 310,000 $ 2,020,358 Year Ended December 31, 2018 Edyza TGH Total Beginning Balances as of 1/1/2018 $ 400,000 $ – $ 400,000 Purchase of additional shares under SPOA, including $75,000 reflected in Accrued Expenses 400,000 – 400,000 Initial purchase of Membership Interest – 125,000 125,000 Additional Membership interest purchased with first option – 150,000 150,000 Additional Membership interest purchased with second option – 158,000 158,000 Legal fees 12,883 15,766 28,649 Ending Balances as of 12/31/2018 $ 812,883 $ 448,766 $ 1,261,649 |
8. Accrued Expenses (Tables)
8. Accrued Expenses (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Payables and Accruals [Abstract] | ||
Schedule of accrued expenses | Accrued expenses are summarized as follows: September 30, December 31, 2020 2019 Accrued operating expenses $ 798,752 $ 854,056 Accrued wages and related expenses 402,710 487,327 Accrued interest expense 44,635 – Accrued sales tax payable 616,999 345,458 $ 1,863,096 $ 1,686,841 | Accrued expenses are summarized as follows: December 31, December 31, 2019 2018 Accrued operating expenses $ 854,056 $ 240,941 Accrued wages and related expenses 487,327 490,961 Accrued interest expense – 10,958 Accrued sales tax payable 345,458 401,282 $ 1,686,841 $ 1,144,142 |
9. Notes Payable and Operating
9. Notes Payable and Operating Lease Liabilities (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Debt Disclosure [Abstract] | ||
Schedule of notes payable | September 30, December 31, 2020 2019 Unsecured, interest only, note payable with Chris Parkes originally due December 31, 2018. Initial interest payments due monthly at an annual rate of 20.4%. Note payable revised in December 2018 extending the maturity date to March 31, 2019. During August 2019, the maturity date was extended to March 31, 2020 and the interest rate was decreased to an annual rate of 9%. In consideration for extending the due date of the note and reducing the interest rate, the Company issued the holder 3,000 shares of Common Stock. Beginning in April 2020, the Company is making monthly principal payments in the amount of $10,000. $ 20,000 $ 80,000 Unsecured, interest only, note payable with David Parkes originally due December 31, 2018. Initial interest payments due monthly at an annual rate of 18.0%. Note payable revised in December 2018 extending the maturity date to March 31, 2019. During August 2019, the maturity date was extended to March 31, 2020 and the interest rate was decreased to an annual rate of 9%. In consideration for extending the due date of the note and reducing the interest rate, the Company issued the holder 3,000 shares of Common Stock. Beginning in April 2020, the Company is making monthly principal payments in the amount of $10,000. 40,000 100,000 Note payable with Hydrofarm Holdings Group, Inc. (“Hydrofarm”), secured by all currently existing and future assets. Interest accrues at 8.0% per year and is paid quarterly. The note matures on the earlier of: (a) 90 days’ notice from Hydrofarm; (b) acceleration of the note payable due to the Company being in default; or (c) December 2023. The note was repaid in full on February 27, 2020. – 2,000,000 Secured agreement to sell future receivables to GCF Resources, LLC, net of $30,000 in closing fees. The agreement requires 32 weekly payments of $42,190 totaling $1,350,000. The agreement matured on May 7, 2020 but is repayable prior to maturity for less than the $1,350,000 in total payments. The note was repaid in full on February 27, 2020. – 632,709 Paycheck Protection Program (“PPP”) loan entered into on April 16, 2020. Interest rate of 1.0% per annum. Payments of principal and interest are deferred until August 1, 2021 (the “Deferral Period”). The PPP loan may be forgiven in part or fully depending on the Company meeting certain PPP loan forgiveness guidelines. The Company has not yet determined if any of the PPP loan is subject to forgiveness and has therefore continued to present the entire PPP loan as an obligation on its financial statements. Any unforgiven portion of the PPP loan is payable over a two-year term, with payments deferred during the Deferral Period. The Company may prepay the unforgiven loan balance at any time without payment of any premium. 1,020,600 – Total 1,080,600 2,812,709 Less current maturities (60,00 ) (2,812,709 ) Long Term $ 1,020,600 $ – | December 31, December 31, 2019 2018 Unsecured, interest only, note payable with Chris Parkes originally due December 31, 2018. Interest payments due monthly at an annual rate of 20.4%. Note payable revised in December 2018 extending the maturity date to March 31, 2020. During August 2019, the maturity date was extended to March 31, 2020 and the interest rate was decreased to an annual rate of 9%. In consideration for extending the due date of the Note and reducing the interest rate, the Company issued the Holder 3,000 shares of Common Stock. Beginning of March 31, 2020, the Company has made monthly payments in the amount of $10,000. $ 80,000 $ 80,000 Unsecured, interest only, note payable with David Parkes originally due December 31, 2018. Interest payments due monthly at an annual rate of 18.0%. Note payable revised in December 2018 extending the maturity date to March 31, 2020. During August 2019, the maturity date was extended to March 31, 2020 and the interest rate was decreased to an annual rate of 9%. In consideration for extending the due date of the Note and reducing the interest rate, the Company issued the Holder 3,000 shares of Common Stock. Beginning of March 31, 2020, the Company has made monthly payments in the amount of $10,000 100,000 100,000 Unsecured, interest only, note payable with Michael S. Bank originally due April 30, 2019. Interest at 19.8% per year is paid twice per month. The note contains a demand re-payment provision that can be executed by Mr. Bank at any time by providing a one-time notice. The Company may re-pay any part or the entire principal sum at any time with penalty and abatement of interest expense from date of early payment. The note includes six thousand warrants, each exercisable to purchase one share of the Company's Common Stock at a price of $1.00 per share. In March 2019, the Company repaid $35,000 of the principal and extended the maturity date to April 30, 2019. The note was repaid in full on April 30, 2019. – 298,869 Note payable with Hydrofarm Holdings Group, Inc. (“Hydrofarm”), secured by all currently existing and future assets. Interest accrues at 8.0% per year and is paid quarterly. The note matures on the earlier of: (a) 90 days’ notice from Hydrofarm; (b) acceleration of the note payable due to the Company being in default; or (c) December 2023. 2,000,000 2,000,000 Secured agreement to sell future receivables to GCF Resources, LLC, net of $30,000 in closing fees. The agreement requires 32 weekly payments of $42,190 totaling $1,350,000. The agreement matures on May 7, 2020 but is repayable prior to maturity for less than the $1,350,000 in total payments. 632,709 – Total 2,812,709 2,478,869 Less current maturities (2,812,709 ) (2,478,869 ) Long term $ – $ – |
Schedule of debt | The Company's borrowings as of September 30, 2020 and December 31, 2019 consisted of the following: September 30, December 31, 2020 2019 Revolving Facility $ 3,276,493 $ – Term Loan, net of $315,402 unamortized debt issuance costs 1,684,598 – Total 4,961,091 – Less current debt due within one year (2,196,280 ) – Total long-term debt $ 2,764,811 $ – |
11. Operating Lease Liabiliti_2
11. Operating Lease Liabilities & Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of operating lease liability | The following is a summary of operating lease liabilities: December 31, December 31, Operating lease liabilities related to right of use assets. $ 222,236 $ – Less current portion (123,395 ) – Long term $ 98,841 $ – |
Future minimum operating lease payments | Year ending Total Minimum December 31, Lease Payments 2020 177,688 2021 91,688 |
13. Stock-Based Compensation (T
13. Stock-Based Compensation (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | ||
Schedule of stock grant activity | The following table shows stock grant activity for the nine months ended September 30, 2020: Grants outstanding as of December 31, 2019 412,501 Grants awarded 794,166 Forfeiture/Cancelled (200,000 ) Grants vested (253,333 ) Grants outstanding as of September 30, 2020 753,334 | The following schedule shows stock grant activity for the year ended December 31, 2019 Grants outstanding as of December 31, 2018 1,802,667 Grants awarded 41,800 Forfeiture/Cancelled (70,000 ) Grants vested (1,361,966 ) Grants outstanding as of December 31, 2019 412,501 |
Schedule of stock grant vesting periods | The following table summarizes stock grant vesting periods. Number of Unrecognized stock compensation Year Ending Shares expense December 31, 264,167 $ 142,552 2020 148,334 34,775 2021 412,501 $ 177,327 | |
Schedule of stock option activity | The following table shows stock option activity for the nine months ended September 30, 2020: Number of Weighted Weighted Stock options outstanding as of December 31, 2019 1,702,167 9.21 $ 1.21 Issued 2,425,000 9.49 $ 1.00 Exercised – – – Expired (297,501 ) 9.19 $ 1.21 Stock options outstanding at September 30, 2020 3,829,666 9.35 $ 1.05 Stock options exercisable at September 30, 2020 1,437,578 8.88 $ 1.12 | The following schedule shows stock option activity for the year ended December 31, 2019. Number of Weighted Average Remaining Weighted Average Stock options outstanding as of December 31, 2018 1,184,000 9.68 $ 1.15 Issued 736,499 9.20 $ 1.38 Exercised – – – Expired 218,332 9.12 $ 1.33 Stock options outstanding at December 31, 2019 1,702,167 9.21 $ 1.21 Stock options exercisable at December 31, 2019 703,538 8.89 $ 1.17 |
Schedule of stock option vesting periods | The following table summarizes stock option vesting periods under the two stock options plans. Number of Unrecognized stock compensation Year Ending Shares expense December 31, 540,998 $ 359,521 2020 408,964 120,015 2021 48,667 10,400 2022 998,629 $ 489,936 |
16. Derivative Financial Instru
16. Derivative Financial Instruments (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Schedule of warrant activity | Warrants are immediately exercisable upon issuance. The following table shows warrant activity for the nine months ended September 30, 2020. Number of shares Weighted Warrants outstanding as of December 31, 2019 692,034 $ 2.88 Issued in conjunction with debt 124,481 $ 2.41 Issued in conjunction with agreement with former executive (see Note 13 – Shareholders’ Equity) 400,000 $ 1.00 Warrants outstanding as of September 30, 2020 1,216,515 $ 2.21 Warrants exercisable as of September 30, 2020 1,216,515 $ 2.21 | The following table shows warrant activity for the years ended December 31, 2019 and 2018. December 31, December 31, 2019 2018 Number of shares Weighted Average Exercise Price Number of shares Weighted Average Exercise Price Warrants outstanding as of December 31, 2018 6,000 $ 1.00 – – Warrants issued in connection with convertible debenture offering (see Note 10): Issued to convertible debenture holders 532,134 $ 3.00 Issued to 4Front as part of compensation 153,900 $ 2.41 Warrants exercised – – Warrants expired Warrants outstanding as of December 31, 2019 692,034 $ 2.88 6,000 1.00 Warrants exercisable as of December 31, 2019 692,034 $ 2.88 6,000 1.00 |
1. Organization and Acquisiti_3
1. Organization and Acquisitions, Business Plan, and Liquidity (Details) - USD ($) | 2 Months Ended | |||
Mar. 07, 2019 | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Allocation of Purchase Price | ||||
Goodwill | $ 902,067 | $ 902,067 | $ 0 | |
Impact Engineering [Member] | ||||
Purchase price | $ 1,000,000 | |||
Allocation of Purchase Price | ||||
Cash | 49,742 | |||
Accounts receivable, net | 93,811 | |||
Goodwill | 902,067 | |||
Accrued expenses | $ 45,620 |
1. Organization and Acquisiti_4
1. Organization and Acquisitions, Business Plan, and Liquidity (Details Narrative) - USD ($) | 2 Months Ended | |||||||
Mar. 07, 2019 | Sep. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Accumulated deficit | $ (20,850,508) | $ (16,890,626) | $ (8,540,053) | |||||
Working capital | (4,833,132) | (7,318,980) | ||||||
Stockholders' Equity | $ (6,703,947) | $ (6,604,564) | (5,008,334) | $ (5,265,472) | $ (2,985,163) | $ (3,826,551) | $ (1,361,028) | |
Cash and cash equivalents | $ 1,178,852 | |||||||
Impact Engineering [Member] | ||||||||
Stock issued for acquisition, shares | 500,000 |
2. Summary of Significant Acc_4
2. Summary of Significant Accounting Policies (Details - Property and Equipment) | 12 Months Ended |
Dec. 31, 2019 | |
Computer and Technology Equipment [Member] | |
Useful life | 3 years |
Furniture and Equipment [Member] | |
Useful life | 5 years |
Leasehold Improvements [Member] | |
Useful life | Lease term |
Vehicles [Member] | |
Useful life | 3 years |
Other Equipment [Member] | |
Useful life | 3 or 5 years |
Software [Member] | |
Useful life | 3 years |
2. Summary of Significant Acc_5
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Cash equivalents | $ 0 | $ 0 | ||||
Allowance for doubtful accounts | 18,920 | 18,920 | ||||
Bad debt expense | $ 43,849 | $ 12,252 | 67,633 | 106,464 | ||
Impairment charges | $ 0 | 0 | ||||
Operating lease discount rate | 8.00% | |||||
Operating lease cost | $ 123,563 | |||||
Intangible assets, net | 86,151 | 63,755 | ||||
Amortization expense | 1,879 | 974 | ||||
Shipping expense | 17,563,594 | 13,892,025 | ||||
Advertising | 159,728 | 153,878 | ||||
Customer deposits | $ 4,087,592 | 4,087,592 | 2,915,406 | 3,298,609 | ||
Revenue recognized in current year accrued from prior year | 2,678,565 | 3,151,250 | ||||
Revenues | 8,359,422 | $ 5,583,064 | 16,625,688 | 17,056,737 | 24,189,803 | 20,050,776 |
Products [Member] | ||||||
Revenues | 7,910,540 | 4,633,974 | 15,135,472 | 14,469,616 | 3,167,237 | 21,022,566 |
Services [Member] | ||||||
Revenues | $ 448,882 | $ 949,090 | $ 1,490,216 | $ 2,587,121 | $ 928,063 | 19,122,713 |
First Lease [Member] | ||||||
Operating lease discount rate | 8.00% | |||||
Operating lease term | 24 months | |||||
Second Lease [Member] | ||||||
Operating lease discount rate | 8.00% | |||||
Operating lease term | 28 months | |||||
Shipping and Handling [Member] | ||||||
Shipping expense | $ 679,911 | $ 490,526 |
3. Related Party Transactions (
3. Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Related party receivables | $ 9,772 | $ 9,772 | $ 49,658 | $ 122,356 | ||
Related party payables | 0 | 0 | 24,972 | 18,802 | ||
Proceeds from related party | 0 | 1,000,000 | ||||
Bravo and Enviro-Glo [Member] | ||||||
Related party purchases | 45,129 | 276,443 | ||||
Related party receivables | 0 | 43,120 | ||||
Related party payables | 8,570 | 5,562 | ||||
Cloud 9 [Member] | ||||||
Related party receivables | 9,772 | 9,772 | 49,659 | 79,235 | ||
Related party payables | 0 | 0 | 16,402 | 13,240 | ||
Related party cost of services | 0 | $ 24,368 | 0 | $ 75,617 | 97,329 | 84,746 |
Related party sales | $ 112,405 | $ 103,088 | $ 359,562 | $ 229,688 | $ 392,963 | 273,760 |
James Lowe [Member] | ||||||
Proceeds from related party | $ 1,000,000 | |||||
Debt maturity date | Dec. 31, 2019 | |||||
Debt stated interest | 9.00% | |||||
Options granted | 30,000 | |||||
Stock Options Issued for loan term revisions, shares | 10,000 |
4. Prepayments and Advances (De
4. Prepayments and Advances (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Prepayments and advances | $ 2,734,382 | $ 1,258,700 | $ 928,682 |
Vendor Prepayments [Member] | |||
Prepayments and advances | 1,828,531 | 1,070,788 | 776,478 |
Prepaid Services and Fees [Member] | |||
Prepayments and advances | $ 268,655 | $ 187,912 | $ 152,204 |
5. Property Plant and Equipme_3
5. Property Plant and Equipment, net (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Accumulated depreciation | $ (370,376) | $ (309,975) | |
Property and equipment, net | $ 152,577 | 165,035 | 441,141 |
Computer and Technology Equipment [Member] | |||
Property and equipment, gross | 87,300 | 61,910 | |
Furniture and Fixtures [Member] | |||
Property and equipment, gross | 42,518 | 30,162 | |
Leasehold Improvements [Member] | |||
Property and equipment, gross | 164,072 | 143,215 | |
Vehicles [Member] | |||
Property and equipment, gross | 57,414 | 132,875 | |
Software [Member] | |||
Property and equipment, gross | 142,721 | 233,783 | |
Research and Development Assets [Member] | |||
Property and equipment, gross | 3,031 | 84,031 | |
Other Equipment [Member] | |||
Property and equipment, gross | $ 38,355 | $ 65,140 |
5. Property Plant and Equipme_4
5. Property Plant and Equipment, net (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 264,597 | $ 153,162 |
6. Investments (Details)
6. Investments (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Beginning Balances | $ 2,020,358 | $ 1,261,649 | $ 1,261,649 | $ 400,000 | ||
Purchase of investments | 0 | 572,250 | 1,085,975 | 861,649 | ||
Impairment of investment | $ 0 | $ 506,000 | 310,000 | 506,000 | 505,766 | 0 |
Legal fees | 0 | 28,649 | ||||
Ending Balances | 1,710,358 | 1,710,358 | 2,020,358 | 1,261,649 | ||
Edyza [Member] | ||||||
Beginning Balances | 1,710,358 | 812,883 | 812,883 | 400,000 | ||
Impairment of investment | 0 | |||||
Legal fees | 0 | 12,883 | ||||
Ending Balances | $ 1,710,358 | 1,710,358 | 1,710,358 | 812,883 | ||
Edyza [Member] | Stock Purchase and Option Agreement [Member] | ||||||
Purchase of investments | 897,475 | 400,000 | ||||
Total Grow Holdings Cost [Member] | ||||||
Beginning Balances | $ 310,000 | $ 448,766 | 448,766 | 0 | ||
Impairment of investment | (505,766) | |||||
Legal fees | 0 | 15,766 | ||||
Ending Balances | 310,000 | 448,766 | ||||
Total Grow Holdings Cost [Member] | Initial Purchase of Membership Interest [Member] | ||||||
Purchase of investments | $ 367,000 | 125,000 | ||||
Total Grow Holdings Cost [Member] | Additional Membership Interest [Member] | ||||||
Purchase of investments | 150,000 | |||||
Total Grow Holdings Cost [Member] | Additional Membership Interest with Second Option [Member] | ||||||
Purchase of investments | $ 158,000 |
6. Investment (Details Narrativ
6. Investment (Details Narrative) - USD ($) | 3 Months Ended | 8 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2020 | Sep. 30, 2019 | Aug. 31, 2018 | Aug. 31, 2017 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Purchase of investment | $ 0 | $ 572,250 | $ 1,085,975 | $ 861,649 | ||||
Accrued expenses | $ 1,863,096 | 1,863,096 | 1,686,841 | 1,144,142 | ||||
Impairment of investment | $ 0 | $ 506,000 | $ 310,000 | $ 506,000 | $ 505,766 | 0 | ||
Edyza Sensors [Member] | ||||||||
Stock received for acquisition, shares | 827,018 | |||||||
Purchase of investment | $ 400,000 | $ 897,475 | 325,000 | |||||
Accrued expenses | 0 | $ 75,000 | ||||||
Edyza Sensors [Member] | Stock Purchase and Option Agreement [Member] | ||||||||
Stock received for acquisition, shares | 442,685 | 442,685 | ||||||
Stock received for acquisition, value | $ 400,000 | $ 400,000 | ||||||
Total Grow Controls [Member] | ||||||||
Impairment of investment | $ 505,766 |
7. Other Assets (Details Narrat
7. Other Assets (Details Narrative) | 12 Months Ended | |
Dec. 31, 2019USD ($)Integer | Dec. 31, 2018USD ($)Integer | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Intangible assets | $ 86,151 | $ 63,755 |
Amortization expense | $ 1,879 | $ 974 |
Number of patents | Integer | 2 | 0 |
8. Accrued Expenses (Details)
8. Accrued Expenses (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Accrued expenses | $ 1,863,096 | $ 1,686,841 | $ 1,144,142 |
Accrued Operating Expenses [Member] | |||
Accrued expenses | 798,752 | 854,056 | 240,941 |
Accrued Wages and Related Expenses [Member] | |||
Accrued expenses | 402,710 | 487,327 | 490,961 |
Accrued Interest [Member] | |||
Accrued expenses | 44,635 | 0 | 10,958 |
Accrued Sales Tax Payable [Member] | |||
Accrued expenses | $ 616,999 | $ 345,458 | $ 401,282 |
9. Notes Payable (Details)
9. Notes Payable (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Notes payable | $ 1,080,600 | $ 2,812,709 | $ 2,478,869 |
Notes payable, current maturities | 60,000 | (2,812,709) | (2,478,869) |
Notes payable, long term | 1,020,600 | 0 | 0 |
Note Payable 1 [Member] | |||
Notes payable | 20,000 | 80,000 | 80,000 |
Note Payable 2 [Member] | |||
Notes payable | 40,000 | 100,000 | 100,000 |
Note Payable 3 [Member] | |||
Notes payable | 0 | 0 | 298,869 |
Note Payable 5 [Member] | |||
Notes payable | $ 1,020,600 | 2,000,000 | 2,000,000 |
Note Payable 6 [Member] | |||
Notes payable | $ 632,709 | $ 0 |
9. Notes Payable (Details Narra
9. Notes Payable (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Interest expense | $ 0 | $ 796,233 | $ 0 | $ 796,233 | $ 596,075 | $ 119,961 |
Note Payable 1 [Member] | ||||||
Debt interest rate | 9.00% | 9.00% | 9.00% | |||
Debt maturity date | Mar. 31, 2020 | Mar. 31, 2020 | ||||
Stock issued in consideration for extending due date of note, shares | 3,000 | 3,000 | ||||
Periodic payment frequency | monthly | monthly | ||||
Periodic payments | $ 10,000 | $ 10,000 | ||||
Note Payable 2 [Member] | ||||||
Debt interest rate | 9.00% | 9.00% | 9.00% | |||
Debt maturity date | Mar. 31, 2020 | Mar. 31, 2020 | ||||
Stock issued in consideration for extending due date of note, shares | 3,000 | 3,000 | ||||
Periodic payment frequency | monthly | monthly | ||||
Periodic payments | $ 10,000 | $ 10,000 | ||||
Note Payable 3 [Member] | ||||||
Debt interest rate | 8.00% | 8.00% | 19.80% | |||
Debt maturity date | Apr. 30, 2019 | |||||
Note Payable 5 [Member] | ||||||
Debt interest rate | 1.00% | 1.00% | 8.00% | |||
Debt maturity date | Dec. 31, 2023 | |||||
Note Payable 6 [Member] | ||||||
Debt maturity date | May 7, 2020 | |||||
Stock issued in consideration for extending due date of note, shares | 1,350,000 | |||||
Periodic payments | $ 42,190 |
10. Unit Offering (Details Narr
10. Unit Offering (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Debt Disclosure [Abstract] | ||||
Debt converted, amount converted | $ 2,565,000 | |||
Debt converted, interest converted | $ 92,037 | |||
Debt converted, shares issued | 1,102,513 | |||
Proceeds from convertible debt | $ 0 | $ 2,565,000 | $ 2,565,000 | $ 0 |
11. Operating Lease Liabiliti_3
11. Operating Lease Liabilities & Commitments and Contingencies (Details - Lease) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Commitments and Contingencies Disclosure [Abstract] | |||
Operating lease liability | $ 222,236 | $ 0 | |
Operating lease liability - current | $ (80,339) | (123,395) | 0 |
Operating lease liability - noncurrent | $ 49,347 | $ 98,841 | $ 0 |
11. Operating Lease Liabiliti_4
11. Operating Lease Liabilities & Commitments and Contingencies (Details - Future minimum operating lease payments) | Dec. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum future lease payment 2020 | $ 177,688 |
Minimum future lease payment 2021 | $ 91,688 |
11. Operating Lease Liabiliti_5
11. Operating Lease Liabilities & Commitments and Contingencies (Details Narrative) | 12 Months Ended |
Dec. 31, 2019 | |
Operating lease discount rate | 8.00% |
First Lease [Member] | |
Lease commencement date | Sep. 1, 2018 |
Lease expiration date | Aug. 31, 2020 |
Operating lease discount rate | 8.00% |
Operating lease term | 24 months |
Second Lease [Member] | |
Lease commencement date | Sep. 1, 2019 |
Lease expiration date | Dec. 31, 2021 |
Operating lease discount rate | 8.00% |
Operating lease term | 28 months |
12. Risks and Uncertainties (De
12. Risks and Uncertainties (Details Narrative) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Product Concentration Risk [Member] | One Vendor [Member] | ||||||
Concentration risk percentage | 48.00% | 20.00% | 27.00% | 15.00% | 24.00% | 18.00% |
Product Concentration Risk [Member] | Second Vendor [Member] | ||||||
Concentration risk percentage | 11.00% | |||||
Product Concentration Risk [Member] | Bravo Lighting [Member] | ||||||
Concentration risk percentage | 0.20% | 2.00% | ||||
Product Concentration Risk [Member] | Cloud 9 [Member] | ||||||
Concentration risk percentage | 0.40% | 1.00% | ||||
Automated Fertigation Controls [Member] | Accounts Payable [Member] | ||||||
Concentration risk percentage | 3.00% | 46.00% | ||||
One Customer [Member] | Sales Revenue Net [Member] | ||||||
Concentration risk percentage | 51.00% | 17.00% | 26.00% | 15.00% | 21.00% | 14.00% |
One Customer [Member] | Accounts Receivable [Member] | ||||||
Concentration risk percentage | 26.00% | 15.00% | 19.00% | |||
Another Customer [Member] | Accounts Receivable [Member] | ||||||
Concentration risk percentage | 11.00% | 13.00% |
13. Stock Compensation (Details
13. Stock Compensation (Details - Grant activity) - Common Stock Grants [Member] - shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Common stock grants, beginning balance | 412,501 | 1,802,667 |
Common stock grants, awards | 794,166 | 41,800 |
Common stock grants, forfeiture/cancelled | (200,000) | (70,000) |
Common stock grants, vested | (253,333) | (1,361,966) |
Common stock grants, ending balance | 753,334 | 412,501 |
13. Stock Compensation (Detai_2
13. Stock Compensation (Details - Grant vesting periods) - Common Stock Grants [Member] - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Sep. 30, 2020 | Dec. 31, 2018 | |
Common stock grants outstanding | 412,501 | 753,334 | 1,802,667 |
Unrecognized stock compensation expense | $ 177,327 | $ 393,215 | |
Grant 1 [Member] | |||
Common stock grants outstanding | 264,167 | ||
Unrecognized stock compensation expense | $ 142,552 | ||
Vesting period | 1 year | ||
Grant 2 [Member] | |||
Common stock grants outstanding | 148,334 | ||
Unrecognized stock compensation expense | $ 34,775 | ||
Vesting period | 2 years |
13. Stock Compensation (Detai_3
13. Stock Compensation (Details - Option activity) - Options [Member] - $ / shares | 9 Months Ended | 12 Months Ended | 24 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | |
Stock options outstanding, beginning balance | 1,702,167 | 1,184,000 | ||
Stock options issued | 2,425,000 | 736,499 | 1,259,000 | 1,995,499 |
Stock options exercised | 0 | |||
Stock options expired | (297,501) | (218,332) | ||
Stock options outstanding, ending balance | 3,829,666 | 1,702,167 | 1,184,000 | 1,702,167 |
Stock options exercisable | 1,437,578 | 703,538 | 703,538 | |
Weighted average remaining life | 9 years 4 months 24 days | 9 years 8 months 5 days | ||
Weighted average remaining life, issued | 9 years 5 months 27 days | 9 years 2 months 12 days | ||
Weighted average remaining life, expired | 9 years 2 months 8 days | 9 years 1 month 13 days | ||
Weighted average remaining life, outstanding | 9 years 4 months 6 days | 9 years 2 months 16 days | ||
Weighted average remaining life, exercisable | 8 years 10 months 21 days | |||
Weighted average exercise price, outstanding | $ 1.21 | $ 1.15 | ||
Weighted average exercise price, issued | 1 | 1.38 | ||
Weighted average exercise price, exercised | ||||
Weighted average exercise price, expired | 1.21 | 1.33 | ||
Weighted average exercise price, outstanding | 1.05 | 1.21 | $ 1.15 | $ 1.21 |
Weighted average exercise price, exercisable | $ 1.12 | $ 1.17 | $ 1.17 |
13. Stock Compensation (Detai_4
13. Stock Compensation (Details - Options vesting schedule) - Options [Member] - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Stock options outstanding | 3,829,666 | 1,702,167 | 1,184,000 |
Unrecognized stock compensation expense | $ 489,936 | ||
Vesting period | 9 years 4 months 24 days | 9 years 8 months 5 days | |
Options 1 [Member] | |||
Stock options outstanding | 540,998 | ||
Unrecognized stock compensation expense | $ 359,521 | ||
Vesting period | 1 year | ||
Options 2 [Member] | |||
Stock options outstanding | 408,964 | ||
Unrecognized stock compensation expense | $ 120,015 | ||
Vesting period | 2 years | ||
Options 3 [Member] | |||
Stock options outstanding | 48,667 | ||
Unrecognized stock compensation expense | $ 10,400 | ||
Vesting period | 3 years |
13. Stock Compensation (Detai_5
13. Stock Compensation (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 24 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | |
Stock based compensation expense | $ 399,258 | $ 509,219 | $ 1,391,807 | $ 1,606,355 | $ 1,830,426 | $ 1,245,826 | |
Common Stock Grants [Member] | |||||||
Stock grants vested | 253,333 | 1,361,966 | |||||
Stock reserved for issuance | 3,500,000 | 3,500,000 | |||||
Options [Member] | |||||||
Options granted | 2,425,000 | 736,499 | 1,259,000 | 1,995,499 | |||
New Equity Incentive Plan [Member] | |||||||
Stock authorized for issuance | 3,500,000 | 3,500,000 | 3,500,000 | 3,500,000 | |||
Stock Option Plan [Member] | |||||||
Stock authorized for issuance | 3,500,000 | 3,500,000 |
14. Shareholder's Equity (Detai
14. Shareholder's Equity (Details Narrative) | 12 Months Ended |
Dec. 31, 2018shares | |
Equity [Abstract] | |
Stock returned | 375,000 |
15. Income Taxes (Details Narra
15. Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Tax credit carryforwards | $ 0 |
2016 [Member] | |
NOL carryforward with expiration | $ 1,618,386 |
Operating loss carryforward expiration date | Dec. 31, 2036 |
2017 [Member] | |
NOL carryforward with expiration | $ 2,182,354 |
Operating loss carryforward expiration date | Dec. 31, 2037 |
2018 [Member] | |
NOL carryforward without expiration | $ 3,060,443 |
2019 [Member] | |
NOL carryforward without expiration | $ 6,819,954 |
16. Derivative Financial Inst_2
16. Derivative Financial Instruments (Details) - Warrants [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Warrants outstanding, beginning balance | 692,034 | 6,000 |
Warrants issued | 124,481 | |
Warrants outstanding, ending balance | 1,216,515 | 692,034 |
Warrants exercisable, end of period | 1,216,515 | 692,034 |
Weighted average exercise price, beginning | $ 2.88 | $ 1 |
Weighted average exercise price | 2.41 | |
Weighted average exercise price, ending | 2.21 | 2.88 |
Weighted average exercise price, exercisable | $ 2.21 | $ 2.88 |
Convertible Debenture Holders [Member] | ||
Warrants issued | 532,134 | |
Weighted average exercise price | $ 3 | |
4Front Compensation [Member] | ||
Warrants issued | 153,900 | |
Weighted average exercise price | $ 2.41 |
16. Derivative Financial Inst_3
16. Derivative Financial Instruments (Details Narrative) - Warrants [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Sep. 30, 2020 | |
Warrants expire date | Jun. 30, 2021 | |
Aggregate intrinsic value of warrants outstanding | $ 0 | $ 0 |
Aggregate intrinsic value of warrants exercisable | $ 0 | $ 0 |
3. Related Party Transactions_2
3. Related Party Transactions (Sept 2020 Note) (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Related party receivables | $ 9,772 | $ 9,772 | $ 49,658 | $ 122,356 | ||
Related party payables | 0 | 0 | 24,972 | 18,802 | ||
Proceeds from related party | 0 | 1,000,000 | ||||
Bravo and Enviro-Glo [Member] | ||||||
Related party purchases | 0 | $ 7,442 | 0 | $ 43,912 | ||
Related party receivables | 0 | 0 | 0 | |||
Related party payables | 0 | 0 | 8,570 | |||
Cloud 9 [Member] | ||||||
Related party receivables | 9,772 | 9,772 | 49,659 | 79,235 | ||
Related party payables | 0 | 0 | 16,402 | 13,240 | ||
Related party cost of services | 0 | 24,368 | 0 | 75,617 | 97,329 | 84,746 |
Related party sales | $ 112,405 | $ 103,088 | $ 359,562 | $ 229,688 | $ 392,963 | 273,760 |
James Lowe [Member] | ||||||
Proceeds from related party | $ 1,000,000 | |||||
Debt maturity date | Dec. 31, 2019 | |||||
Debt stated interest | 9.00% | |||||
Options granted | 30,000 | |||||
Stock Options Issued for loan term revisions, shares | 10,000 |
4. Prepayments And Other Assets
4. Prepayments And Other Assets (Sept 2020 Note) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Prepayments And Other Assets | $ 2,734,382 | $ 1,258,700 | $ 928,682 |
Vendor Prepayments [Member] | |||
Prepayments And Other Assets | 1,828,531 | 1,070,788 | 776,478 |
Prepaid Services and Fees [Member] | |||
Prepayments And Other Assets | 268,655 | 187,912 | $ 152,204 |
Deferred Financing Asset [Member] | |||
Prepayments And Other Assets | 630,805 | 0 | |
Other Assets [Member] | |||
Prepayments And Other Assets | $ 6,391 | $ 20,028 |
5. Investments (Sept 2020 Note)
5. Investments (Sept 2020 Note) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Investments | $ 1,710,358 | $ 2,020,358 | $ 1,261,649 | $ 400,000 |
Edyza [Member] | ||||
Investments | 1,710,358 | 1,710,358 | $ 812,883 | $ 400,000 |
Total Grow [Member] | ||||
Investments | $ 0 | $ 310,000 |
5. Investments (Sept 2020 Not_2
5. Investments (Sept 2020 Note) (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Sep. 24, 2020 | Jan. 24, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Attorney's fees | $ 0 | $ 28,649 | ||
Mr Pullar [Member] | ||||
Number of shares issued | 1,000,000 | |||
Stock issued per share | $ 0.001 | |||
Fully vested warrant | $ 400,000 | |||
Exercise price | $ 1 | |||
TGH [Member] | ||||
Total consideration | $ 370,000 | |||
Attorney's fees | $ 25,000 |
6. Goodwill (Sept 2020 Note) (D
6. Goodwill (Sept 2020 Note) (Details Narrative) - USD ($) | 9 Months Ended | ||||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Mar. 07, 2019 | Dec. 31, 2018 | |
Goodwill | $ 902,067 | $ 902,067 | $ 0 | ||
Impact Engineering [Member] | |||||
Goodwill | $ 902,067 | ||||
Goodwill impairment | $ 0 | $ 0 |
7. Accrued Expenses (Sept 2020
7. Accrued Expenses (Sept 2020 Note) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Accrued expenses | $ 1,863,096 | $ 1,686,841 | $ 1,144,142 |
Accrued Operating Expenses [Member] | |||
Accrued expenses | 798,752 | 854,056 | 240,941 |
Accrued Wages and Related Expenses [Member] | |||
Accrued expenses | 402,710 | 487,327 | 490,961 |
Accrued Interest [Member] | |||
Accrued expenses | 44,635 | 0 | 10,958 |
Accrued Sales Tax Payable [Member] | |||
Accrued expenses | $ 616,999 | $ 345,458 | $ 401,282 |
8. Notes Payable (Sept 2020 Not
8. Notes Payable (Sept 2020 Note) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Notes payable | $ 1,080,600 | $ 2,812,709 | $ 2,478,869 |
Notes payable, current maturities | (60,000) | 2,812,709 | 2,478,869 |
Notes payable, long term | 1,020,600 | 0 | 0 |
Note Payable 1 [Member] | |||
Notes payable | 20,000 | 80,000 | 80,000 |
Note Payable 2 [Member] | |||
Notes payable | 40,000 | 100,000 | 100,000 |
Note Payable 3 [Member] | |||
Notes payable | 0 | 0 | 298,869 |
Note Payable 4 [Member] | |||
Notes payable | 0 | 632,709 | |
Note Payable 5 [Member] | |||
Notes payable | $ 1,020,600 | $ 2,000,000 | $ 2,000,000 |
8. Notes Payable (Sept 2020 N_2
8. Notes Payable (Sept 2020 Note) (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Repayment of note payable | $ 2,743,428 | $ 227,749 | $ 629,772 | $ 0 |
Note Payable 1 [Member] | ||||
Debt interest rate | 9.00% | 9.00% | ||
Debt maturity date | Mar. 31, 2020 | Mar. 31, 2020 | ||
Stock issued in consideration for extending due date of note, shares | 3,000 | 3,000 | ||
Periodic payment frequency | monthly | monthly | ||
Periodic payments | $ 10,000 | $ 10,000 | ||
Note Payable 2 [Member] | ||||
Debt interest rate | 9.00% | 9.00% | ||
Debt maturity date | Mar. 31, 2020 | Mar. 31, 2020 | ||
Stock issued in consideration for extending due date of note, shares | 3,000 | 3,000 | ||
Periodic payment frequency | monthly | monthly | ||
Periodic payments | $ 10,000 | $ 10,000 | ||
Note Payable 3 [Member] | ||||
Debt interest rate | 8.00% | 19.80% | ||
Debt maturity date | Apr. 30, 2019 | |||
Repayment of note payable | $ 2,000,000 | |||
Note Payable 4 [Member] | ||||
Repayment of note payable | $ 632,709 | |||
Note Payable 5 [Member] | ||||
Debt interest rate | 1.00% | 8.00% | ||
Debt maturity date | Dec. 31, 2023 |
9. Debt (Sept 2020 Note) (Detai
9. Debt (Sept 2020 Note) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Total debt | $ 4,961,091 | $ 0 |
Less: current debt due within one yar | (2,196,280) | 0 |
Total long-term debt | 2,764,811 | 0 |
Revolving Facility [Member] | ||
Total debt | 3,276,493 | 0 |
Term Loan [Member] | ||
Total debt | $ 1,684,598 | $ 0 |
9. Debt (Sept 2020 Note) (Det_2
9. Debt (Sept 2020 Note) (Details Narrative) - USD ($) | Sep. 04, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Feb. 21, 2020 |
Interest expense | $ 0 | $ 796,233 | $ 0 | $ 796,233 | $ 596,075 | $ 119,961 | ||
Revolving Facility [Member] | ||||||||
Credit line maximum amount | $ 2,000,000 | |||||||
Unamortized debt issuance costs | 630,805 | 630,805 | ||||||
Revolving Facility [Member] | Canada, Dollars | ||||||||
Credit line maximum amount | 2,700,000 | |||||||
Term Loan [Member] | ||||||||
Credit line maximum amount | 4,000,000 | |||||||
Unamortized debt issuance costs | 315,402 | $ 315,402 | ||||||
Term Loan [Member] | Canada, Dollars | ||||||||
Credit line maximum amount | 5,400,000 | |||||||
Credit Agreement [Member] | ||||||||
Credit line interest rate | Bank of Nova Scotia as the prime rate, plus 11% per annum | |||||||
Debt issuance costs | 1,314,868 | |||||||
Interest expense | 393,158 | 125,733 | $ 1,057,501 | 374,850 | ||||
Maturity Date | Dec. 31, 2021 | |||||||
Credit Agreement [Member] | Amortization of Debt Issuance Costs [Member] | ||||||||
Interest expense | $ 164,941 | $ 368,661 | ||||||
Credit Agreement [Member] | Amortization Of Convertible Debentures [Member] | ||||||||
Interest expense | $ 796,233 | $ 796,233 | ||||||
Credit Agreement [Member] | Common Stock and Warrant Issuances [Member] | ||||||||
Debt issuance costs | $ 676,822 |
10. Unit Offering (Sept 2020 No
10. Unit Offering (Sept 2020 Note) (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Debt converted, amount converted | $ 2,565,000 | |||
Debt converted, interest converted | $ 92,037 | |||
Debt converted, shares issued | 1,102,513 | |||
Proceeds from convertible debt | $ 0 | $ 2,565,000 | $ 2,565,000 | $ 0 |
Unit Offering [Member] | ||||
Debt converted, amount converted | 2,565,000 | |||
Debt converted, interest converted | $ 92,037 | |||
Debt converted, shares issued | 1,102,513 | |||
Proceeds from convertible debt | $ 2,565,000 | |||
Warrants exercised | 0 |
11. Risks and Uncertainties (Se
11. Risks and Uncertainties (Sept 2020 Note) (Details Narrative) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Product Concentration Risk [Member] | One Vendor [Member] | ||||||
Concentration risk percentage | 48.00% | 20.00% | 27.00% | 15.00% | 24.00% | 18.00% |
One Client [Member] | Sales Revenue Net [Member] | ||||||
Concentration risk percentage | 51.00% | 17.00% | 26.00% | 15.00% | 21.00% | 14.00% |
One Client [Member] | Accounts Receivable [Member] | ||||||
Concentration risk percentage | 26.00% | 15.00% | 19.00% | |||
Another Client [Member] | Accounts Receivable [Member] | ||||||
Concentration risk percentage | 11.00% |
12. Stock Compensation (Sept 20
12. Stock Compensation (Sept 2020 Note) (Details - Grant activity) - Common Stock Grants [Member] - shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Common stock grants, beginning balance | 412,501 | 1,802,667 |
Common stock grants, awards | 794,166 | 41,800 |
Common stock grants, forfeiture/cancelled | (200,000) | (70,000) |
Common stock grants, vested | (253,333) | (1,361,966) |
Common stock grants, ending balance | 753,334 | 412,501 |
12. Stock Compensation (Sept _2
12. Stock Compensation (Sept 2020 Note) (Details - Option activity) - Options [Member] - $ / shares | 9 Months Ended | 12 Months Ended | 24 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | |
Stock options outstanding, beginning balance | 1,702,167 | 1,184,000 | ||
Stock options issued | 2,425,000 | 736,499 | 1,259,000 | 1,995,499 |
Stock options exercised | 0 | |||
Stock options expired | (297,501) | (218,332) | ||
Stock options outstanding, ending balance | 3,829,666 | 1,702,167 | 1,184,000 | 1,702,167 |
Stock options exercisable | 1,437,578 | 703,538 | 703,538 | |
Weighted average remaining life, outstanding | 9 years 4 months 24 days | 9 years 8 months 5 days | ||
Weighted average remaining life, issued | 9 years 5 months 27 days | 9 years 2 months 12 days | ||
Weighted average remaining life, expired | 9 years 2 months 8 days | 9 years 1 month 13 days | ||
Weighted average remaining life, outstanding | 9 years 4 months 6 days | 9 years 2 months 16 days | ||
Weighted average remaining life, exercisable | 8 years 10 months 17 days | |||
Weighted average exercise price, outstanding | $ 1.21 | $ 1.15 | ||
Weighted average exercise price, issued | 1 | 1.38 | ||
Weighted average exercise price, exercised | ||||
Weighted average exercise price, expired | 1.21 | 1.33 | ||
Weighted average exercise price, outstanding | 1.05 | 1.21 | $ 1.15 | $ 1.21 |
Weighted average exercise price, exercisable | $ 1.12 | $ 1.17 | $ 1.17 |
12. Stock Compensation (Sept _3
12. Stock Compensation (Sept 2020 Note) (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Stock based compensation expense | $ 399,258 | $ 509,219 | $ 1,391,807 | $ 1,606,355 | $ 1,830,426 | $ 1,245,826 |
Stock Options | ||||||
Unrecognized stock compensation expense | 1,919,523 | 1,919,523 | ||||
Common Stock Grants [Member] | ||||||
Unrecognized stock compensation expense | $ 393,215 | $ 393,215 | $ 177,327 | |||
New Equity Incentive Plan [Member] | ||||||
Stock authorized for issuance | 3,500,000 | 3,500,000 | 3,500,000 |
13. Shareholder's Equity (Sept
13. Shareholder's Equity (Sept 2020 Note) (Details Narrative) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2018 | |
Stock returned and retired | 375,000 | |
Executive [Member] | Separation Agreement | ||
Stock returned and retired | 100,000 | |
Number of shares issued | 1,000,000 | |
Issued in conjunction with agreement with former executive | 400,000 | |
Stock issued per share | $ 1 |
14. Warrants (Sept 2020 Note) (
14. Warrants (Sept 2020 Note) (Details) - Warrants [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Warrants outstanding, beginning balance | 692,034 | 6,000 |
Warrants issued | 124,481 | |
Issued in conjunction with agreement with former executive | 400,000 | |
Warrants outstanding, ending balance | 1,216,515 | 692,034 |
Warrants exercisable, end of period | 1,216,515 | 692,034 |
Weighted average exercise price, beginning | $ 2.88 | $ 1 |
Weighted average exercise price, issued | 2.41 | |
Weighted average exercise price, Issued in conjunction with agreement with former executive | 1 | |
Weighted average exercise price, ending | 2.21 | 2.88 |
Weighted average exercise price, exercisable | $ 2.21 | $ 2.88 |
14. Warrants (Sept 2020 Note)_2
14. Warrants (Sept 2020 Note) (Details Narrative) - Warrants [Member] - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Aggregate intrinsic value of warrants outstanding | $ 0 | $ 0 |
Aggregate intrinsic value of warrants exercisable | $ 0 | $ 0 |
Weighted average life of warrants | 2 years 6 months |