United States securities and exchange commission logo
February 2, 2021
Bradley J. Nattrass
Chief Executive Officer
urban-gro, Inc.
1751 Panorama Point, Unit G
Lafayette, CO 80026
Re: urban-gro, Inc.
Amendment No. 3 to
Registration Statement on Form S-1
Filed January 25,
2021
File No. 333-250120
Correspondence
filed February 1, 2021
Dear Mr. Nattrass:
We have limited our review of your registration statement and
related correspondence to
those issues we have addressed in our comments. In some of our comments,
we may ask you to
provide us with information so we may better understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Amendment No. 3 to Registration Statement on Form S-1
Risk Factors
We have historically been dependent on a small number of clients for a
substantial portion of our
annual revenue, page 11
1. You disclose in your
risk factors that you have historically been dependent on a small
number of customers for
a substantial portion of your revenue. You also disclose in the
notes to your financial
statements that during the nine months ended September 30, 2020,
one client represented
26% of total revenue and during the three months ended September
30, 2020, one client
represented 51% of total revenue. At September 30, 2020 one client
represented 26% of
total outstanding receivables. Clarify whether this revenue reflects
product or service
revenue or both and whether you expect such revenues to be recurring
Bradley J. Nattrass
FirstName LastNameBradley J. Nattrass
urban-gro, Inc.
Comapany2,Nameurban-gro,
February 2021 Inc.
February
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in the future.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations, page 29
2. You quantify the amount of increase and decrease, as applicable, in
product and service
sales for each period discussed, however, you do not quantify the
amount attributable to
each overall in this section. Please revise your disclosure here to
clarify.
3. Where you discuss increases in revenues, please revise to state why.
Given that you have
historically attributed part of this increase to the general growth of
the cannabis industry
in North America, such as in your annual report on Form 10-K for the
period ending
December 31, 2019, please continue to state as much, as applicable.
Business
Strategic Vendor Relationships with Premier Manufacturers, page 38
4. We note your discussion of certain strategic vendor partnerships with
premier
manufacturers. However, you also discuss certain trademark and patent
protection for
products you design and/or manufacture. Explain how the products you
design and/or
manufacture are marketed and used in your business, with a view to
understanding how
they contribute to your revenues and business model.
European Expansion, page 42
5. We note your disclosure that While North America presents the
dominant opportunity
currently for commercial indoor cultivation, the European plant-based
medicines market is
projected to become the largest market over the next 10 years. In
fact, according to New
Frontier Data (August 2020), the total EU annual spending on
plant-based medicines is
expected to rise from 8.3 billion in 2020 to 13.6 billion by
2025. Please tell us how
this statement is consistent with your statement and disclosure that
the company is shifting
its focus away from the cannabis and plant-based medicines
industry and why it is
appropriate to discuss this as an addressable market.
Correspondence filed February 1, 2021
Risk Factors
We do not know for certain how much of our revenues to date have been generated
from clients
in the cannabis industry..., page 10
6. In your proposed S-1 disclosure, you state that you do not know for
certain how much of
[y]our revenues to date have been generated from clients in the
cannabis industry, but
[you] are certain some of [y]our clients are in the cannabis industry,
that an unknown
but substantial portion of all [y]our revenues to date have been
generated from clients in
the cannabis industry, and that historically, a large number of
[y]our clients were
cannabis producers, and [you] still do substantial work for those
clients, but [you] have
Bradley J. Nattrass
urban-gro, Inc.
February 2, 2021
Page 3
shifted [y]our focus to non-cannabis crops as you seek to address a
broader market.
Given your historical ability to provide some specificity around your
cannabis client base
and related revenues, and, as recently as August 2020, you stated that
substantially all of
your revenues to date had been generated from customers in the
cannabis industry, please
provide more precision around the revenues you generate from your
cannabis client
base or tell us why you are unable to do so.
Business
Regulation, page 47
7. Your proposed S-1 disclosure and your current S-1 states that you
primarily market and
sell your solutions in the United States and Canada, you formed
urban-gro Canada
Technologies, Inc., a wholly owned Canadian subsidiary, for all of
your Canadian sales
operations, you have registered trademarks in Canada, and you pay
income taxes in
Canada. Given that you appear to have significant operations in Canada
and have, as
recently as June 2020, acknowledged the materiality of Canadian
cannabis regulations to
your business, please include comparable disclosure in your S-1, or
provide your analysis
for why such disclosure is no longer material.
General
8. Please revise your disclosure to clearly explain the difference between
controlled
environment agriculture ( CEA ), indoor cultivation, commercial
cultivators, and
cannabis producers, and use the terms consistently throughout. For
example, you use the
term CEA when discussing your historical operating activities, which we
understand to be
almost entirely in service of the cannabis industry. You also use the
term to discuss the
market expansion that you suggest is aimed beyond the cannabis industry:
While we will
continue to provide our solutions to the plant-based medicine market
that has been our
strength, we believe that the CEA market will represent a more
significant and increasing
FirstName LastNameBradley J. Nattrass
share of our revenue and be a significant factor in our organic growth
moving forward.
Comapany
As aNameurban-gro, Inc.how to interpret your references to CEA in
the context of your
result, it is unclear
historical
February 2, 2021and
Page future
3 operations.
FirstName LastName
Bradley J. Nattrass
FirstName LastNameBradley J. Nattrass
urban-gro, Inc.
Comapany2,Nameurban-gro,
February 2021 Inc.
February
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FirstName LastName
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Please contact Taylor Beech at 202-551-4515 or Mara Ransom at
202-551-3264 with any
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services
cc: Michael Bradshaw, Esq.