CORRESP 1 filename1.htm

Andrew I. Telsey, P.C.   Attorney at Law

12835 E. Arapahoe Road, Tower One, Penthouse #803, Englewood, Colorado 80112

Telephone: 303/768-9221 • Facsimile: 303/768-9224 • E-Mail: andrew@telseylaw.com

 

 

December 17, 2019

 

 

VIA:     EDGAR

 

Securities and Exchange Commission

100 F St., NE

Washington, D.C. 20549

Attn: Donna Di Silvio

 

RE:  

urban-gro, Inc.;

SEC Comment Letter Dated December 2, 2019

SEC File No. 000-55966

 

Dear Ms. Di Silvio:

 

This letter is intended to respond to the staff’s comment letter, above referenced. Relevant thereto, please be advised as follows.

 

Form 10-K for the Fiscal Year Ended December 31, 2018

Controls and Procedures

(page 26)

 

Comments No. 1 and 2. The disclosure relating to management’s conclusion on page 27 stating that disclosure controls and procedures and internal control over financial reporting were ineffective is an error. We note that all prior and subsequent similar disclosure included in the Company’s 34 Act reports as filed with the Commission correctly indicated that such controls and procedures were effective as of the date of such report.

 

Subject to the staff’s review and consideration of Comments 3 and 4, below, the Company shall file an amendment to the Form 10-K for the Fiscal Year Ended December 31, 2018 with the Commission that corrects this error.

 

Audited Financial Statements

Note 2 – Summary of Significant Accounting Policies

Revenue Recognition

(page F-10)

 

Comment 3. As disclosed in the Company’s Form 10-K for the year ended December 31, 2018, the Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criterial standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given to whether that control happens over time or not. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the services and products delivered and the collectability of those amounts.

 

 

 

   

 

 

Page 2

 

 

The Company proposes to enhance this disclosure in future reports filed with the Commission to disclose that services and products sold by the Company, and revenue recognition on those services and products, are as follows:

·Design and engineering services – These services are performed pursuant to short-term customer contracts that are typically less than two months in duration. Revenue is recognized when the services have been performed and the customer has been delivered design contracts.
·Selling cultivation systems and pest management products – These products are delivered pursuant to equipment order forms signed by the customer. Revenue is recognized when the systems and products are delivered to the customer.
·Providing facility management services – These services are performed pursuant to annual customer contracts. Revenue is recognized when the performance obligations in the contract are satisfied, i.e. when the control of these goods and services are transferred or provided to the customer.
·Other – Primarily shipping services billed to customers that are separate from the above services and products. Revenue is recognized when the services and products have been provided to the customer.

 

These services and product components and the revenue recognized from them for the three and nine month periods ended September 30, 2019 and 2018 are as follows:

 

Revenue Component 3ME
September 30, 2019		 3ME
September 30, 2018		 9ME
September 30, 2019		 9ME
September 30, 2018
Design and engineering services $1,076,358 $367,179 $2,495,110 $874,173
Selling cultivation systems and pest management products 4,313,442 4,900,832 14,031,757 13,704,479
Providing facility management services 23,422 3,151 38,201 20,719
Other 169,842 65,469 491,669 80,924
Total $5,583,064 $5,336,631 $17,056,737 $14,680,295

 

These services and product components and the revenue recognized from them for the years ended December 31, 2018 and 2017 are as follows:

 

Revenue Component 2018 2017
Design and engineering services $903,900 $107,830
Selling cultivation systems and pest management products 18,901,967 12,184,016
Providing facility management services 36,719 -
Other 208,190 6,169
Total $20,050,776 $12,298,015

 

Management of the Company believes that this disclosure, compared to the existing disclosure in the Company’s Form 10-K for the Year Ended December 31, 2018 and the Form 10-Q for the nine months ended September 30, 2019, are not significant enough to require amendments to these reports. The Company does undertake to expand this disclosure in future filings.

 

 

 

   

 

 

Page 3

 

Note 6 – Investments

(Page F-13)

 

Comment No. 4. The changes in the components of the investments for the nine months ended September 30, 2019 and the years ended December 31, 2018 and 2017 are summarized as follows:

 

                           9ME September 30, 2019
  Edyza TGH Total
Beginning Balances $812,883 $448,766 $1,261,649
Cash Investments 205,250 367,000 572,250
Impairment of Investment   (506,000) (506,000)
Ending Balances $1,018,133 $309,766 $1,327,899
       

 

 

                         12ME December 31, 2018
  Edyza TGH Total
Beginning Balances $400,000   $400.000
Cash Investments 412,883 448,766 861,649
Ending Balances $812,883 $448,766 $1,261,649
       

 

 

                         12ME December 31, 2017
  Edyza TGH Total
Beginning Balances $- $- $-
Cash Investments 400,000 - 400,000
Ending Balances $400,000 $ $400,000
       

 

If the Company proposed suggestion that it amends its Form 10-K as indicated in the above responses to Comments 1 and 2, but not to amend relevant to Comments 3 and 4, please advise the undersigned and the Amendment will thereafter immediately be filed. If the staff wishes for additional disclosure applicable to Comments 3 and 4 above, such additional disclosure will be included in the proposed Amendment to the Form 10-K and an additional amendment to the applicable Form 10-Q will also be filed.

 

If we can be of any assistance in connection with the staff’s review herein please do not hesitate to contact the undersigned at your earliest convenience.

 

Very truly yours,

 

ANDREW I. TELSEY, P.C.

 

s/ Andrew I. Telsey

 

For the Firm