Urban-Gro announces delayed 10-Q filing, restatement of financial statements

urban-gro announced its decision to restate its previously issued financial statements for the years ended December 31, 2022 and 2023, as well as the first quarter of 2024. As a result of the restatement process, the Company will not be able to file its Quarterly Report on Form 10-Q for the second fiscal quarter of 2024 within the filing deadline established by the Securities and Exchange Commission. As reported on the Company’s Current Report on Form 8-K filed on May 6, 2024, the Company dismissed its previous independent registered public accounting firm, BF Borgers. On May 3, 2024, the SEC instituted public administrative and cease-and-desist proceedings against BF Borgers. In the Current Report on Form 8-K filed on May 29, 2024, the Company announced that it had appointed Sadler, Gibb & Associates as its new independent public accounting firm. Sadler Gibb has substantially conducted a re-audit of the Company’s previously issued financial statements for the year ended December 31, 2023. In connection with the re-audit of the 2023 financial statements as conducted to date, Sadler Gibb has not identified any material misstatements in the Company’s revenue, Adjusted EBITDA, or cash flows. Sadler Gibb identified incorrect accounting of the deferred tax liabilities associated with historical share-purchase acquisitions made by the Company. Accounting for the initial deferred tax liabilities associated with the acquisitions was determined to be proper, however, the majority of the deferred tax liabilities that were recorded in connection with the share-purchase acquisition of each acquired company should have been recorded as income tax benefits to the statement of operations shortly after each acquisition. The Company had been amortizing these deferred tax liabilities to the statement of operations over a period corresponding to the amortization of the intangible assets with which they were associated. Adjusting for this incorrect accounting is expected to result in a reduction in cumulative net losses for fiscal years 2022 and 2023. As a result of the audit findings to date, the Company will now engage Sadler Gibb to re-audit the Company’s fiscal year 2022 financial statements in order for the Company to file amended 10-K and 10-Q filings for the fiscal years ended December 31, 2023 and 2022 and the fiscal quarters ended March 31, 2022 through March 31, 2024. As part of the 2023 re-audit, Sadler Gibb has identified other immaterial adjustments which will also be adjusted in connection with the amended filings. Based on the information currently available, which is limited to Sadler Gibb’s re-audit of the 2023 financial statements, the Company does not expect a material impact to previously reported revenues, Adjusted EBITDA, or cash flows. As a result, the Company has not yet filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and will be unable to file the report by the prescribed due date. Although the Company cannot at this time estimate when it will file its restated financial statements and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, it is diligently pursuing completion of the restatements and intends to make such filings as soon as reasonably practicable following the completion of Sadler Gibb’s re-audit of the 2022 financial statements. Based on the preliminary findings by and in consultation with Sadler Gibb, the Company’s Audit Committee has determined that the Company’s previously issued financial statements for the years ended December 31, 2023 and 2022 and the quarterly periods ended during those fiscal years, as well as the quarter ended March 31, 2024, should no longer be relied upon. Similarly, any previously issued or filed reports, press releases, earnings releases, investor presentations or other communications of the Company describing the Company’s financial results or other financial information relating to those periods should no longer be relied upon.