urban-gro, Inc. Receives Nasdaq Notification of Non-Compliance with Listing Rule 5250(c)(1)

Rhea-AI Summary

urban-gro (NASDAQ:UGRO) received a notice from Nasdaq on September 21, 2024, regarding non-compliance with listing Rule 5250(c)(1) due to delayed filing of its Q3 2024 10-Q report. The delay stems from the need to restate financial statements from 2022-2024 due to errors in accounting for deferred tax liabilities related to historical share-purchase acquisitions. The company must file all delinquent reports by January 31, 2025 to maintain Nasdaq listing. While there's no immediate effect on the stock listing, failure to meet the deadline could result in delisting, subject to appeal.

Positive

• Company has opportunity to maintain Nasdaq listing by meeting January 31, 2025 deadline
• Right to appeal potential delisting determination

Negative

• Non-compliance with Nasdaq listing requirements
• Need to restate financial statements for 2022-2024
• Accounting errors in deferred tax liabilities
• Risk of potential delisting from Nasdaq
• Delayed filing of Q3 2024 10-Q report

Insights

Legal & Compliance Expert

This Nasdaq non-compliance notice represents a serious regulatory challenge for urban-gro. The company must restate multiple years of financial statements due to errors in deferred tax liability accounting from acquisitions. The scope is extensive, covering fiscal years 2022-2023 and multiple quarterly periods through March 2024.

While there's no immediate delisting risk, the January 31, 2025 deadline is critical. The company must file all delinquent reports by then or face potential delisting proceedings. The comprehensive nature of the restatements, involving both the Amended Form 10-K and 10-Q, suggests significant internal control weaknesses that need addressing. The accounting errors related to acquisition accounting indicate deeper financial reporting issues that could impact investor confidence and valuation.

Financial Analyst

The accounting restatement scope is concerning for a company with only $16.5M market cap. Deferred tax liability errors in acquisition accounting typically suggest inadequate financial controls and expertise. This could lead to:

• Increased audit costs and professional fees
• Higher cost of capital due to perceived risk
• Potential covenant issues with lenders
• Reduced investor confidence in management's financial oversight

The need to restate multiple years of financials means current financial metrics and valuations are unreliable until the restatement is complete. This uncertainty will likely pressure the stock until resolution.

LAFAYETTE, CO / ACCESSWIRE / November 27, 2024 / urban-gro, Inc. (NASDAQ:UGRO) ("urban-gro" or the "Company"), an integrated professional services and Design-Build firm offering solutions to the Controlled Environment Agriculture ("CEA") and other commercial sectors, today announced that the Company received a notice (the "Notice) from The Nasdaq Stock Market LLC ("Nasdaq") on September 21, 2024, stating that because the Company had not yet filed its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024 (the "Form 10-Q"), the Company continues to not be in compliance with Nasdaq listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission.

This notification has no immediate effect on the listing of the Company's common stock on the Nasdaq Capital Market.

As disclosed in the Current Report on Form 8-K filed by the Company on August 14, 2024, the Company's audit committee, in consultation with the Company's independent public accounting firm, concluded that, as a result of inadvertent errors in the accounting for deferred tax liabilities associated with historical share-purchase acquisitions made by the Company, it is appropriate to restate the Company's previously issued financial statements as of and for the fiscal years ended December 31, 2022 and December 31, 2023 and condensed consolidated interim financial statements as of and for the fiscal periods ended March 31, 2022, June 30, 2022, September 30, 2022, March 31, 2023, June 30, 2023, September 30, 2023, and March 31, 2024 in a comprehensive amended Annual Report on Form 10-K (the "Amended Form 10-K") for the fiscal year ended December 31, 2023 with expanded financial information and other disclosures in lieu of filing separate amended annual and quarterly reports for the affected periods during the fiscal years ended December 31, 2022 and December 31, 2023 and in an amended Quarterly Report on Form 10-Q for the three months ended March 31, 2024 (the "Amended Form 10-Q"). Given the scope of the process for preparing the Amended Form 10-K and Amended Form 10-Q, the Company was unable to complete and file the Form 10-Q by the required due date of November 14, 2024. On November 15, 2024, the Company filed a Form 12b-25 Notification of Late Filing with the SEC related to the Form 10-Q.

On September 27, 2024, the Company submitted a plan to regain compliance with Rule 5250(c)(1) with Nasdaq. On November 8, 2024, Nasdaq notified the Company that the Company must file all of its delinquent filings, including the Form 15, on or before January 31, 2025. If the Company does not regain compliance by that date, Nasdaq would provide written notification of delisting of the Company's common stock, and the Company would have the opportunity to appeal the delisting determination to a hearings panel.

About urban-gro, Inc.

urban-gro, Inc.® (Nasdaq:UGRO) is an integrated professional services and Design-Build firm. We offer value-added architectural, engineering, and construction management solutions to the Controlled Environment Agriculture ("CEA"), industrial, healthcare, and other commercial sectors. Innovation, collaboration, and creativity drive our team to provide exceptional customer experiences. With offices across North America and in Europe, we deliver Your Vision - Built. Learn more by visiting www.urban-gro.com

Safe Harbor Statement

This press release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this release, terms such as "believes," "will," "expects," "anticipates," "may," "projects" and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. The forward-looking statements in this press release include, without limitation, the expected scope of the material misstatements identified in this press release and the expected timing of filing restated periodic reports and the Form 10-Q for the Company's third fiscal quarter of 2024. These and other forward-looking statements are based on the current expectations, forecasts, beliefs and assumptions of the Company's management and are subject to risks and uncertainties that could cause actual outcomes and results to differ materially from those anticipated or expected, including, among others, our ability to meet the other continued listing rules of Nasdaq and whether Nasdaq exercises its discretion, if necessary, to grant an extension period based on any plan of compliance we submit. A more detailed description of these and certain other factors that could affect actual results is included in the Company's filings with the Securities and Exchange Commission. Copies of these filings are available online at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as may be required by law.

Investor Contacts:

Jeff Sonnek - ICR, Inc.
(720) 730-8160
investors@urban-gro.com

Media Contact:

Barbara Graham - urban-gro, Inc.
(720) 903-1139
media@urban-gro.com

SOURCE: urban-gro, Inc.

View the original press release on accesswire.com

FAQ

Why did urban-gro (UGRO) receive a Nasdaq non-compliance notice in September 2024?

urban-gro received the notice due to failing to file its Q3 2024 10-Q report on time, violating Nasdaq listing Rule 5250(c)(1) which requires timely filing of periodic financial reports.

What is the deadline for urban-gro (UGRO) to regain Nasdaq compliance?

urban-gro must file all delinquent financial reports by January 31, 2025, to regain compliance with Nasdaq listing requirements.

What accounting errors led to urban-gro's (UGRO) financial restatement?

The company discovered inadvertent errors in accounting for deferred tax liabilities associated with historical share-purchase acquisitions, requiring restatement of financial statements from 2022-2024.