urban-gro, Inc. Announces Delayed 10-Q Filing and Restatement of Previously Issued Financial Statements Tied to Incorrect Accounting of Deferred Tax Liabilities Associated with Historical Acquisitions

No Expected Material Impact on Revenue, Adjusted EBITDA, or Cash Flows

Expects Q2 2024 Revenue of $17.5 Million, a Sequential 13% Increase

LAFAYETTE, CO / ACCESSWIRE / August 14, 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 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 (the "SEC").

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 CPA PC ("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, LLC ("Sadler Gibb") 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.