8-K: URBAN-GRO Faces Nasdaq Delisting Threat Over Unfiled Financial Reports

URBAN-GRO, Inc. has received a notice from Nasdaq regarding non-compliance with listing rules due to its failure to timely file its Annual Report on Form 10-K for fiscal year 2024 and Quarterly Report on Form 10-Q for Q1 2025.

Summary

• URBAN-GRO, Inc. (UGRO) received a notice from Nasdaq on May 21, 2025, indicating non-compliance with Listing Rule 5250(c)(1) for failing to file its Form 10-K for the fiscal year ended December 31, 2024, and Form 10-Q for the fiscal quarter ended March 31, 2025.
• Nasdaq Listing Rule 5250(c)(1) mandates timely filing of all required periodic financial reports with the SEC.
• The Company's delays stem from inadvertent errors in accounting for deferred tax liabilities related to historical share-purchase acquisitions, which necessitated restatement of prior financial statements.
• The restated financial statements were completed and filed by February 19, 2025.
• Further delays were caused by the significant management attention and expenditures required for the restatements, as well as turnover within the Company's finance department.
• The Nasdaq notice requires URBAN-GRO to submit a plan to regain compliance within 60 calendar days from April 16, 2025, specifically by June 16, 2025.
• If Nasdaq accepts the plan, the Company may be granted up to 180 days from the Form 10-K's due date, or until October 13, 2025, to regain compliance.
• Failure to submit an acceptable plan or regain compliance could lead to delisting, though the Company has the right to appeal such a decision to a Nasdaq Hearings Panel.
• The notice currently has no immediate effect on the listing of the Company's common stock on The Nasdaq Capital Market.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the company's non-compliance with Nasdaq listing rules, significant delays in financial reporting, and underlying issues like restatements and finance department turnover. While there's a plan to regain compliance, the current situation indicates operational and governance challenges.

Positives

• The Nasdaq notification has no immediate effect on the listing of the Company's common stock on The Nasdaq Capital Market.
• The Company intends to file the Form 10-K as soon as practicable and submit a plan to Nasdaq to regain compliance.

Negatives

• URBAN-GRO is out of compliance with Nasdaq Listing Rule 5250(c)(1) due to unfiled periodic financial reports.
• The Company has not filed its Annual Report on Form 10-K for fiscal year 2024 or its Quarterly Report on Form 10-Q for Q1 2025 by their prescribed due dates.
• Prior financial statements required restatement due to inadvertent errors in accounting for deferred tax liabilities.
• Significant management attention and expenditures were diverted to the restatement process, contributing to current filing delays.
• Turnover in the Company's finance department has also contributed to the delays in preparing and auditing financial statements.

Risks

• Risk of delisting from Nasdaq if the Company fails to submit an acceptable compliance plan or does not regain compliance within the stipulated timeframe.
• Potential for further delays in filing the overdue Form 10-K and Form 10-Q.
• Uncertainty regarding Nasdaq's acceptance of the Company's compliance plan.
• Impact on investor confidence and stock price due to non-compliance and financial reporting issues.

Future Outlook

URBAN-GRO intends to file its Annual Report on Form 10-K as soon as practicable and, if necessary, will submit a plan to Nasdaq to regain compliance. If accepted, Nasdaq may grant an extension until October 13, 2025, to achieve compliance.

Management Comments

• Bradley Nattrass, Chairperson of the Board of Directors and Chief Executive Officer, signed the report on behalf of URBAN-GRO, Inc.

Industry Context

URBAN-GRO, Inc. operates as an integrated professional services and Design-Build firm primarily serving the Controlled Environment Agriculture (CEA) sector, along with industrial, healthcare, and other commercial sectors. The current non-compliance issue is specific to the company's internal financial reporting and governance, rather than a direct reflection of broader industry trends. However, financial instability or delisting could impact its competitive standing within the specialized CEA market.

Stakeholder Impact

• Shareholders: Face increased risk of stock price volatility and potential delisting, which could impair liquidity and investment value.
• Nasdaq: The regulatory body is enforcing its listing rules, impacting the company's standing on the exchange.
• Employees: Turnover in the finance department suggests potential internal instability or increased workload for remaining staff.
• Customers/Suppliers: While not directly impacted by this filing, persistent financial reporting issues could indirectly affect confidence in the company's long-term stability.

Next Steps

• URBAN-GRO intends to file its Annual Report on Form 10-K as soon as practicable.
• The Company plans to submit a plan to Nasdaq by June 16, 2025, to regain compliance with listing rules.
• If Nasdaq accepts the plan, the Company may be granted an extension until October 13, 2025, to regain compliance.
• If Nasdaq does not accept the plan, the Company will have the opportunity to appeal the decision to a Nasdaq Hearings Panel.

Key Dates

Recommendation

Keywords

SEC filing, Nasdaq compliance, Form 10-K, Form 10-Q, financial reporting, restatement, delisting risk, corporate governance, URBAN-GRO, UGRO, Controlled Environment Agriculture