KushCo Holdings, a provider of packaging solutions for the cannabis industry, said it will restate earnings due to accounting errors, resulting in a doubling of its fiscal 2018 loss.
In a regulatory filing, KushCo said Tuesday it identified errors in the accounting for certain shared-settled contingent consideration relating to the earnout provisions of its recent acquisitions of three companies — CMP Wellness, Summit Innovations, and Hybrid Creative.
Contingent consideration was recorded as equity, the Garden Grove, Calif.-based company said, when it should have been accounted for as liabilities with changes in the fair value recorded in the consolidated statements of operations.
Previously issued financial statements will be corrected, with the net loss for the fiscal year ended Aug. 31, 2018 increasing from $10.2 million to $24.3 million and net income for the previous year increasing from $0.1 million to $1.7 million.
“Management has concluded that the company’s internal control over financial reporting and its disclosure controls and procedures were not effective as of the end of the respective restatement periods,” the filing said.
KushCo went public on the OTCQB market in 2015. In trading Tuesday, its shares fell 3.8% to $5.80.