8-K: LuxUrban Hotels Dismisses Auditor Grassi & Co., Appoints Bush & Associates Amidst Going Concern Warning

LuxUrban Hotels Inc. announced the dismissal of its independent registered public accounting firm, Grassi & Co., CPAs, P.C., and the appointment of Bush & Associates CPA, with the prior auditor's reports including a substantial doubt about the company's ability to continue as a going concern.

Summary

• LuxUrban Hotels Inc. (the "Company") dismissed Grassi & Co., CPAs, P.C. ("Grassi") as its independent registered public accounting firm on May 29, 2025.
• Grassi had served as the Company's auditor from September 15, 2021, to May 29, 2025.
• There were no disagreements between the Company and Grassi on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
• The decision to replace Grassi was approved by the Board of Directors of the Company.
• Grassi's audit reports for the years ended December 31, 2023, and 2022, did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified, except for an explanatory paragraph indicating substantial doubt about the Company's ability to continue as a going concern.
• Effective May 30, 2025, the Company appointed Bush & Associates CPA ("Bush & Associates") as its new independent registered public accounting firm.
• Bush & Associates will audit the consolidated financial statements of the Company.
• Grassi & Co. confirmed their agreement with the Company's statements regarding their firm in the Form 8-K, as detailed in Exhibit 16.1.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the explicit mention of 'substantial doubt about the Company's ability to continue as a going concern' in the prior auditor's reports. While the auditor change itself was without disagreement, the underlying financial health concern is paramount.

Positives

• The change in auditors was approved by the Board of Directors, indicating proper corporate governance procedures were followed.
• There were no reported disagreements between LuxUrban Hotels Inc. and Grassi & Co. on accounting principles, practices, financial statement disclosure, or auditing scope or procedure, which suggests a smooth transition and no underlying accounting disputes.

Negatives

• Grassi & Co.'s audit reports for both 2023 and 2022 included an explanatory paragraph indicating a substantial doubt about LuxUrban Hotels Inc.'s ability to continue as a going concern, which is a significant red flag for investors.

Risks

• Substantial doubt about the Company's ability to continue as a going concern, as noted in the audit reports for 2023 and 2022, poses a significant risk to the Company's long-term viability and financial stability.
• The ongoing uncertainty regarding the Company's financial health could negatively impact its ability to secure future financing, attract new business, or retain existing relationships.

Future Outlook

The document does not provide specific forward-looking statements or guidance regarding the Company's financial performance or operational outlook, beyond the implication that Bush & Associates will audit future consolidated financial statements.

Management Comments

• Michael James, Chief Financial Officer, signed the report on behalf of LuxUrban Hotels Inc.

Industry Context

Changes in independent auditors are a routine occurrence for publicly traded companies, often driven by factors such as cost, service quality, or a desire for fresh perspectives. However, the inclusion of a 'going concern' explanatory paragraph in prior audit reports is a significant disclosure that can raise concerns among investors and stakeholders, distinguishing this change from a typical auditor rotation.

Corporate Governance

Stakeholder Impact

• Shareholders: The 'going concern' warning could lead to increased scrutiny and potential downward pressure on the stock price due to heightened financial risk.
• Creditors: May become more cautious in extending credit or renegotiating terms given the uncertainty about the Company's ability to continue operations.
• Employees: Potential concerns about job security if the Company's financial situation does not improve.

Next Steps

• Bush & Associates CPA will audit the consolidated financial statements of LuxUrban Hotels Inc., including the related consolidated statements of operations, changes in stockholders deficit, and cash flows, and the related notes to consolidated financial statements.

Key Dates

Recommendation

Keywords

LuxUrban Hotels, LUXH, SEC filing, Form 8-K, auditor change, certifying accountant, Grassi & Co., Bush & Associates CPA, going concern, financial reporting, corporate governance, public accounting firm