8-K: Brag House Holdings Changes Auditor Amidst Marcum-CBIZ Merger, Citing Going Concern and Internal Control Weaknesses

Brag House Holdings, Inc. announced a change in its independent registered public accounting firm from Marcum LLP to CBIZ CPAs P.C. following Marcum's business combination with CBIZ, while also disclosing a going concern explanatory paragraph and material weaknesses in internal controls.

Summary

• Brag House Holdings, Inc. (the "Company") changed its independent registered public accounting firm from Marcum LLP to CBIZ CPAs P.C. on June 10, 2025.
• This change occurred because CBIZ CPAs P.C. acquired the attest business of Marcum LLP on November 1, 2024, leading to Marcum's resignation.
• Marcum's audit reports for the fiscal years ended December 31, 2023, and December 31, 2024, did not contain adverse opinions or disclaimers.
• However, the report for the fiscal year ended December 31, 2024, included an explanatory paragraph regarding "substantial doubt about the Company's ability to continue as a going concern."
• The Company reported no disagreements with Marcum on accounting principles or auditing scope during the past two fiscal years and subsequent interim period through June 10, 2025.
• A material weakness in internal control over financial reporting was identified, related to: (i) review and approval of cash disbursements and related journal entries, including lack of accessible executed agreements; (ii) lack of controls over income tax accounts and disclosures; (iii) lack of cybersecurity policies; and (iv) inability to record and disclose complex debt/equity transactions.
• The Company did not consult CBIZ on accounting principles or audit opinions prior to their engagement.
• Marcum LLP confirmed agreement with the Company's statements regarding their firm in the Form 8-K.

Sentiment

Score: 3

Explanation: The change in auditor is routine due to a merger, which is neutral. However, the disclosure of a 'going concern' issue and multiple material weaknesses in internal controls indicates significant financial and operational challenges, leading to a negative sentiment.

Positives

• The transition of auditors from Marcum LLP to CBIZ CPAs P.C. was a result of a business combination, not due to disagreements over accounting or auditing matters.
• Marcum LLP's audit reports for fiscal years 2023 and 2024 did not contain adverse opinions or disclaimers of opinion.
• Marcum LLP confirmed agreement with the Company's statements in the Form 8-K regarding their firm.

Negatives

• The audit report for the fiscal year ended December 31, 2024, included an explanatory paragraph indicating "substantial doubt about the Company's ability to continue as a going concern."
• The Company identified a material weakness in its internal control over financial reporting, encompassing issues with cash disbursement approvals, lack of accessible significant agreements, inadequate income tax controls, absence of cybersecurity policies, and difficulties in recording complex debt/equity transactions.

Risks

• Substantial doubt about the Company's ability to continue as a going concern, as noted in the December 31, 2024 audit report.
• Material weakness in internal control over financial reporting, specifically concerning:
• Inadequate review and approval processes for cash disbursements and related journal entries for operating and payroll expenses.
• Failure to maintain readily accessible executed versions of significant agreements.
• Lack of sufficient controls over income tax related accounts and disclosures.
• Absence of cybersecurity policies and procedures.
• Challenges in accurately recording and disclosing complex transactions with debt and/or equity features.

Future Outlook

The document does not provide explicit forward-looking statements or guidance beyond the implications of the going concern warning and the need to address internal control weaknesses.

Management Comments

• "On June 10, 2025, Brag House Holdings, Inc. (the Company) was notified by Marcum LLP (Marcum) that Marcum resigned as the Companys independent registered public accounting firm, in the context of Marcums business combination with CBIZ CPAs P.C."
• "On June 10, 2025, Marcum resigned as auditors of the Company and with the approval of the Audit Committee of the Companys Board of Directors, CBIZ was engaged as the Companys independent registered public accounting firm."
• "The Company provided Marcum with a copy of this Current Report on Form 8-K prior to its filing with the U.S. Securities and Exchange Commission (the SEC) and requested that Marcum furnish the Company with a letter addressed to the SEC, pursuant to Item 304(a)(3) of Regulation S-K, stating whether it agrees with the above statements and, if it does not agree, the respects in which it does not agree."

Industry Context

Changes in auditing firms due to mergers and acquisitions within the accounting industry are common. However, the simultaneous disclosure of a "going concern" issue and material weaknesses in internal controls for Brag House Holdings, Inc. suggests specific company-level challenges that are not necessarily reflective of broader industry trends, but rather highlight the importance of robust financial reporting and internal controls for all publicly traded companies.

Comparison to Industry Standards

• The disclosure of a "going concern" explanatory paragraph for the fiscal year ended December 31, 2024, indicates that Brag House Holdings, Inc. faces significant financial viability challenges, which is a serious concern and deviates negatively from the standard expectation for healthy public companies.
• The identified material weaknesses in internal control over financial reporting (e.g., cash disbursement approvals, lack of accessible agreements, income tax controls, cybersecurity policies, complex transaction recording) suggest a significant deficiency in the company's financial governance and operational integrity compared to best practices and regulatory expectations for public companies.
• While auditor changes due to accounting firm mergers (like Marcum/CBIZ) are common in the industry, the context of Brag House Holdings' internal control issues and going concern warning makes this particular change more scrutinized than a routine transition.

Corporate Governance

Stakeholder Impact

• Shareholders: Face increased risk due to the "going concern" warning and material weaknesses in internal controls, which could impact stock price and investor confidence.
• Management: Must prioritize addressing the going concern issue and remediating the identified internal control weaknesses to ensure financial stability and compliance.
• Employees: Potential uncertainty regarding the company's long-term viability if the going concern issue is not resolved.
• Creditors: May view the company as a higher credit risk due to the going concern warning.
• Regulators (SEC): Will expect the company to actively address and remediate the disclosed material weaknesses in internal controls and the going concern issue.

Next Steps

• Brag House Holdings, Inc. will need to address the "substantial doubt about its ability to continue as a going concern."
• The Company must remediate the identified material weaknesses in its internal control over financial reporting.
• CBIZ CPAs P.C. will now serve as the Company's independent registered public accounting firm.

Key Dates

Recommendation

Keywords

SEC filing, Form 8-K, Brag House Holdings, TBH, auditor change, independent registered public accounting firm, Marcum LLP, CBIZ CPAs P.C., going concern, material weakness, internal control over financial reporting, corporate governance, financial reporting, audit