8-K: Edible Garden AG Inc. Announces Change in Independent Registered Public Accounting Firm

Edible Garden AG Inc. reports the resignation of Marcum LLP as their independent auditor and the engagement of CBIZ CPAs P.C., effective April 18, 2025.

Summary

• Edible Garden AG Incorporated announced that Marcum LLP resigned as their independent registered public accounting firm, effective April 18, 2025.
• The company engaged CBIZ CPAs P.C. as their new independent registered public accounting firm, also effective April 18, 2025.
• This change was approved by the Audit Committee of the Board of Directors.
• Marcum's reports for the fiscal years ended December 31, 2024 and December 31, 2023, did not contain an adverse opinion or a disclaimer of opinion, but included an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern.
• There were no disagreements with Marcum on accounting principles, practices, financial statement disclosure, or auditing scope or procedure.
• Material weaknesses in the company's internal control over financial reporting related to inadequate segregation of duties and lack of maintenance of appropriate documentation were previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023.
• The company did not consult with CBIZ regarding the application of accounting principles or the type of audit opinion that might be rendered prior to their engagement.

Sentiment

Score: 3

Explanation: The change in auditors coupled with the going concern note from the previous auditor creates a negative sentiment.

Positives

• The transition to a new auditor was approved by the Audit Committee of the Board of Directors.
• Marcum agreed with the statements made by Edible Garden AG Incorporated regarding their resignation.

Negatives

• Marcum's audit reports for 2023 and 2024 included an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern.
• Material weaknesses in internal control over financial reporting were previously disclosed.

Risks

• The previously identified material weaknesses in internal control over financial reporting could pose ongoing risks.
• The explanatory paragraph in Marcum's audit reports regarding the company's ability to continue as a going concern indicates potential financial instability.

Industry Context

Changes in auditing firms are not uncommon, but the circumstances surrounding the change, such as an acquisition of the previous auditor's attest business and the presence of a going concern note, can be relevant to investors.

Comparison to Industry Standards

• The presence of a 'going concern' note from the auditor is a red flag and would be viewed negatively compared to industry standards where companies typically receive unqualified audit opinions.
• Comparable companies in the agricultural sector, such as AppHarvest or Local Bounti, are expected to maintain robust internal controls and receive clean audit opinions to ensure investor confidence.

Stakeholder Impact

• Shareholders may be concerned about the change in auditors and the going concern note.
• Creditors may reassess the company's creditworthiness.

Key Dates

Keywords

auditor, CBIZ, Marcum, accounting firm, financial reporting, Edible Garden AG, internal control