Home Accountant LIFEWAY FOODS, INC. : Changes to Chartered Accountant, Financial Statements and Supporting Documents (Form 8-K)

LIFEWAY FOODS, INC. : Changes to Chartered Accountant, Financial Statements and Supporting Documents (Form 8-K)

0

Item 4.01 Changes of Chartered Accountant

On June 8, 2022, Lifeway Foods, Inc. (“Lifeway” or the “Company”) has been notified by Mayer Hoffman McCann PC., its independent registered public accounting firm (“MHM”), that MHM would not seek reappointment following the completion of the ongoing audit of the Company’s financial statements for the year ending
December 31, 2021. However, MHM has informed the Company that it will continue to provide services to the Company within the financial quarters ended
March 31, 2022 and ending June 30, 2022 and September 30, 2022. The Company is working diligently with MHM to file its Form 10-K for the year ended
December 31, 2021 (the “2021 Form 10-K”) as soon as possible. Lifeway has begun the process of evaluating other independent registered public accounting firms to replace MHM and plans to appoint a new firm as soon as possible. MHM is committed to cooperating fully with the replacement company to ensure an orderly transition.

MHM’s audit reports on the Company’s financial statements for the years ended December 31, 2020 and 2019 did not contain an adverse opinion or disclaimer of opinion and have not been qualified or modified as to uncertainty, scope of the audit or accounting principles.

As indicated previously, the April 29, 2022the Audit and Corporate Governance Committee of the Board of Directors of the Company, after discussion with management and MHM, has concluded that the audited consolidated financial statements previously issued by the Company (i) for the year ended December 31, 2020and (ii) unaudited consolidated financial statements for the periods ended March 31, 2020, June 30, 2020, September 30, 2020, March 31, 2021, June 30, 2021and
September 30, 2021 (collectively, the “Affected Periods”) should be restated and no longer relied upon due to material errors in the recording of deferred income taxes related to indefinite life intangible assets associated with the 2009 acquisition of Freshly Made, Inc. The error resulted in a $1.18 million
undervaluation of deferred tax liabilities and goodwill of
January 1, 2020, but had no impact on the Company’s liquidity or cash position. The Company intends to restate the audited consolidated financial statements for the Relevant Periods (collectively, the “Restatement”) and to correct the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the form 10-K 2021 as soon as possible.

As part of the restatement, management has evaluated the Company’s internal control over financial reporting and has determined that a material weakness exists in the December 31, 2021, related to the fact that the company has not designed internal controls to identify and correct the errors mentioned above. Accordingly, the Company’s management has concluded that the Company did not maintain effective internal control over financial reporting at December 31, 2021. Management is currently evaluating the Company’s disclosure controls and procedures as of this date, but has not yet reached a conclusion. The Company will report the material weakness in the 2021 Form 10-K and is taking steps to address the related internal control deficiencies.

Over the years ended December 31, 2021 and 2020, and the following interim period until June 8, 2022there has been (i) no “disagreement”, as defined in Section 304(a)(1)(iv) of Regulation SK, between the Company and MHM on any matter of accounting principles or practices, financial statement disclosure or audit scope or proceeding which, if not resolved to MHM’s satisfaction, would have caused MHM to refer to the subject matter of the disagreement as part of its report for that year and (ii) no “Reportable Event”, as defined in Regulation SK Section 304(a)(1)(v), except for Restatement and Material Weakness in the Company’s Internal Control on the financial information mentioned above.

The Company has provided MHM with a copy of the disclosures it makes in this current report on Form 8-K and has requested that MHM provide the Company with a letter addressed to the Security and Exchange Commission indicating whether or not he agrees with the statements contained in this document. A copy of the letter from MHM, dated June 14, 2022is filed as Exhibit 16.1 to this current report on Form 8-K.

Item 9.01 Financial statements and supporting documents.


(d) Exhibits



Exhibit No.   Description

                Letter from Mayer Hoffman McCann P.C., dated June 14, 2022,
16.1          addressed to the Securities and Exchange Commission.
104           Cover Page Interactive Data File (formatted as Inline XBRL).

© Edgar Online, source Previews