| Item 4.01. | Change in Registrant’s Certifying Accountant. |
(a) Resignation of Independent Registered Public Accountants.
On April 15, 2022, the Audit Committee of the Board of Directors (“Audit Committee”) of BurgerFi International, Inc. (the “Company”) commenced a competitive process to determine the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022 and distributed a Request for Proposal (“RFP”) to several qualified accounting firms, including BDO USA, LLP (“BDO”), the Company’s then current independent registered public accounting firm.
On May 6, 2022, BDO notified the Company (the “BDO Notification”) that the client-auditor relationship between the Company and BDO will cease upon the completion of BDO’s review of the unaudited condensed quarterly consolidated financial statements to be included in the Company’s Form 10-Q for the period ended March 31, 2022 and the procedures related to BDO’s consent for inclusion of its audit report within the Company’s Franchise Disclosure Documents to be filed with various states’ regulatory agencies on or about May 20, 2022. The Company deemed the BDO Notification to be a resignation of BDO as the Company’s independent registered public accounting firm effective as of the time periods noted in the BDO Notification.
The reports of BDO on the Company’s consolidated financial statements for the fiscal years ended December 31, 2021 and 2020 did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2021 and 2020, and through the date of BDO’s resignation, there were (i) no “disagreements” (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and BDO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of BDO would have caused BDO to make reference to the subject matter of the disagreement in connection with its reports on the Company’s consolidated financial statements for such years and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K, except for the material weaknesses in the Company’s internal control over financial reporting previously reported in Part II, Item 9A “Controls and Procedures” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The material weaknesses were:
2021. A material weakness related to the design and implementation of controls over the accounting for income taxes. Specifically, management did not maintain controls over the Company’s assessment of its ability to realize historical deferred tax assets on its acquired businesses in accordance with Section 382 of the Internal Revenue Code and the Company’s tax provision controls were not designed to detect certain errors and omissions in calculating the impact of certain transactions on the income tax provision during the period. This material weakness resulted in the identification of errors that were corrected in the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
2020. A number of material weaknesses in our internal control over financial reporting, as follows:
| | • | | lack of controls over the financial closing and reporting process relating to a sufficient segregation of duties in the preparation of our financial statements and related notes, and, for period (the “Successor Period”) from December 16, 2020 until December 31, 2020, the valuation and recognition of stock-based compensation and warrant liabilities; |
| | • | | lack of resources to perform and review the application of accounting standards for revenue, leases, and variable interest entities (“VIEs”); |
| | • | | specifically with respect to VIEs, our internal control over financial reporting failed to detect errors related to consolidating variable interest entities for which we are the primary beneficiary; |
| | • | | lack of effective controls over the accounting for deferred rent and accounting for initial franchise fees and brand development revenue in connection with the adoption of our new revenue recognition standard; and |
| | • | | lack of controls during the Successor Period related to the valuation of contingent consideration issued in the business combination with BurgerFi International, LLC. |
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