| Item 4.02 | Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. |
On March 15, 2024, the audit committee and the board of directors of The Real Good Food Company, Inc. (the “Company”), after consultation with the Company’s management, concluded that the Company’s previously issued audited consolidated financial statements for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2023, as well as previously issued consolidated financial statements for the quarterly periods ended March 31, 2023, June 30, 2023, and September 30, 2023 (collectively with the year ended December 31, 2022, the “Non-Reliance Periods”), included in the Company’s quarterly reports on Form 10-Q filed with the SEC on May 15, 2023, August 14, 2023, and November 14, 2023, respectively, should no longer be relied upon.
During the preparation of the Company’s consolidated financial statements for the year ended December 31, 2023, the Company identified certain errors related to differences between the 2022 year-end physical inventory listing and the inventory recorded as of December 31, 2022 (collectively, the “Error”). The correction of the Error will result in both the reduction of the inventory balance and an increase in cost of goods sold previously reported for the year ended 2022, and a reduction of the inventory balance and retained earnings for the above-mentioned quarterly periods in 2023. The Company is currently in the process of assessing the magnitude of the Error, but currently estimates the reduction to the inventory balance as between $7 million and $12 million. The changes to the financial statements related to the Error are not expected to impact the Company’s cash position, cash flow, revenues or liquidity. Accordingly, investors should no longer rely upon the Company’s previously issued consolidated financial statements for the Non-Reliance Periods. In addition, investors should no longer rely upon earnings releases for these periods and other communications relating to these consolidated financial statements. Additionally, investors should cease any reliance on previously provided financial guidance.
At this time, the Company has not fully completed its review and the expected financial impact of the Error described above is preliminary, remains subject to continued analysis by the Company’s management, and as such is subject to change. The Company will file an amended Form 10-K for the year ended December 31, 2022 and amended Form 10-Qs for the quarterly periods ended March 31, 2023, June 30, 2023, and September 30, 2023, as soon as practicable, to restate the financial statements for the Non-Reliance Periods (collectively, the “Amended Reports”). The Company is continuing to evaluate whether any amendments to additional previously issued consolidated financial statements will be necessary.
In addition, as a result of the Error, the Company’s management identified material weaknesses in the Company’s internal control over financial reporting that are in addition to those previously disclosed as of December 31, 2022, March 31, 2023, June 30, 2023 and September 30, 2023. The Company will provide further details on these one or more material weaknesses and its plan for remediation in the Amended Reports.
The Company also plans to file with the SEC a Form 12b-25 request for extension, which will state that it will be unable to file its Annual Report on Form 10-K for the year ended December 31, 2023 (the “Delayed Form 10-K”) by the prescribed due date of April 1, 2024 without unreasonable effort or expense due to the Error.
The Audit Committee discussed the matters disclosed in this Current Report on Form 8-K with the Company’s independent registered public accounting firm, Grant Thornton LLP.
| Item 5.02 | Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers. |
On March 15, 2024, the Company announced the appointment of Tim Zimmer as the Company’s Chief Executive Officer, effective March 15, 2024. Mr. Zimmer succeeds Gerard Law, who departed the Company as its Chief Executive Officer, effective March 15, 2024, following notice received that same day. Mr. Law’s status as a member of the Company’s Board of Directors will be determined at a later date.
Mr. Zimmer, age 58, has extensive experience in the consumer products food space. He most recently served as Chief Marketing Officer for Smithfield Foods from January 2017 through June 2023, after working as Senior Vice President, Sales and Business Development for the Farmland Division from 2011. Prior to that, Mr. Zimmer held several positions from 2003 to 2010 at Sara Lee, including Vice President, Marketing, after serving as a Senior Brand Manager in various divisions of Kraft Foods from 1996 to 2002 and working in sales at Nestle from 1990 to 1992. Mr. Zimmer holds an M.B.A. from Wake Forest University and a B.B.A from the University of Texas at Arlington.
Mr. Zimmer’s offer letter with the Company (the “Offer Letter”) provides for a base salary of $500,000 per year and a cash bonus of up to 50% of Mr. Zimmer’s annual base salary, subject to achieving certain performance targets established by the Board. In addition, the Offer Letter provides for a grant of 500,000 performance-based restricted stock units (“PRSUs��), 100,000 of which will vest upon the trading price of the Company’s Class A common stock reaching at least $3.00 per share, 200,000 of which will vest upon the trading price of the Company’s Class A common stock reaching at least $5.00 per share, and 200,000 of which will vest upon the trading price of the Company’s Class A common stock reaching at least $10.00 per share, subject to Mr. Zimmer remaining employed by the Company through each such vesting date. The grant of these PRSUs is subject to Board approval. Pursuant to his Offer Letter, Mr. Zimmer will be an at-will employee and thus free to terminate his employment or to have his employment terminated by the Company at any time for any reason or for no reason, with or without cause, and with or without notice. All other terms of the Offer Letter are consistent with those offered to the Company’s full-time employees. The foregoing description of Mr. Zimmer’s Offer Letter is qualified in its entirety by the full text thereof, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
