Five days after Tattooed Chef (TTCF), a plant based frozen food brand, belatedly filed its annual report March 16, 2022, the company’s auditor, BDO USA LLP., quit. But not before identifying what is, by our count, Tattooed Chef’s seventh control deficiency since becoming a public company 17-months ago.

In an Exclusive Report on Tattooed Chef published December 1, 2021, we uncovered 157 accounting mistakes in a belatedly filed 10-Q and and nearly $4 million in balance sheet discrepancies across various filings. We began investigating the company eight months earlier, when Tattooed Chef restated 2020 net income nine days after reporting it.

Prior to publishing, we provided a list of the discrepancies and where they could be found to Tattooed Chef. When pressed for an explanation as to why the prior year’s balance sheet suddenly changed, Tattooed Chef refused to answer our questions. On November 22, 2021, a belatedly filed 10-Q acknowledged only what Tattooed Chef deemed to be immaterial errors.

Suddenly though, three months later, the company reversed course and now admits its accounting errors are material.

On March 11, 2022— two weeks before its auditor quit— Tattooed Chef acknowledged in a filing its financial statements for the first three quarters of 2021 should longer be relied upon as they contain material errors. The company will restate its financials for those periods and blames an accumulation of immaterial errors. In addition to accounting trouble, Tattooed Chef has exhibited a pattern of inaccuracy unrelated to financials in public filings:

*Two Tattooed Chef documents— filed on the same day with the SEC— list different ages for the company’s new CFO (the second in 14-months and someone investors were told would not be CFO once TTCF became a publicly traded company)
*CEO Salvatore “Sam” Galletti’s biography is inconsistent with California business records we’ve obtained, which indicate Tattooed Chef’s predecessor company, Stonegate Foods, was founded six years earlier than TTCF’s website claims
*We also know— based on bills of lading, or the detailed list of a shipment of goods— Tattooed Chef is still using the Stonegate Foods name despite Galletti’s bio saying the name was changed in 2015

Tattooed Chef shares are down 19.4% since our report was published. Unless the company’s trouble is behind it for good, we suspect shares have farther to fall. To justify its valuation when we first published our report — $1.4 billion— the market expected Tattooed Chef to grow sales 35% annually for fifteen years, immediately increase NOPAT margin from (7%) to 10%, and increase its market share from less than 1% to more than 50%.

Even if Tattooed Chef hits its long term growth forecasts and achieves 40% market share— generating sales above that of food giants like Conagra, B&G Foods, and Flowers Foods— our model suggested Tattooed Chef had 72.9% downside risk, and that shares are worth less than $5.00.