Company: CODI-PB
Filing Date: 2025-12-08
Form Type: 10-K/A
Source: 0001345126-25-000078
Chunk: 8

Company: Compass Diversified Holdings
Filing Date: 2025-12-08
Form: 10-K/A
Chunk 8
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 the “Advisors”).

On May 7, 2025, after considering the advice and recommendations of the Company’s management and the Advisors, and discussion with the Company’s independent registered accounting firm, Grant Thornton LLP, the Audit Committee concluded that the Company’s consolidated financial statements and other financial information for the fiscal year ended December 31, 2024 should not be relied upon due to the materiality of the preliminary findings of the Lugano Investigation.

As the Lugano Investigation progressed, the Advisors observed certain unrecorded financing arrangements and irregularities in sales, cost of sales, inventory, and accounts receivable recorded by Lugano, and confirmed to the Audit Committee that the identified irregularities also existed during fiscal years 2022 and 2023. Accordingly, as previously disclosed in a Current Report on Form 8-K filed with the SEC on June 25, 2025, on June 18, 2025, the Audit Committee, after consultation with the Company’s management, the Advisors, and Grant Thornton, further concluded that the previously issued financial statements and other interim and full-year financial information for the fiscal years ended December 31, 2023 and 2022 should also no longer be relied upon.

The Lugano Investigat ion is now complete. The Luga no Investigation has concluded that the former Lugano chief executive officer deliberately engaged in fraudulent activity by, among other things, entering into off-balance sheet financing arrangements with third parties in violation of Company policies and directives and the terms of the Company’s intercompany credit agreement with Lugano, misrepresenting the existence and valuation of inventory, and causing the recording of fictitious sales. In doing so, the former Lugano chief executive officer sought to

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circumvent financial controls (including, among other things, through the creation and use of false documents and manipulation of Lugano employees who exhibited a lack of due care); ignored directives from the Company and the Audit Committee to implement additional controls; and actively recorded or edited, or caused the recording or editing of, false entries in Lugano’s accounting and financial records. The accounting errors at Lugano were determined to be a direct result of the Lugano’s former chief executive officer’s misconduct, which entailed a scheme that included the CEO’s repeated circumvention and override of internal controls implemented by the Company, creation of false shipping documents and invoices, and fabricated correspondence, and collusion with third-party providers.

Management identified misstatements in each of the Affected Periods