Hudson Labs Red Flags - Dirty Laundry
Filings from the week of June 14 - June 18,2021
EHANG HOLDINGS LTD (EH)
20-F | Market cap: $2B
EHang filed their annual report late, having missed their initial May filing deadline.
The company disclosed new material weaknesses in internal controls arising from insufficient controls for tracking shipping records and monitoring collection of accounts receivables. [1]
Revenue concentration has increased with one customer accounting for 51% of revenues. [2]
Accounts receivable has increased significantly. Notably decreases in unbilled revenues were due to impairment, rather than billing or collection. [2, 3]
Ehang’s prior year 20-F was assessed as high risk by our algorithms and featured in our short concordance newsletter.
- “We and our independent registered public accounting firm also identified two new material weaknesses in our internal control over financial reporting as of December 31, 2020 relating to our lack of sufficient controls for properly tracking the shipping records of the AAVs and monitoring of the collection of accounts receivable on a timely basis. ”
- “We have substantial customer concentration and we have experienced a significant increase in accounts receivable. Due to the short history of our business and that we have not achieved significant scale, we had and expect to continue to have customer concentration.”... “In 2018, 2019 and 2020, the largest customer accounted for 30%, 24% and 51% of our revenues, respectively.”
- “In 2020, the significant increase in Accounts receivable was due to more sales of passenger-grade AAVs during 2020, the decrease in the Unbilled revenue was primarily due to impairment of balances amounted to RMB2,800 (US$429) provided in the general and administrative expenses in the Group’s consolidated statements of comprehensive loss.”
MIX TELEMATICS LTD (MIXT)
10-K | Market cap: $350M
On May 20, 2021, the company was named in a new patent infringement case in Texas relating to their geo-fencing products and On-Board computers. [1]
The company incurred $1.1M in restructuring costs as part of a plan to minimize the business effect of Covid-19. These costs are excluded from Adjusted EBITDA. [2]
- “As part of the headcount reductions in fiscal 2021, we incurred a $1.1 million restructuring charge as we committed to plans to restructure certain parts of our business as a measure to minimize the adverse economic and business effect of the COVID-19 pandemic and to re-align resources to our current business outlook and cost structure.”
- “This patent infringement case was filed on May 29, 2021, in United States federal court in the Eastern District of Texas. In the complaint, PerDiemCo alleges that MiX Telematics’ “ELD and geo-fencing products and services” including “MiX On-Board Computers (e.g. 3000 or 4000 Series products),” MiX Rovi II, MiX Fleet Manager, and MiX Telematics’ related Software as a Service infringe United States patent numbers 10,382,966; 10,021,198; 9,871,874; 9,680,941; 10,277,689; 10,602,364; 10,284,662; 10,397,789; 10,819,809; 10,171,950.”
Auditor Changes
AMERIS BANCORP (ABCB)
2021-06-15 | 8-K | Market cap: $3B
The firm dismissed Crowe LLP and appointed KPMG LLP as the firm’s independent auditors. Crowe LLP had identified a material weakness in internal control in their FY19 audit which was considered remediated during 2020.
NICOLET BANKSHARES INC (NCBS)
2021-06-03 | 8-K | Market cap: $700M
The firm dismissed Wipfli LLP and appointed BKD LLP as the firm’s independent auditors. The dismissal of Wipfli followed the hiring of H. Phillip Moore, Jr. as CFO, who previously worked with Wipfli as their Southeast US Market Leader.
CITI TRENDS INC (CTRN)
2021-06-09 | 8-K | Market cap: $700M
The firm dismissed KPMG and appointed Deloitte as the firm’s independent auditors. The dismissal was effective immediately after the filing of the company’s 10-Q.
Auditor Changes?
GAN LTD (GAN)
2021-06-08 | 8-K | Market cap: $700M
There was some confusion as to whether Gan’s auditors have changed. On June 2, 2021, GAN received notice that BDO USA had ceased providing services based on dismissal by GAN’s audit committee. The company advised BDO that the audit committee had not taken any formal actions to dismiss them and did not have authority to dismiss an independent auditor.
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