Hudson Labs Red Flags - Dirty Laundry
Welcome to our weekly reports featuring impactful and unusual disclosures as extracted by Bedrock AI’s algorithms.
Filings from the week of September 27 - October 1 2021
IBIO INC (BIO)
10-K | Market cap: $200M
iBio is a vaccine manufacturer. iBio has been the subject of short reports in the past.
iBio likely won’t meet diligence milestones under their license agreement with the University of Pittsburgh because they are unlikely to file a new drug application on time. [1]
iBio recently started employing the CEO’s wife. [2]
iBio reclassified operating expenses in Q3 2021 due to an “error”. The result of the reclassification is that more expenses are classified as R&D and fewer as G&A. The new classification will be used going forward. [3]
iBio has liquidity risks including a going concern issue. [4]
“We are unlikely to file an investigational new drug application by December 31, 2021 so we have engaged in discussion with UP to extend the deadlines.”
“The Company terminated its agreement with KBI consulting effective March 31, 2021, at which time Mr. Isett’s wife became an employee of the Company with a salary consistent with her consultant rate. ”
“Disclosure of Prior Period Financial Statement Immaterial Errors Operating Expense Reclassifications The Company reclassified certain expenses on its Condensed Consolidated Statement of Operations effective for the third quarter of fiscal 2021….The Company assessed the materiality of this error in accordance with SAB No. 99 “Materiality” and Accounting Standards Codification 250 Accounting Changes and Error Corrections and determined that this was an immaterial error.”
"In the past, the history of significant losses, the negative cash flow from operations, the limited cash resources on hand and the dependence by the Company on its ability – about which there was uncertainty – to obtain additional financing to fund its operations after the current cash resources are exhausted raised substantial doubt about the Company's ability to continue as a going concern."
PIONEER BANCORP INC MD (PBFS)
10-K | Market cap: $300M
Pioneer Bancorp is the holding co of Pioneer Bank.
During the year, the company restated their FY19 financial statements due to a failure to accrue loan balance impairments in the correct period. [1]
The company’s estimated maximum exposure from litigation to be $52.5 million in excess of current accruals, and has expensed $4.5M in ligation expenses (excluding fees) for the current year. [2]
“The Restatement results from a technical accounting correction to reflect the Mann Entities-related $15.8 million Loan Balances Impairment as a recognized (Type I) subsequent event in the quarter and fiscal year ended June 30, 2019…. On February 12, 2021, the Audit Committee of the Board of Directors of the Company, after consultation with management, determined that certain financial statements previously issued by the Company should be restated and no longer relied upon (the “Restatement”). [Red flag from quarterly statement]”
“Excluding legal fees and expenses, litigation-related expense of $4.5 million was recognized for the year ended June 30, 2021 (none in 2020). For those matters for which a loss is reasonably possible and estimable, whether in excess of an accrued liability or where there is no accrued liability, the Company’s estimated range of possible loss is $0 to $52.5 million in excess of the accrued liability, if any, as of June 30, 2021. ”
A few other interesting Red Flags from this week
Affirm Holdings (AFRM) changed their data model for credit losses, leading to a decrease in allowance and increase in operating expenses of $48M:
"This change in model resulted in a decrease in the allowance of approximately $48.2 million."
AFRM also recorded a $5M reduction in revenues related to the PTON recall. And more.
Oracle (ORCL) offset expenses with a one-time gain in Q3, 2021:
"These constant currency expense increases were partially offset by lower sales and marketing expenses, which decreased primarily due to an allocation of the gain from the operating asset sale..."
McCormick & Co (MKC) offset tax expense with $13M of tax benefits due to a change in their "assessment of the technical merits of that position".
"Income tax expense for the three months ended August 31, 2021 included $22.9 million of net discrete tax benefits consisting principally of the following: (i) $13.3 million of tax benefits due to the partial release of certain reserves...."
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