Hudson Labs Red Flags - Dirty Laundry
Welcome to our weekly reports featuring impactful and unusual disclosures as extracted by Hudson Labs' algorithms.
Filings from the week of August 9 - 13, 2021
OUSTER INC (OUST)
10-Q | Market cap: $1.3B
In June 2021, the SEC notified the company of an investigation relating to their S-4 registration statement filed December 22, 2020. [1]
A senior advisor serving as board chair resigned in June 2021, forfeiting 1,614,492 options. No options vested from this grant prior to his resignation. [2]
The company continues to have unremediated internal controls around accounting personnel knowledge, segregations of duties, journal entries, and IT general and access. [3]
- “On June 10, 2021, we received a letter from the SEC notifying us of an investigation and document subpoena. The subpoena seeks documents regarding projected financial information in CLA’s Form S-4 registration statement filed on December 22, 2020. We intend to cooperate with the SEC’s subpoena.“
- “ The Company granted an option to purchase 1,614,492 shares of Company common stock to a senior advisor serving on the Company’s board of directors as chair with 20% of the total number of such option shares vesting on each of the first five anniversaries from the senior advisor’s employment start date, subject to his continued employment with the Company and provided that option grant will only be exercisable in the event that the closing trading price per share of the Company stock equals or exceeds 130% of the exercise price per share of the option for 30 consecutive trading days. The senior advisor has resigned in June 2021 and the option to purchase 1,614,492 shares of Company common stock was forfeited. ”
- “Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of June 30, 2021 due to the material weaknesses in our internal control over financial reporting described below...”
The company has reached a ‘settlement in principle’ NYDFS’s Consumer Protection and Financial Enforcement Division relating to anti-money laundering and cyber-security issues, LIDAR INC (VLDR)
10-Q | Market cap: $1.3B
The company is in arbitration and has applied for an injunction and restraining order against their former executive chairman David Hall. [1]
The audit committee investigation into David and Marta Hall has cost $1.4M this quarter, and $3.7M year-to-date. Marta Hall is the former CMO, and is a current director. [2]
Travel restrictions have been causing production delays at a key manufacturing plant in Thailand during the last six months. [3]
- “Furthermore, subsequent to the removal of Mr. Hall as the chair of our Board and these resignations, Mr. Hall has made statements to the press and in a Schedule 13D criticizing our Board and management. Furthermore, on June 9, 2021, we initiated an arbitration proceeding against David Hall, alleging breach of contract and misappropriation of our confidential, proprietary, and trade secret information. To protect our intellectual property and in aid of the arbitration process, on July 2, 2021 we filed an application with the Santa Clara County Superior Court for a temporary restraining order and preliminary injunction to prohibit Mr. Hall from any further copying, disclosure or use of our intellectual property and to require him to return all such property to us ”
- “For the three and six months ended June 30, 2021, general and administrative expenses included $1.4 million and $3.7 million, respectively, in legal and professional expenses in connection with our Audit Committee’s investigation, announced in the first quarter of 2021, into conduct by David Hall, the Company’s former Chairman, and Marta Hall, the Company’s former Chief Marketing Officer and a current director of the Company.”
- “As a result of COVID-19, we experienced some production delays during the first six months of 2021 due to travel restrictions to Thailand, the location of one of our key manufacturing partners.”
BLINK CHARGING CO (BLNK)
10-Q | Market cap: $1B
In June, the company agreed to pay their CEO, Mr. Farkas, $1M to resolve a dispute regarding the transfer of 260,000 shares of company stock to an institutional investor. The expense was recorded as a settlement loss during the quarter. [1]
In June, the company entered into a new agreement with their CEO Mr. Farkas, agreeing to suspend the sales commission agreement with an entity controlled by the CEO for as long as he remains a full-time employee earning at least $30k per month. [2]
The company has reduced their obsolete inventory provision by $109k and $191k for the three and six month ended June 30, respectively, due to increased sales of residential charger units. [3]
- “Finally, the Company and the CEO agreed to resolve a dispute over the CEO’s transfer of 260,000 shares of the Company’s common stock to a prior institutional investor through a settlement agreement and payment of $1,000,000 from the Company to the CEO.”
- “The Employment Agreement provides that a commission sales agreement entered into on November 17, 2009 between an entity controlled by the CEO and a predecessor to the Company will remain suspended and no payments will be due thereunder for as long as the CEO is a full-time employee of the Company and is paid a monthly salary of at least $30,000.”
- “Furthermore, the three months ended June 30, 2021 included a reduction in the provision for excess and obsolete inventory of $109,351 relating to the increased sales of residential home charger units.”... “Furthermore, the six months ended June 30, 2021 included a reduction in the provision for excess and obsolete inventory of $191,212 relating to the increased sales of residential home charger units.”
SQUARESPACE INC (SQSP)
10-Q | Market cap: $6B
Squarespace filed their first 10-Q since their direct listing in May.
The company has recorded accelerated amortization on customer relationships acquired in it’s 2019 purchase of Videolicious. Estimated customer life decreased by 70% from 96 months to 26 months. [1]
Tock, a fully owned subsidiary has identified an unremediated material weakness in internal controls. [2]
- “Amortization of finite-lived intangible assets was included in the following line items on the condensed consolidated statements of operations: The increase in marketing and sales expense during the six months ended June 30, 2021 includes accelerated amortization of $3,230 associated with the Company’s acquired Videolicious, Inc. (“Videolicious”) customer relationships asset due to the change in useful life from 96 months to 26 months.”
- “As disclosed in our Final Prospectus for our Direct Listing filed with the SEC, pursuant to Rule 424(b)(4) on May 19, 2021, a material weakness over financial reporting was identified as of December 31, 2020 for Tock, Inc. (now Tock LLC, "Tock").”
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