BYND, CORZ, RUMBL, CPTN, ETWO
Filings from the week of April 6 - April 12.
Top Red Flags
E2OPEN PARENT HOLDINGS INC (ETWO) | 8-K | $2.5B - ETWO announced the restatement of its financial statements for the fiscal year ended December 31, 2020 relating to its accounting classification of redeemable Class A common stock. This restatement occurred after “a series of mergers” during 2020. Last month, ETWO’s CFO announced his retirement from the company.
BEYOND MEAT INC (BYND) | 8-K | $2.8B - BYND announced a proposed settlement on a shareholder derivative lawsuit alleging top executives of breaching their fiduciary duties by altering food safety reports.
CORE SCIENTIFIC INCTX (CORZ) | 8-K | $2.5B - CORZ reported the resignation of Michael Truzpek, the company’s Executive Vice President, CFO, and Principal Financial Officer. The announcement came shortly after CORZ’s 10-K filing on March 30, 2022, which reported ineffective controls.
CEPTON INC (CPTN) | 8-K | $450M - CPTN reported a same-day CFO resignation on April 5th. CPTN previously reported restatements and has filed FIVE NT forms since 2019.
From the SEC
WHITING PETROLEUM CORP (WLL) | SEC Letter | $3.2B - Newly public correspondence shows that the SEC was responsible for WLL’s financial statement restatement last month. Management had initially concluded that errors were immaterial and controls were functioning but the SEC instructed them to “reassess their conclusion” and restate their financials. WLL did not press release the restatement and the share price has increased since then on news of a merger.
LIGHTSPEED COMMERCE INC (LSPD) | SEC Letter | $4.5B - LSPD, a Canadian company that is not covered by the Bedrock platform, has been asked to revise their revenue disclosures in the FY2021 40-F.
RUMBLEON INC (RMBL)
10-K | Market Cap: $390M
RumbleON (RMBL), which operates a car and motorcycle e-commerce platform, has struggled to keep the same auditors. In fact, RMBL has had three different auditors since 2018, which include Scharf Pera & Co PLLC, Grant Thornton LLP, and Dixon Hughes Goodman LLP.
The shuffling of auditors coincided with accounting issues at RMBL. Dixon Hughes Goodman LLP, the company’s most recent auditors, issued an adverse opinion on the company’s internal controls as of December 31, 2021. [1]
RMBL reported that its ineffective controls related to many different factors, including segregation of duties conflicts, lack of reconciliations for inventory, and lack of review controls on accounting estimates relating to mergers and acquisitions, just to name a few. [2]
These unfavorable disclosures were reported after RMBL filed a notification of late filing (NT 10-K) on March 16, 2022.
Leading up to its 10-K filing, both RMBL’s Executive Vice Chairman and COO announced their resignations on February 11, 2022. [3]
- “The Company is now subject to the requirement to include in this 2021 Form 10-K our auditor’s attestation report on its assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act (“SOX”). We and our auditors have identified deficiencies in our internal control over financial reporting as disclosed in this 2021 Form 10-K as required under Section 404 of SOX. As some of these deficiencies are deemed material weaknesses in internal control over financing reporting, our auditors have issued an adverse opinion in their assessment of our internal control over financial reporting. The issuance of an adverse opinion regarding our internal control over financial reporting could adversely impact investor confidence in the accuracy, reliability, and completeness of our financial reports.”
- “The following material weaknesses in our internal control over financial reporting have been identified:
- Information technology general controls particularly as such controls related to user access, program change management, and ineffective complementary user-organization controls, which limited management’s ability to rely on technology dependent controls relevant to the preparation of our financial statements.
- Controls over the period end close process, including the review and approval process of journal entries, balance sheet account reconciliations, segregation of duties conflicts, and consolidation of intercompany entries.
- Documentation and design of controls over the recording and reconciliation of inventory.
- Review of key assumptions and estimates related to purchase accounting for significant acquisitions.
- The control environment, risk assessment, control activities, information and communication, and monitoring components of the Company’s internal control framework such that internal control weaknesses were not detected, communicated, addressed with mitigating control activities, or remediated in a timely manner."
3. “On February 11, 2022, William Coulter, a director and the Executive Vice Chairman of the
Company, and Mark Tkach, a director and the Chief Operating Officer of the Company,
resigned from all positions with the Company. The Company appointed Peter Levy, the President of the Company, to also serve as Chief Operating Officer of the Company.”
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