February 5, 2015
By Alex Keown, BioSpace.com Breaking News Staff
DAVIS, Calif.— A Marrone Bio Innovations in-house audit released Thursday revealed employees provided faulty financial information to management, which led to investor lawsuits over fraudulent financial information last year, issues with the federal government and plunging stock prices.
In September of last year Marrone Bio, a manufacturer of bio-based pest management and plant health products for the agriculture, turf and ornamental and water treatment markets, disclosed it had found documents “calling into question” about $870,000 in reported revenue for the fourth quarter of 2013. That amounted to about 15 percent of that quarter’s revenue, according to news reports.
After that announcement the company said financial statements for the 2013 fiscal year, as well as the quarterly reports through March and June of 2014 could no longer be relied upon due to lack of compliance with generally accepted accounting principles. Lawsuits filed against the Davis-based company charge that investors were misled in regards to reported financial statements and earnings. The lawsuit also calls into question company statements regarding the commercial viability of some of its products. Within one day of announcing the issues surrounding the company’s financial statements, stock prices fell 44 percent.
The company began an audit in September 2014 after the faulty revenue issues were discovered. The audit, completed this month, found the employees misled the company in four different ways, which led to the faulty accounting. According to the company employees did not share transactional terms, sales personnel executed inaccurate “sales representation” letters and some employees mischaracterized storage and freight expenses. The audit also found that supply chain employees were directed to shop the wrong products to customers because the company did not have the correct product in stock.
The employees who were allegedly part of the misreporting are no longer with Marrone Bio Innovations, Inc.Marrone officials said they are evaluating the necessity of reissuing accurate financial statements, but cannot provide an estimate of when such a release could occur.
The San Francisco Regional Office of the U.S. Securities & Exchange Commission has opened an investigation into the original faulty financial information report. Company officials said they are cooperating fully with the investigation.
Marrone is also trying to return to compliance with NASDAQ filing requirements. The trading board informed the company in November 2014 it had failed to comply with listing rules. Last week Marrone was informed it has until May 13, 2015 to file any delinquent reports and regain compliance. The company went public in 2013.
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