Obalon Accused of Implementing Inadequate Internal Controls Over Financial Reporting
According to the complaint, Obalon Therapeutics, Inc. (NasdaqGM: OBLN) repeatedly attested in its public filings and press releases that its financial statements were prepared in accordance with United States generally accepted accounting principles. Obalon emphasized substantial revenue growth and improvements in its gross margin in its financial reports throughout the class period. It therefore came as a surprise when Obalon revealed on January 23, 2018, that a whistleblower contacted KPMG LLP, the company’s independent auditors, to allege that Obalon had improperly recognized revenue during the company’s fourth fiscal quarter of 2017. As a result, Obalon canceled its previously announced offering of 5,454,545 shares of its common stock at a price of $5.50 per share and said that its Audit Committee would investigate the allegations. On this news, Obalon’s stock fell nearly 77% from its IPO price of $15.00 per share to close at only $3.46 per share on January 23, 2018.
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