Updated: Aug 10
DOLE, CINC, ASTR, RBLX, TSLA, INVA, TTCF
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Filings from the week of March 23 - March 29.
DOLE reported the recall for its packaged salads relating to a listeria outbreak but failed to mention the deaths linked to the outbreak. DOLE also simultaneously reported effective AND ineffective internal controls (oops). CINC disclosed going concern issues and a restatement.
In case you missed it, the SEC published new comment letters to TSLA last week. Read more here.
Top Red Flags
ASTRA SPACE INC (ASTR) | 8-K | $1.1B - ASTR fired its auditors Grant Thornton and hired PwC for FY 2022. This is the SECOND TIME in less than a year that ASTR fired its auditors! The company dismissed WithumSmith + Brown as its auditors back in June 30, 2021. ASTR reported ineffective controls in its most recent 10-Q filing.
ROBLOX CORP (RBLX) | 8-K | $30B - RBLX announced the resignation of its Controller and Principal Accounting Officer, Brett Tolley, on March 23, 2022. The company had control issues in the past. RBLX previously identified ineffective controls, which led to the restatements of its FY 2018 and FY 2019 financial statements. The company’s controls were not audited in FY 2021.
TATTOOED CHEF INC (TTCF) | 8-K | $1.1B - After giving an adverse opinion on TTCF’s internal controls for FY2021, BDO stepped down as auditors for the company. TTCF will hire Deloitte as the new auditors.
DOLE PLC (DOLE)
20-F | Market Cap: $1.2B
DOLE, the largest fruit and vegetable producer in the world, reported the January 2022 product recall for its packaged salads, which were contaminated with listeria. The recalled products were harvested in Springfield, Ohio and Soledad, California.  The company estimated losses of approximately $15M due to this outbreak and recall, “subject to change” as further developments arise.  According to a February 2022 report by the Centers for Disease Control and Prevention (CDC), two deaths were linked to the listeria outbreak from DOLE’s packaged salads.  Nevertheless, DOLE’s annual report, which was filed on March 22, 2022, made no mention of these deaths relating to the product recall. DOLE also reported deficiencies in its controls over financial reporting during FY 2021. The control issues related to its journal entries process and information technology.  Although DOLE reported material weaknesses in controls at December 31, 2022, the CEO and CFO concluded that its disclosure controls and procedures were effective for FY 2021.  Certainly an inconsistency here.
“On January 7, 2022, Dole issued a voluntary recall of certain packaged salads processed at the Fresh Vegetables segment’s Springfield, Ohio and Soledad, California plants containing product harvested using a specific piece of equipment due to a possible contamination of that equipment by Listeria occurring in the natural environment.”
“Total expected exceptional one-off costs in fiscal year 2022 related to the recalls and plant suspensions are approximately $15.0 million. However, the total impact of both recalls and the plant suspensions is uncertain and may be subject to change based on newly identified facts, penalties or other potential claims.”
“As of December 31, 2021, we have identified two material weaknesses in our internal control over financial reporting (neither of which resulted in the identification of a material misstatement in our consolidated financial statement for the year-ended December 31, 2021). A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the consolidated financial statements will not be prevented or detected on a timely basis. First, we identified a material weakness in our internal controls over the manual review of journal entry postings in the legacy Total Produce group general ledger, and second, we identified that the design necessary for an effective control environment with certain information technology general controls was not adequate for certain divisions in our legacy Total Produce group.”
“Management carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of December 31, 2021. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2021 so as to provide reasonable assurance that (1) information required to be disclosed by the Company in the reports that the Company files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.”
CINCOR PHARMA INC (CINC)
20-F | Market Cap: $780M
CinCor Pharma Inc. (CINC), a clinical-stage pharmaceutical company, reported ineffective controls relating to the tracking and disclosure of its outstanding common stock. This led to adjustments to its FY 2019 and FY 2020 financial statements.  As a clinical-stage pharmaceutical company with 15 employees, CINC is still undergoing research & development for its one and only product CIN-107.  It hasn't generated revenues since inception in 2018. Although CINC raised funds through its IPO in January , the company doesn’t have enough money to make it 12 months without more funding, noting going concern issues.  CINC will need even more financing to make progress on launching CIN-107.  If the company is unable to raise capital, it could be forced to terminate the development.  CINC reported that its business is entirely dependent on the success of CIN-107.  The company is still in the early stages of development for CIN-107. 
“Although we are not yet subject to the certification or attestation requirements of Section 404 of the Sarbanes-Oxley Act, in the course of reviewing our annual financial statements for our initial public offering, management and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting with respect to the accumulation, tracking, and disclosure of our outstanding common stock that was deemed to be remediated as of the date of this filing. As a result of such material weakness, there were adjustments to the disclosure of common stock and resulting impact on our net loss per share required in our 2020 and 2019 financial statements.”
“We are a clinical-stage biopharmaceutical company focused on developing our lead clinical candidate, CIN-107, for the treatment of hypertension and other cardio-renal diseases. CIN-107 is a highly selective, oral small molecule inhibitor of aldosterone synthase, the enzyme responsible for the synthesis of aldosterone in the adrenal gland.”
“Our history of recurring losses and anticipated expenditures raises substantial doubts about our ability to continue as a going concern.”
“Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, CIN-107 and any future product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.”
“We will require substantial additional funding to finance our operations. If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate our development of CIN-107 or other operations.”
“Our business is entirely dependent on the success of one clinical development program, CIN-107, for which we are currently pursuing clinical development in various clinical trials. Our future success is substantially dependent on the successful clinical development and regulatory approval of CIN-107. If we are not able to obtain required regulatory approvals for CIN-107 or any future product candidates, we will not be able to commercialize CIN-107 or any future product candidates and our ability to generate revenue will be adversely affected.”
“Developing commercially viable manufacturing processes for CIN-107 is a difficult and uncertain task and requires significant expertise and capital investment. We are still in the early stages of developing and implementing manufacturing processes for CIN-107.
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