Renovacare (RCAR), DCP Midstream (DCP), Bionano Genomics (BNGO) , and OpenText (OTEX)

Updated: Aug 10

Bedrock AI Red Flags - Dirty Laundry


Welcome to our weekly reports featuring impactful and usual disclosures as extracted by Bedrock AI’s algorithms.


Filings from the week of August 2 - 6.

 

RENOVACARE INC (RCAR)


10-Q | Market cap: $140M

In May 2021, the SEC filed a complaint alleging violation of antifraud provisions against the company’s Chairman. [1]


A company related to the Chairman made payments to the company’s former CFO for the CFO’s salary, on behalf of the company. [2]


Renovacare has not generated any revenue since inception. [3]


The company has material weaknesses in internal controls due to inadequate segregation of duties. [4]

  1. “On May 28, 2021 the SEC filed a civil complaint naming the Company and Harmel S. Rayat, RenovaCare Chairman as defendants (the “Complaint”). The Complaint charges Mr. Rayat and the Company with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and also charges Mr. Rayat with aiding and abetting the Company's violations of those provisions. The complaint also charges the Company with violating the reporting provisions of Exchange Act Section 15(d) and Rules 15d-11 and 12b-20 thereunder.”

  2. “During the three and six months ended June 30, 2020, Talia Jevan Properties, Inc. made payments totaling $5,287 and $10,811, respectively, to Stephen Yan-Klassen, former CFO who resigned in 2020, for his salary on behalf of the Company. Talia Jevan Properties, Inc. is a related party of Harmel S. Rayat, Chairman of the Board.“

  3. “The Company has not generated any revenue and has sustained recurring losses and negative cash flows from operations since inception.”

  4. “Based on this evaluation, management concluded that our internal control over financial reporting was not effective at June 30, 2021 due to inadequate segregation of duties consistent with control objectives.”

 

DCP MIDSTREAM (DCP)


10-Q | Market cap: $5.5B

The company has recognized $20M in impairments in the past 6 months, including:

  • a $13M impairment in the Logistics and Market segment due to negative long-term volume forecasts, and

  • a $7M impairment reflective of the subsequent sale of the Midwest revision Gathering and Processing Segment. [1]

These impairments follow a $648M of impairment losses recognized in the same period of the prior fiscal year. [2]


Impairment losses (including those associated with negative volume forecasts) have been excluded from adjusted EBITDA. [3]


The company continues to have collection issues stemming from Covid-19 that are impacting working capital. [4]

  1. “During the three and six months ended June 30, 2021 we recognized a $7 million impairment associated with certain assets in the Midcontinent region of our Gathering and Processing segment that were sold in July 2021, and determined that a triggering event occurred due to a negative outlook for long-term volume forecasts for an asset in our Logistics and Marketing segment resulting in an impairment of $13 million. ”

  2. “During the six months ended June 30, 2020, we recognized a $587 million impairment loss associated with certain asset groups in the Permian and South regions of our Gathering and Processing segment and an impairment of $61 million of our equity investment in Discovery Producer Services LLC (“Discovery”).”

  3. “Adjusted EBITDA — We define adjusted EBITDA as net income or loss attributable to partners adjusted for (i) distributions from unconsolidated affiliates, net of earnings, (ii) depreciation and amortization expense, (iii) net interest expense, (iv) noncontrolling interest in depreciation and income tax expense, (v) unrealized gains and losses from commodity derivatives, (vi) income tax expense or benefit, (vii) impairment expense and (viii) certain other non-cash items. Adjusted EBITDA further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. ”

  4. “Certain counterparty billings during this time are under dispute and are taking longer to collect than normal, which have negatively impacted working capital at June 30, 2021.”

 

BIONANO GENOMICS INC (BNGO)


10-Q | Market cap: $1.7B

The company acquired Lineagen in August 2020, paying $1.9M to Lineagen’s creditors, assumed $2.9M in liabilities, and paid $1.1M to satisfy outstanding promissory notes. [1] Revenues generated by Lineagen business are insufficient to fund operations. [2]


In March, the company entered into an at-the-market (ATM) agreement which provides for the sale of up to $350M in common shares. [3]


This ATM agreement followed significant issuances of common stock:

  • Fiscal 2020 - $39M for 33.2M shares (excludes Lineagen acquisition)

  • January 2021 - $331M for 71.7M shares [4]


  1. “The total number of shares of the Company’s common stock issued or reserved for issuance as consideration for the Merger was 6,167,510 shares, subject to adjustment for cash, accounts receivable, unpaid indebtedness, unpaid transaction expenses and certain other liabilities of Lineagen (the “Merger Shares”). 925,126 of the Merger Shares (the “Escrowed Shares”) will be held in an escrow fund for purposes of satisfying any post-closing purchase price adjustments and indemnification claims under the Merger Agreement.Also as consideration for the Merger, pursuant to the Merger Agreement, the Company paid approximately $1.9 million in cash to certain creditors and assumed certain liabilities of Lineagen totaling approximately $2.9 million, reflective of the Company’s preliminary estimate of the post-closing purchase price adjustment (which adjustment is subject to finalization pursuant to the terms of the Merger Agreement). In addition, on August 21, 2020, concurrent with the Closing, the Company paid approximately $1.1 million to satisfy all outstanding principal and accrued interest amounts due pursuant to that certain Promissory Note, dated April 22, 2020, by and between Lineagen and Silicon Valley Bank (the “Lineagen PPP Loan”), issued pursuant to the CARES Act administered by the SBA.”

  2. “To date, the revenue generated by our Lineagen business has been insufficient to fund operations.”

  3. “In March 2021, we entered into a new at-the-market facility, or the Cowen ATM, with Cowen and Company, LLC, or Cowen, which provides for the sale, in our sole discretion, of shares of our common stock having an aggregate offering price of up to $350.0 million through or to Cowen, acting as sales agent or principal. To-date, no shares have been issued pursuant to the Cowen ATM.”

  4. “During the fiscal year ended December 31, 2020, we sold 27,025,384 shares of common stock under the Sales Agreement for aggregate gross proceeds of approximately $22.1 million and from January 1, 2021 through January 11, 2021, we sold 6,298,152 shares of common stock under the Sales Agreement for aggregate gross proceeds of approximately $16.9 million. On January 12, 2021, we announced the completion of an underwritten public offering of 33,368,851 shares of our common stock for gross proceeds, before deducting underwriting discounts and commissions and offering expenses, of approximately $101.8 million. Moreover, on January 25, 2021, we announced the completion of an underwritten public offering of 38,333,352 shares of our common stock for gross proceeds, before deducting underwriting discounts and commissions and offering expenses, of approximately $230.0 million.

 

OPEN TEXT CORP (OTEX)


10-K | Market cap: $18B

The company recorded $30M in restructuring reserve reversals related to lease termination costs. [1]


One of the company’s directors earns consulting fees for acquisitions, including $450/hour for services and a percent of acquired company’s revenues [2]. Amounts earned under this agreement were 2021 - $37k, 2020 - $0.7M, 2019 - $0.6. [3]


The company provides corporate perks including club memberships, financial planning and tax preparation to their executive officers. [4]

  1. “Included in the special charges for Fiscal 2021 were net recoveries of $29.5 million associated with the reversal of lease liabilities from facilities abandoned in the prior fiscal year, which have since been assigned or early terminated as well as the release of other facility charges accrued for under the plans.”

  2. “Mr. Sadler is paid at the rate of Canadian dollars (CAD) $450 per hour for services relating to his consulting agreement. In addition, he is eligible to receive a bonus fee equivalent to 1.0% of the acquired company's revenues, up to CAD $10.0 million in revenue, plus an additional amount of 0.5% of the acquired company's revenues above CAD $10.0 million. The total bonus fee payable, for any given fiscal year, is subject to an annual limit of CAD $450,000 per single acquisition and an aggregate annual limit of CAD $980,000.”

  3. “During the year ended June 30, 2021, Mr. Stephen Sadler, a member of the Board of Directors, earned $37 thousand (year ended June 30, 2020 and 2019—$0.7 million and $0.6 million, respectively) in consulting fees from OpenText for assistance with acquisition-related business activities.”

  4. “In order to remain competitive in the marketplace, our Named Executive Officers are entitled to some limited benefits that are not otherwise available to all of our employees, including: •An annual executive medical physical examination;•A base allowance to cover expenses such as financial planning, tax preparation or club memberships.”

 

Bedrock AI is software that extracts red flags for all SEC filers and predicts crisis in real-time. Protect your portfolio. Visit bedrock-ai.com to request a demo of our institutional product.

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