Late last month Obalon pulled the plug on a $35 million stock offering to investigate allegations of improper revenue recognition during the company's fourth quarter. Obalon said that investigation is now complete and the allegations in the complaint are without merit.
"We took the whistleblower complaint very seriously and conducted a thorough investigation," said Les Howe, chair of Obalon's audit committee. "The investigators found no merit to any of the whistleblower allegations, determined that preliminary revenues were not misrepresented and that management did nothing to mislead investors."
Prior to its U.S. launch in January 2017, Obalon worked with its audit committee to develop a robust procedure for appropriately recognizing revenue, according to CFO Bill Plovanic.
"We hired a dedicated revenue recognition specialist who carefully analyzes our programs, develops a formal position on revenue recognition and presents that analysis to the company's auditors prior to implementing any accounting treatments," Plovanic said. "We have run marketing promotions in every quarter since launch in January 2017. We have followed our revenue recognition process every quarter, including the fourth quarter of 2017."
San Diego, CA-based Obalon sells a swallowable, gas-filled intragastric balloon system for the treatment of obesity, which FDA approved in September 2016.