Marietta, Ga.-based MiMedx last July ousted ex-CEO Parker Petit and president & COO William Taylor amid a board-directed independent investigation that had already prompted the departure of CFO Michael Senken and treasurer John Cranston in June.
At the time, MiMedx said it would restate all of its earnings reports going back to 2012 and was cooperating with U.S. Securities & Exchange Commission and Justice Dept. investigations into the matter.
The company later said that all four executives’ departures were for cause, triggering the forfeit of all equity and incentive awards for the executives and Petit’s resignation from the board. Petit and Taylor denied the allegations in a statement from their lawyer.
Last week MiMedx, which makes regenerative and therapeutic biologics using human placental tissue allografts, said the company hired by its board’s audit committee resigned Dec. 4 after determining that it can’t rely on the company’s internal financial controls or the representations from the former executives and their interim replacements.
“EY advised the company that the internal controls necessary for the company to develop reliable financial statements do not exist,” MiMedx said in a Dec. 7 regulatory filing. “Although EY could accept representations from the current interim CEO and interim CFO based on their knowledge, EY advised the company that EY is unable to rely on representations from them because, as of the date of the resignation, the current interim CEO and interim CFO, in turn, would have needed to rely on representations from certain legacy management personnel still in positions that could affect what is reflected in the company’s books and records.”
The accounting firm said it would need to “significantly expand” the scope of its audit, “due to material allegations of inappropriate financial reporting, material allegations of noncompliance with laws and regulations, the findings to date from the independent investigation conducted by the Audit Committee into these allegations, and the lack of internal controls necessary for the company to develop reliable financial statements,” MiMedx said in the filing.
“EY advised the company that information has come to EY’s attention that EY has concluded materially impacts the reliability of previously issued financial statements, and the issues raised by this information have not been resolved to EY’s satisfaction prior to its resignation,” MiMedx said.
MDXG shares closed down -4.2% at $1.15 apiece Dec. 7.
Last week the company said it’s planning to lay off 24% of its workforce in a restructuring effort.