Obalon Therapeutics (NSDQ:OBLN) said today it is terminating a $35 million offering after a whistleblower contacted the company’s independent auditors, KPMG LLP, with allegations of improper revenue recognition during its fourth quarter.
The San Diego, Calif.-based company priced the round last week, which was slated to close today, looking to offer 5.5 million shares at $5.50 per share, which would have netted it approximately $35 million.
Obalon said the allegations were reported late yesterday, which makes it “infeasible for the company to complete an investigation of the allegations prior to the intended closing of the public offering,” according to a press release.
The company said its audit committee will oversee an internal investigation of the allegations, and that it is “currently unable to predict the timing or outcome of the investigation.”
Obalon said it does not believe it will need to make material adjustments to the preliminary, unaudited revenue for its fourth quarter 2017 and full year 2017 as a result of the allegations.
The company said it will make further announcements regarding the outcome of the investigation “as soon as practicable.”
The medical device company produces an ingestible, gas-filled balloon designed for weight loss, which won FDA premarket approval in September 2016.
The Obalon device is indicated for weight loss in adults 30 to 100 pounds overweight, with a body mass index of 30 to 40, who have failed to lose weight through diet and exercise. The device is swallowed as a capsule which inflates with gas as it reaches the stomach, partially filling the stomach to help patients feel full and eat less.