On December 26, 2018, the SEC levied a fine on a company that failed to follow the Regulation S-K Item 10 (e) guidance concerning the use of non-GAAP measures. Specifically, the company did not present the most directly comparable GAAP measure with equal or greater prominence in the headline and highlights in two of its earnings releases.
As you can read about here, the issue was aggravated because while the company touted increases in non-GAAP measures such as adjusted EBITDA, which showed “profitability” in the headline and highlights of its earnings releases, the comparable GAAP measure, net loss, had actually worsened. It clearly raises concerns when a non-GAAP measure shows profitability and the comparable GAAP measure shows a loss and where the measures are moving in different directions.
The company agreed to pay a fine of $100,000.
As always, your thoughts and comments are welcome!