MiMedx is a medical device development and supply company, utilizing a number of different distributors to deliver its products.
According to the law firm press release, in December of 2016, MiMedx was sued by two former employees alleging wrongful termination in relation to their reporting of a "channel-stuffing scheme" to "fraudulently recognize revenue" with regard to a particular distribution contract. MiMedx denied these claims. And in September 2017, when market analysts published reports purportedly corroborating these allegations, among others, MiMedx again denied any wrongdoing and sued for defamation.
Then, on February 20, 2018, pre-market, MiMedx announced that the Company's audit committee "has engaged independent legal and accounting advisors to conduct an internal investigation into current and prior-period matters relating to allegations regarding certain sales and distribution practices at the Company. Company executives are also reviewing, among other items, the accounting treatment of certain distributor contracts."
On this news, the Company's stock fell more than 39% to close at $8.75 on February 20, 2018, causing tens of millions of dollars in losses to investors.
The complaint alleges that Defendants made false and/or misleading statements and/or failed to disclose that (i) MiMedx was engaged in a "channel-stuffing" scheme designed to inappropriately recognize revenue that had not yet been realized; (ii) the Company lacked adequate internal controls over financial reporting; and (iii) that as a result of the foregoing, MiMedx's publicly disseminated financial statements were materially false and misleading.