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Investing.com -- Shares of Evolv Technology (NASDAQ: EVLV) tumbled 6.5% following the company’s announcement that it would delay filing its annual report on Form 10-K for the period ended December 31, 2024. The delay is attributed to the need for additional time to address misstatements in previous financial statements and to complete the financials for the year ended December 31, 2024.
The company disclosed that an internal investigation revealed accounting inaccuracies related to certain sales transactions, including premature or incorrect revenue recognition. These misstatements are considered material for the affected financial periods and have led to the restatement of consolidated financial statements for those times. Evolv Technology has identified material weaknesses in its internal control over financial reporting, which contributed to the restatement.
This news comes after the company had previously reported on October 25, 2024, that its financial statements for fiscal years 2022 and 2023, as well as several quarterly reports within those years, should not be relied upon. The investigation, conducted by an ad hoc committee of independent directors, found that certain sales to one of Evolv’s largest channel partners were subject to extra-contractual terms not shared with accounting personnel, resulting in misconduct by certain company employees.
Evolv has received an exception from Nasdaq, allowing it until May 19, 2025, to file any delinquent required periodic financial reports. The company is working expeditiously to prepare amended financial statements and expects to be current with all SEC filing requirements by the granted deadline.
The market’s reaction reflects concerns over the integrity of Evolv’s financial reporting and the effectiveness of its internal controls. Investors typically view delays in financial reporting and restatements as red flags, often leading to decreased confidence and a subsequent drop in share price.
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