Facts

Amyris is an industrial biotechnology company that manufactures and sells natural, sustainably-sourced health and wellness products. On April 3, 2019, Shane Mulderrig filed a class action complaint alleging that Amyris, John Melo (CEO), and Kathleen Valiasek (former CFO) violated securities laws. Vincent Carbone was later named lead plaintiff.

PLAINTIFFS' CONTENTIONS: Plaintiff contended, among others, that defendants made material misrepresentations as to the company's financial results, its royalty revenues, and the effectiveness of its internal control over the financial reporting. At the core of plaintiffs' contentions was a new accounting rule, effective January 2018. The rule, Accounting Standard Codification Topic 606, generally allowed businesses to recognize certain revenue once performance obligations have been fulfilled rather than when payment has been received. The company began using this rule immediately when it became effective and the application of that rule gave the appearance of sizable growth. But despite defendants' awareness that reported royalty revenue was based on this materially inflated estimates of future sales-based royalties, defendants did not disclose this material information to its investors. Because of defendants' false and misleading statements, the company's publicly traded common stock was artificially inflated and precipitously declined thereafter when the truth was revealed: disappointing third quarter royalty revenues that missed projections by about $15 million and then, the company's inability to timely file its annual report due to defendants' continued evaluation of Amyris's internal control over financial reporting which could result in material deficiencies being reported. The first disclosure caused a near 30 percent stock drop whereas the second about 20 percent.

DEFENDANTS' CONTENTIONS: Defendants, individually and collectively, denied all claims and contentions of any wrongdoing, asserting they made no materially false or misleading statements and that they disclosed all material information required to be disclosed by federal securities laws.

Result

The case settled for $13.5 million in cash plus all interest or income earned.