Company Delays Release of Third Quarter
Financial Results
Evolv Technology (“Evolv” or the “Company”) (NASDAQ: EVLV), a
leading security technology company pioneering AI-based screening
designed to create safer experiences, today announced that
shareholders and others should not rely upon certain of the
Company’s previously issued financial statements and that it will
delay filing its Quarterly Report on Form 10-Q for the period ended
September 30, 2024.
An ad hoc committee of independent directors (the “committee”)
of the Board of Directors of the Company (the “Board”), under the
direction of the Board, is conducting an internal investigation
that is focused on the Company’s sales practices, including whether
certain sales of products and subscriptions to channel partners and
end users were subject to extra-contractual terms and conditions
that impacted revenue recognition and other metrics, and if so,
when senior Company personnel became aware of these issues.
While the committee’s investigation is ongoing, the committee
has made a preliminary determination that certain sales, including
sales to one of its largest channel partners, were subject to
extra-contractual terms and conditions, some of which were not
shared with the Company’s accounting personnel, and that certain
Company personnel engaged in misconduct in connection with those
transactions. Furthermore, these extra-contractual terms and
conditions were withheld from the Company’s Audit Committee of the
Board (the “Audit Committee”) and the Company’s independent
registered public accounting firm, PricewaterhouseCoopers LLP
(“PwC”).
As a result of these preliminary findings, the committee has
determined that the accounting for certain sales transactions was
inaccurate and that, among other things, revenue was prematurely or
incorrectly recognized in connection with financial statements
prepared for the periods between the second quarter of 2022 and the
second quarter of 2024. The committee has determined that these
misstatements are material for certain financial statements
prepared for these periods and that the recognition of revenue in
the proper periods will impact each of those financial statements.
The committee currently estimates that, on a net basis (taking into
account revenue that was prematurely recognized but offset by
amounts appropriately recognized in subsequent periods) through
June 30, 2024, the sales transactions at issue have resulted in
premature or incorrect revenue recognition of approximately $4
million to $6 million. The committee anticipates that the vast
majority of this revenue was prematurely rather than incorrectly
recognized. This estimate is preliminary and subject to change
pending the conclusion of the investigation. Other previously
reported metrics that are a function of revenue were also misstated
as a result of these revenue misstatements.
Accordingly, on October 24, 2024, based on the committee’s
recommendation, the Board determined that the Company’s previously
issued consolidated financial statements and other financial data
for the fiscal years ended December 31, 2022 and December 31, 2023
contained in its Annual Report on Form 10-K, and its condensed
consolidated financial statements for the quarters and year-to-date
periods ended June 30, 2022, September 30, 2022, March 31, 2023,
June 30, 2023, September 30, 2023, March 31, 2024 and June 30, 2024
contained in its Quarterly Reports on Form 10-Q (collectively, the
“Non-Reliance Periods”), should no longer be relied upon because of
the misstatements described above. The Board also determined that
the Company’s disclosures related to such financial statements and
related communications issued by or on behalf of the Company with
respect to the Non-Reliance Periods should no longer be relied
upon. The Company is in the process of evaluating the impact on
internal control over financial reporting and expects to report one
or more additional material weaknesses in internal control over
financial reporting. Certain members of the Audit Committee and the
Board discussed this conclusion with PwC.
As a result of the investigation, the Quarterly Report on Form
10-Q filing and the Company’s earnings release for the third
quarter will be delayed.
The Board commented, “We recognize the importance of timely and
accurate financial disclosures and are working expeditiously to
conclude our thorough investigation. The Board is committed to
taking whatever remedial actions are necessary, so that the Company
can provide reliable information to our key stakeholders.”
The Board continued, “The fundamentals of our business remain
strong. We are seeing demand for our products and services that is
in line with our internal forecasts and consistent with our
long-term expectations of advancing our distribution model and
achieving the Rule of 40.”
The Company has self-reported these issues to the Division of
Enforcement of the U.S. Securities and Exchange Commission (the
“SEC”), which had been conducting a previously disclosed and
unrelated investigation. The Company is continuing to cooperate
with the SEC investigation.
The ad hoc committee has retained Debevoise & Plimpton LLP
as legal counsel, Cleary Gottlieb Steen & Hamilton LLP as its
independent legal counsel and Ankura Consulting Group as its
forensic accounting firm to conduct the investigation. The
committee is working closely with these outside experts to complete
the investigation and prepare amendments to the Company’s financial
statements and related filings as expeditiously as possible.
The Company will file a Form 12b-25, Notification of Late
Filing, with the SEC for its Quarterly Report on Form 10-Q for the
period ended September 30, 2024 to provide for additional time to
complete the committee’s internal investigation and prepare
amendments to the Company’s financial statements and related
filings.
The Company will provide a further update as soon as the
internal investigation is complete.
About Evolv Technology
Evolv Technology (NASDAQ: EVLV) is designed to transform human
security to make a safer, faster, and better experience for the
world’s most iconic venues and companies as well as schools,
hospitals, and public spaces, using industry leading artificial
intelligence (AI)-powered screening and analytics. Its mission is
to transform security to create a safer world to live, work, learn,
and play. Evolv has digitally transformed the gateways in many
places where people gather by enabling seamless integration
combined with powerful analytics and insights. Evolv’s advanced
systems have scanned more than a billion people since 2019. Evolv
has been awarded the U.S. Department of Homeland Security (DHS)
SAFETY Act Designation as a Qualified Anti-Terrorism Technology
(QATT) as well as the Security Industry Association (SIA) New
Products and Solutions (NPS) Award in the Law Enforcement/Public
Safety/Guarding Systems category, as well as Sport Business
Journal’s (SBJ) awards for “Best In Fan Experience Technology” and
“Best In Sports Technology”. Evolv®, Evolv Express®, Evolv
Insights®, Evolv Visual Gun Detection™, Evolv eXpedite™, and Evolv
Eva™ are registered trademarks or trademarks of Evolv Technologies,
Inc. in the United States and other jurisdictions. For more
information, visit evolv.com.
Forward-looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. We intend for such forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements
contained in Section 27A of the Securities Act of 1933, as amended
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical fact are
statements that could be deemed forward-looking statements,
including results and statements regarding the final outcome or
duration of the committee’s internal investigation, the estimated
impact on previously reported financial metrics, the impact on
internal controls over financial reporting, the delay of the
release of the Company’s Quarterly Report on Form 10-Q for the
period ended September 30, 2024, the filing of a Form 12b-25,
Notification of Late Filing, the timing of future SEC filings,
demand for the Company’s products and services, the Company’s
internal forecasts, long-term expectations and future actions by
our Board. Forward-looking statements involve known and unknown
risks, uncertainties and other important factors that may cause our
actual results and actions to be materially different from any
future results or actions expressed or implied by the
forward-looking statements, including, but not limited to, the
factors discussed under the caption “Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2023 filed with
the Securities and Exchange Commission ("SEC") on February 29,
2024, as any such factors may be updated from time to time in our
other filings with the SEC, including the Quarterly Report on Form
10-Q for the quarter ended June 30, 2024. The forward-looking
statements in this press release are based upon information
available to us as of the date hereof, and while we believe such
information forms a reasonable basis for such statements, it may be
limited or incomplete, and our statements should not be read to
indicate that we have conducted an exhaustive inquiry into, or
review of, all potentially available relevant information. These
statements are inherently uncertain, and investors are cautioned
not to unduly rely upon these statements.
Except as required by applicable law, we do not plan to publicly
update or revise any forward-looking statements contained in this
press release, whether as a result of any new information, future
events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241025565187/en/
Media Contact: Alexandra Smith Ozerkis
aozerkis@evolvtechnology.com
Investor Contact: Brian Norris
bnorris@evolvtechnology.com
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