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BOXD, another SPAC, reports going concern issues and ineffective controls


Filings from the week of June 1 - June 6.


Boxed Inc. (BOXD), a SPAC merger, reports going concern issues and ineffective controls. Eagle Bancorp (EGBN) pays the SEC $12.6 million. Peloton’s (PTON) CFO resigns. Sheryl Sandberg departs from Meta (FB) as COO.


Top Red Flags

EAGLE BANCORP INC ($EGBN) | 8-K | $1.6B - EGBN agreed to pay $12.6 million to resolve an SEC investigation. The SEC had been investigating EGBN’s ties to former DC Councilman Jack Evans, who allegedly lobbied for legislation favorable to the company after it hired him as a consultant. He also owned shares of EGBN.

META PLATFORMS INC ($FB) | 8-K | $528B - Sheryl Sandberg, COO of FB, informed the company of her resignation. Meta has clearly been underperforming - its Q1 2022 net income decreased by over 21% compared to its Q1 2021 net income. PELOTON INTERACTIVE INC ($PTON) | 8-K | $4.2B - PTON announced the resignation of its CFO, Jill Woodworth. The company has struggled with declining revenues, asset impairment charges, and ineffective controls in 2022. PACTIV EVERGREEN INC ($PTVE) | 8-K | $1.9B - PTVE’s board fired its CFO, Michael J Ragen, who has worked at the company for over 8 years. PTVE replaces Mr. Ragen with Jonathan Baksht. ARGO GROUP INTERNATIONAL HOLDINGS LTD ($ARGO) | 8-K | $1.5B - ARGO reported that EY is resigning as the company’s independent auditor. In the company’s FY 2020 annual report, EY stated that ARGO had “not maintained effective internal control[s].”



S-1 | Market Cap: $242M

Boxed Inc. ($BOXD), a US e-commerce retailer and enabler, filed an S-1 last week on May 31, 2022. The company went public via SPAC. Following a trend among SPAC mergers, BOXD reported several red flags.

Despite receiving almost $200 million through financing in 2021 [1] (primarily through the SPAC acquisition), BOXD reported that it has substantial doubt on continuing as a going concern. [2]

The company disclosed that it has a risk of covenant non-compliance on its $45 million loan. These covenants include maintaining a minimum unrestricted cash balance of $15 million, a minimum net revenue target, and a minimum gross margin percentage of 8% for its retail segment. [3]

Although BOXD appears to be compliant of these covenants right now, the company has reported a drastic downward trend in its operational performance. BOXD reported a net loss of $36.2 million for Q1 2022, which was $22 million worse than its Q1 2021 net loss. Furthermore, BOXD reported a total net cash outflow of $35 million in Q1 2022. This was more than 4X the company’s total net cash outflow for Q1 2021, which was only $7.6 million. [4]

BOXD also identified material weaknesses in its internal controls. [5] In its most recent Form 10-Q and 10-K, the company reported that its internal controls were ineffective due to staffing issues.

  1. BOXD’s Consolidated Statements of Cash Flows for the year ended December 31, 2021, per the company’s FY 2021 Form 10-K.

  2. “As of March 31, 2022, we were in compliance with the financial covenants required by our term loan. However, these uncertainties, including the inherent uncertainties associated with executing our growth strategy, combined with the financial covenants and growth requirements associated with our $45.0 million term loan, create risk that we may not be able to maintain compliance with one or more of these covenants over the next twelve months. Further, as of March 31, 2022, we had no additional capital available for borrowing and no firm commitment from current or prospective investors to provide us additional capital to fund operations in the foreseeable future. These uncertainties, including the inherent uncertainties discussed above regarding our growth strategy and financial covenants, raise substantial doubt about our ability to continue as a going concern.”

  3. “The agreement provides the lender with a first priority security interest in all of the Company’s assets and contains a certain number of financial covenants, which requires us to (i) maintain minimum unrestricted cash balance of $15,000, (ii) maintain minimum net Retail revenue based upon agreed upon quarterly targets, and (iii) maintain a Retail gross margin percentage of at least 8%.”

  4. BOXD’s Consolidated Statements of Operations and Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and March 31, 2021, per the company’s Form S-1.

  5. “We have identified material weaknesses in our internal control over financial reporting and we may identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, which may result in material misstatements of our Consolidated Financial Statements or cause us to fail to meet our periodic reporting obligations or cause our access to the capital markets to be impaired.”


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