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Upcoming Boston IE Club Panel at Venture Cafe 03/05/2015

Posted by Morse Barnes-Brown Pendleton in Corporate, Events, Legal Developments, New Resources, Public Companies.
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2015-03-03_10-20-57On Wednesday March 11, 2015, Innovation & Enterprise Business Club (The IE Club) will host an event entitled “Successful Partnerships Between Large And Small Companies Building Great Success With… Very Different Teams Working Together: How To Make It Work”. The panel will feature several CEOs of small companies sharing their views of company best practices, as well as practices to avoid (internet/enablers/innovative services). This event will be held at the Venture Cafe at the Cambridge Innovation Center from 5:30 pm – 8:00 pm, and is complimentary.


David Feinberg, Esq. Feinberg Hanson LLP


Robert Kalocsai, Founder, Software Continuity
Bernard Haurie, General Manager, Geopost
Ann Halford, Executive Director of Digital Technology, Boston University
Daniel Behr, CEO at Slips Technologies


MBBP’s Robert M. Finkel is a board member of IE Club of Boston. To learn more or to register for the event, please visit The IE Club.

Going Concern Evaluation – FASB Issues a Roadmap for Management 09/15/2014

Posted by Morse Barnes-Brown Pendleton in Legal Developments, Public Companies.
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Corporate Attorney Daniele Ouellette Levy

By: Daniele Ouellette Levy

Under US GAAP (generally accepted accounting principles) a company’s continuation as a going concern is presumed when preparing the financial statements.  As part of their review of the financial statements, auditors are required to evaluate whether there is a substantial doubt about the company’s ability to continue as a going concern for a reasonable period of time (often 12 months) after the date of the financial statements.

Until recently GAAP did not provide guidance to management regarding management’s responsibility to evaluate whether there exists a substantial doubt about the company’s ability to continue as a going concern.  As a result, there have been significant inconsistencies between companies in their evaluation of this issue as well as the related disclosures.  Also, without the benefit of guidance, management was often left to rely on the assessment performed by the auditors.

Companies may face unintended negative implications on their business resulting from the auditor’s determination of “substantial doubt” and the inclusion of a going concern qualification in the audit letter. For example, inclusion of a going concern qualification may result in a significant reduction in a company’s D&B Supplier Evaluation Risk Rating (SER).  The SER, which predicts the likelihood that a business will seek legal relief from creditors or cease operations in the next 12 months, is relied on by many large retailers to evaluate their vendors.  A significant reduction in a company’s SER could result in that company being dropped from the approved vendor list and losing a significant customer.

In August, FASB issued guidance to management in making this evaluation.  Based on this guidance, management is required to evaluate on a quarterly basis whether there are conditions or events that raise substantial doubt about the company’s ability to continue as a going concern in the next 12 months.  In its guidance FASB defined substantial doubt as: “Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued . . . .”

Careful review of the roadmap provided by FASB and analysis by management may help standardize the evaluation and disclosures provided by companies and avoid negative business implications associated with a going concern qualification.

For more information on this topic, please contact Daniele.

Consultant or Executive Officer? SEC Brings an Action to Clarify 07/30/2014

Posted by Morse Barnes-Brown Pendleton in Public Companies.
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By: Mark Tarallo

On July 16, 2014, the United States Securities and Exchange Commission (“SEC”) brought an action against Natural Blue Resources, Inc. (“Natural Blue”), James E. Cohen (“Cohen”) and Joseph A. Corazzi (“Corazzi”)(Natural Blue, Cohen and Corazzi are referred to collectively as the “Respondents”).  The SEC is seeking a cease-and-desist order against the Respondents, alleging among other items that Cohen and Corazzi acted as the de facto executive management of Natural Blue, while failing to make any of the disclosures required of executive officers of a public company.

Natural Blue was a privately-held corporation based in Nevada that went public in August, 2009 via a reverse merger with Datameg Corporation.  In November 2009, Natural Blue entered into a consulting agreement with JEC Corp. (“JEC”) a corporation owned by Cohen’s family.  Cohen was the President of JEC, and  Corazzi was employed by JEC.  Cohen and Corazzi each had extensive disciplinary histories that would have prevented them from serving as an executive officer of Natural Blue.

From the time that Natural Blue went public in 2009 through the end of 2011, Cohen and Corazzi exercised a significant degree of control over Natural Blue through JEC.  They recommended virtually all of the directors that served on the board of Natural Blue, and almost all of the key executive positions were filled by individuals with whom they had significant preexisting business or social relationships.  Despite the fact that Natural Blue had a named CEO, Cohen and Corazzi controlled all of the key functions of Natural Blue, such as the accounting department (the CFO was an associate of Cohen’s with whom Cohen shared outside office space).  Cohen and Corazzi dealt directly with third parties and purported to enter into agreements on behalf of Natural Blue.  Despite the fact that the actions of Cohen and Corazzi did not actually generate any revenue for Natural Blue or its shareholders, they were paid significant amounts of cash and Natural Blue stock (which was sold at a profit) for their efforts.

The SEC’s action alleges among other things that the Respondents engaged in fraud by failing to accurately report the roles played by Cohen and Corazzi, and that those failures caused harm to investors.  Given the disciplinary histories of Cohen and Corazzi, it is clear why they went to the lengths that they did to hide their actual roles.  The SEC filing can be found here.

For more information on this topic, please feel free to contact Mark Tarallo.


MBBP Clients make BBJ’s Fastest-Growing Public Companies List 07/01/2014

Posted by Morse Barnes-Brown Pendleton in Client News, Public Companies.
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BBJ Fastest-Growing Public CompaniesLast month, the Boston Business Journal (BBJ) published its print edition containing a list of the Top 50 Fastest-Growing Public Companies in Massachusetts. Five MBBP clients were selected and ranked on this list according to each company’s two-year revenue growth as of their most recent fiscal year:

Congratulations to all of our clients!

The full list of the Fastest-Growing Public Companies in Massachusetts is available to subscribers via the Boston Business Journal’s digital edition here.

SEC Continues to Adapt to Use of Social Media – Companies not Responsible for Re-Tweets 05/13/2014

Posted by Morse Barnes-Brown Pendleton in Public Companies.
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Corporate Attorney Daniele Ouellette LevyBy: Daniele Ouellette Levy

As we have discussed in prior posts, the U.S. Securities and Exchange Commission (SEC) has been considering how the use of the social media by public companies fits within the existing regulatory framework.  The SEC recently issued additional guidance regarding the use of social media by public companies.  In its guidance, appearing as C&DIs 110.02 and 232.16, the SEC clarified that when third parties re-tweet or otherwise re-transmit a social media post originated by a public company, the company is not responsible for ensuring that the re-transmission complies with securities laws.  Under the SEC’s guidance, a re-tweet or re-transmission is not attributed to the company provided that:

  • the company has no involvement with the third party’s re-transmission of the post;
  • the third party is not acting on behalf of the company; and
  • the third party is not a participant in an offering of company securities.

We believe this new guidance provides another step toward permitting public companies to use social media to communicate with stockholders and the investment community.  This trend toward social media as a preferred platform for communicating with stockholders and potential investors underlines the need for public companies to adopt a comprehensive social media policy.

For more information on this topic please contact Daniele Levy.

Supreme Court Expands Pool of Claimants in Whistleblower Case 03/07/2014

Posted by Morse Barnes-Brown Pendleton in Public Companies.
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Corporate Attorney Joseph MarrowBy: Joseph Marrow

On March 4, 2014, the United States Supreme Court issued its decision in a much anticipated whistleblower retaliation case. In its decision, Lawson v. FMR, LLC, No. 12-3, the Supreme Court expanded the coverage of an anti-retaliation claim under Sarbanes-Oxley Act of 2002 (SOX) to an employee of a privately-held contractor (the contractor provided investment management services to Fidelity mutual funds). Pursuant to the Dodd-Frank Act, the Securities and Exchange Commission established an award program for whistleblowers creating a new private right of action for employees in the financial services sector who suffer retaliation for disclosing information about fraudulent or unlawful conduct related to the offering or provision of a consumer financial product or service. The First Circuit had ruled that the anti-retaliation provision only applies to employees of public companies. In a 6 to 3 vote, the Supreme Court reversed the decision of the First Circuit in favor of expanding the coverage of the whistleblower statute to cover employees of a public company’s private contractors and subcontractors.

In Lawson v. FMR, the Supreme Court interpreted a provision of SOX, namely 18 U.S.C. Section 1514A protecting whistleblowers, which provides in part: “No [public] company …, or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing or other protected activity].” The Supreme Court was faced with the question whether the protected class was simply limited to employees of the public company itself or would include “employees of privately held contractors and subcontractors – for example, investment advisers, law firms, accounting enterprises – who perform work for the public company?” Noting that SOX was enacted following the Enron scandal and in part in response to that scandal, the Supreme Court interpreted the statute as a response to a “concern about contractor conduct of the kind that contributed to Enron’s collapse.” As such, the Supreme Court held that a broader interpretation of the statute (to capture contractors that perform work for public companies) was warranted.

The implications of the Supreme Court’s decision are far reaching. The Supreme Court’s holding significantly expands the pool of potential whistleblower claimants. It remains to be seen whether the parade of horribles predicted by the dissent – resulting in a multitude of spurious claims – will come to fruition.

For more information on this topic please contact Joe Marrow.

JOBS Act: Pathway for Emerging Growth Companies 09/21/2012

Posted by Morse Barnes-Brown Pendleton in Events, Legal Developments.
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On Tuesday, October 16th Morse, Barnes-Brown & Pendleton, PC and Moody, Famiglietti & Andronico, LLP are holding an informational seminar to discuss the economic basis behind the JOBS Act as well as the specific changes instituted by it. A panel of experts will delve into recent data indicating who is taking advantage of the Act’s provisions and why, and describe the ways in which the new legislation has impacted public filings since its inception.

This seminar will examine the following topic areas:

  • Economic and regulatory drivers that set the stage for the JOBS Act
  • Goals of the JOBS Act in terms of job creation and IPO revitalization
  • Major regulatory changes established by the Act
  • The new concept of the “emerging growth company”
  • Confidential public filing
  • Benefits of going public in today’s market

For more information, directions, or to register, please visit the event page: Exclusive Event – JOBS Act: Pathway for Emerging Growth Companies.

Action Item for Public Companies: Disclosing Cybersecurity Risks 11/14/2011

Posted by Morse Barnes-Brown Pendleton in Attorney News, Legal Developments, Public Companies.
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Corporate Attorney Daniele Ouellette LevyBy: Daniele Levy

The U.S. Securities and Exchange Commission (SEC) recently issued guidance to help public companies assess what, if any, disclosure should be provided regarding cybersecurity risks or incidents. While federal securities laws do not specifically require companies to disclose cybersecurity risks, the SEC’s guidance makes it clear that a number of existing disclosure requirements may impose obligations to disclose cybersecurity matters.

The SEC specifically stated that its guidance and the federal securities laws should not be interpreted to require disclosure that would compromise a company’s cybersecurity efforts.

As an action item, companies should consider whether cybersecurity risks and incidents may affect their risk factor disclosure, MD&A, description of the company’s business and operations, legal proceedings disclosure and financial statements.

Disclosure committees, in their periodic review of the effectiveness of disclosure controls and procedures, will want to consider cybersecurity matters as well.

For more information on this topic, please feel free to contact Daniele Levy.

MassChallenge Awards Therapeutic Systems with $50,000 Gold Prize 11/14/2011

Posted by Morse Barnes-Brown Pendleton in Client News.
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`On October 24th, MassChallenge held a ceremony to announce the winners of the $1 million 2011 MassChallenge Startup Competition and Accelerator. Three companies were awarded the $100K Diamond Prize and fourteen were awarded the $50K Gold Prize. MBBP client Therapeutic Systems, LLC were selected as one of the $50K Gold Prize winners for the design and development of their product, the Vayu Vest, which is a new and innovative medical device that uses deep pressure to adderss the unique sensory needs of people with autism and related disorders.

Congratulations Therapeutic Systems!

Please visit MassChallenge for more information on the competition.

Securities Regulation and the Use of Social Media by Public Companies 09/10/2009

Posted by Morse Barnes-Brown Pendleton in Corporate, Legal Developments, Public Companies.
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Corporate Attorney Joseph MarrowBy Joseph C. Marrow

Public companies today, more than ever, disseminate corporate communications to their constituents (shareholders, customers, prospective investors) by means of a variety of social media platforms (corporate web sites, blogs, Twitter). In so doing, companies should consider whether the disclosure of corporate information runs afoul of the federal securities laws. To guard against federal securities law violations, public companies should implement policies to regulate such disclosures by company representatives.

To read more, click on: SEC’s Regulation FD on Fair Disclosure.

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