On January 13, 2011 Securities and Exchange Commission filed a complaint against NutraCea, an Arizona based health foods manufacturer and seller, alleging the company of falsification of its financial statements.
The complaint states that the company overstated its revenues in 2007 by booking invalid sales and engaging in improper revenue recognition practices. Two key cases highlighted in the complaint are – false booking of sales of $2.6 million by NutraCea to Bi- Coastal Pharmaceutical Corp and improperly recording revenue on bill and hold transactions – $1.9 million sale of product to ITV Global, Inc. (“ITV”) in the fourth quarter of 2007.
As a result of these two transactions alone, NutraCea overstated its product sales revenue by 36.8% and misstated its operating loss by nearly 7% for fiscal year end 2007.
