Weight loss balloon maker Obalon stops $35 mill stock sale after whistleblower’s assertion of faulty revenue accounting

The weight-loss balloon maker Obalon halted its $35 million stock sale after a whistleblower made allegations of improper revenue recognition during the company’s fourth quarter. Obalon Therapeutics was supposed to close a $35 million stock offering.Tuesday, but a whistleblower foiled those plans with allegations that something wasn’t quite on the up and up with the company’s fourth-quarter accounting. The company said a whistleblower contacted its independent auditor, KPMG, to report alleged improper revenue recognition during the company’s fourth fiscal quarter of 2017. Obalon terminated the offering because it was not feasible to complete an investigation of the allegations before the intended closing, as the allegations surfaced late in the day on Monday.

Obalon sells a swallowable, gas-filled intragastric balloon system for the treatment of obesity, which FDA approved in September 2016. The company said its audit committee will oversee an internal investigation, the outcome of which will be reported “as soon as practicable.”

Jeffrey Newman represents whistleblowers.