A while ago, Microtune (TUNE) seemed to be emblematic of a prior era of accounting problems: the firm had employed some deliberate aggressive revenue recognition practices in the anything goes era of the late 1990’s. Now it’s emblematic of the current era of accounting problems with backdating. (Trouble is, as “eras” go, they were both pretty much in the same time frame. It’s just that we’re now finding out how widely “anything goes”, really went.)
Yesterday, Microtune issued a non-reliance 8-K and joined the ranks of the way, way-back restaters. A couple snips from the filing:
The Audit Committee investigation has included the evaluation of more than 2,000 individual option grants to purchase more than 16 million shares of the Company’s common stock. In order to analyze each of these grants, the Audit Committee’s legal and accounting advisors have reviewed thousands of pages of hard copy and electronic documents, captured and analyzed millions of e-mail correspondence and interviewed certain current and former employees, officers and directors of the Company.
Sounds like plenty of work, for sure - but try not to feel too sorry for the poor guys slogging through all the paperwork. Options on 16 million shares may not sound like much, but Microtune has only about 53 million shares outstanding. Those options covered a lot of shareholder interests, so it should be a serious matter to those people/institutions who own the company. More:
The Company has not yet determined the final amount of such charges, but at this time has identified non-cash, stock-based compensation charges of approximately $5 million that will impact amounts previously reported during years 2001 through 2005, and the first half of 2006. Further analysis could cause the amount of the charges currently identified to change materially. As a result of these findings, on November 1, 2006, the Board of Directors, the Audit Committee and management of the Company, after reviewing information provided by the Audit Committee’s advisors, concluded that the Company will need to restate certain financial statements and related footnote disclosures during years 2001 through 2005 and the first half of 2006.
So Microtune will join the list of restaters whose reissue will cover long past financials; no mention of a catch-up adjustment. One other note: this is a small-cap company whose controls apparently were inadequate for proper reporting of stock compensation expense. If the opponents of Sarbanes-Oxley Section 404 are concerned about the costs of implementing and maintaining internal controls, do they really think it’s cheaper for a small fry to go back look “more than 2,000 individual option grants” after a firm has damaged its reporting credibility?