Friday, October 31, 2014 6:06:01 PM
Much more troublesome is the revisions to the q2 2014 numbers. They incorrectly recorded legal expenses as being reimbursable by their insurance carrier (to the tune of ~1.3M), which has the net effect of swinging the company from an operating profit to an operating loss. Audit committee concluded that this was a result of deficient internal controls. In my opinion, this is unacceptable conduct from a CFO, especially during the course of an SEC investigation.
This would be a very different story if we were told that the revisions to the 2010-2013 numbers, and the repayment of those improperly expensed amounts, resulted from the SEC concluding its investigation. But they did not.
Real story here is the swing from profitability to unprofitability in Q2 and the fact that this resulted from deficient internal controls DURING an investigation by the SEC. I anticipate a significant drop in share price come market open on Monday.
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