OCZ Says Financial Investigation Substantially Complete
OCZ Technology Group, Inc. today announced that an Audit Committee's investigation on possible securities law violations has been substantially completed and a preliminary report has been provided to the Audit Committee.
In November, the U.S. Securities and Exchange Commission (SEC) initiated inverstigations on possible securities law violations involving the SSD maker. In October, OCZ issued a press release announcing that it was delaying the filing of its financial results for the second quarter of fiscal year 2013, which ended August 31, 2012. The press release also disclosed that OCZ's second quarter revenue will be "materially lower" than its previous guidance released on September 5, 2012, which was in the range of $110 to $120 million, "principally due to the impact of customer incentive programs," and that OCZ expects to report a "significant net loss." Shortly after the release of this news, shares of OCZ dropped nearly 42 percent from a close of $3.15 on October 9, 2012 to close at $1.88 per share on October 10, 2012.
OCZ today said that while various matters continued requiring further investigation, the company believes they would be concluded shortly. The Audit Committee has approved this report and, in consultation with management, concluded that OCZ should restate the results for the first quarter of fiscal 2013, as well as the results for certain quarters of fiscal 2012 and for the fiscal year 2012.
The restatements primarily relate to the timing of revenue recognition, the classification of certain customer incentive costs and for the level of reserves for product returns.
OCZ added that the number of prior periods affected and the impact of the adjustments would be disclosed in more detail in the company's restated financial statements, which will be provided "as soon as practical. "
OCZ said that its product development efforts are on track and it currently expects new product announcements to be made on schedule in the current quarter. The company added that the collection of receivables and inventory levels have been more effectively managed resulting in improved cash flow and a reduction in the total amount drawn on the company's credit facility with Wells Fargo Capital Finance. OCZ is also negotiating with Wells Fargo to amend the credit facility to reflect the impact of the current financial situation, as the company has been in default with the liquidity test and related financial covenants. The Company today also submitted a letter to NASDAQ for its approval which described the plan and timing under which the Company expected that it would bring its financial reporting current.
"We understand that restating prior periods is very disappointing and unacceptable to our shareholders. While this investigation process has taken longer than originally anticipated, it has helped the company to identify the relevant issues to enable the financial reporting to be finalized," stated Ralph Schmitt, CEO of OCZ Technology. "We continue to successfully compete in the market and recently released our Vector product, widely reported as the industry's highest performing drive. The Company continues to execute well on its product and business plans."
OCZ today said that while various matters continued requiring further investigation, the company believes they would be concluded shortly. The Audit Committee has approved this report and, in consultation with management, concluded that OCZ should restate the results for the first quarter of fiscal 2013, as well as the results for certain quarters of fiscal 2012 and for the fiscal year 2012.
The restatements primarily relate to the timing of revenue recognition, the classification of certain customer incentive costs and for the level of reserves for product returns.
OCZ added that the number of prior periods affected and the impact of the adjustments would be disclosed in more detail in the company's restated financial statements, which will be provided "as soon as practical. "
OCZ said that its product development efforts are on track and it currently expects new product announcements to be made on schedule in the current quarter. The company added that the collection of receivables and inventory levels have been more effectively managed resulting in improved cash flow and a reduction in the total amount drawn on the company's credit facility with Wells Fargo Capital Finance. OCZ is also negotiating with Wells Fargo to amend the credit facility to reflect the impact of the current financial situation, as the company has been in default with the liquidity test and related financial covenants. The Company today also submitted a letter to NASDAQ for its approval which described the plan and timing under which the Company expected that it would bring its financial reporting current.
"We understand that restating prior periods is very disappointing and unacceptable to our shareholders. While this investigation process has taken longer than originally anticipated, it has helped the company to identify the relevant issues to enable the financial reporting to be finalized," stated Ralph Schmitt, CEO of OCZ Technology. "We continue to successfully compete in the market and recently released our Vector product, widely reported as the industry's highest performing drive. The Company continues to execute well on its product and business plans."
