Company finds no misdeeds, restates results, files SEC forms
Extreme Networks this week said it has completed its review of its stock-option grant practices and submitted filings with the U.S. Securities and Exchange Commission that had been delayed by that review.
A special committee of the Extreme board of directors found deficiencies in the company’s processes for approving and documenting option grants. These deficiencies occurred predominantly from 1999 (fiscal year 2000) through 2001 (fiscal year 2002), but continued in some respects until fiscal year 2004, Extreme said.
No issues were found with the accounting for options granted during fiscal years 2005 and 2006, Extreme said.
The special committee found no evidence of fraud and concluded that none of the company personnel involved intended to mislead investors, Extreme said. Nor were they aware that Extreme’s stock-option granting and documentation practices had resulted or would result in a material misstatement of the company’s financial results, the company said.
The special committee also found no evidence of misconduct by current management, and found no involvement by the current CEO, CFO, controller, or vice president, general counsel in any of the grants for which inaccurate measurement dates were used. The special committee also confirmed that none of the affected options granted to the company’s officers or directors has ever been exercised.
The committee did find that Extreme should have recognized approximately $223 million of pretax, noncash, share-based compensation expense during the review period — Apr. 9, 1999 to Sept. 30, 2006 — that was not accounted for in the company’s previously issued financial statements. In addition, the company should have recorded approximately $300,000 of income tax benefits.
As a result, Extreme is restating financial information in its 2006 Form 10-K for the fiscal years ending July 3, 2005, June 27, 2004, June 29, 2003, and June 30, 2002. This restatement has no impact on the company’s consolidated statement of operations for the fiscal year ending July 2, 2006, or on Extreme’s previously reported revenues for any fiscal year.
The restatement also had no impact on the company’s previously reported cash positions for any period, Extreme said.
In addition to the Form 10-K for the fiscal year ending July 2, 2006, Extreme this week filed Form 10-Q’s for the fiscal quarters ending Oct. 1, 2006, Dec. 31, 2006, and Apr. 1, 2007, with the SEC. The company believes it is now current in its SEC reporting obligations and expects that Nasdaq will continue listing Extreme common stock on the Nasdaq Global Market.
Extreme competitor Foundry Networks this week said it regained compliance with Nasdaq listing requirements after filing on June 14 Form 10-K for the period ending Dec. 31, 2006, and Form 10-Q’s for the periods ending June 30, 2006, Sept. 30, 2006, and March 31, 2007. Foundry also was embroiled in the sweeping stock-option-backdating investigation that affected scores of high-tech companies.
