Solid-state drives developer OCZ Technology Group said Monday that the audit committee's investigation, assisted by third party legal and financial advisors, has been substantially completed and a preliminary report has been provided to the audit committee. The latter has approved this report and, in consultation with management, concluded that OCZ should restate the results for the Q1 of FY 2013, as well as the results for certain quarters of fiscal 2012 and for the FY2012.
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. The number of prior periods affected and the impact of the adjustments will be disclosed in more detail in the company's restated financial statements, which will be provided as soon as practical. The board of directors and management are in discussions with Crowe Horwath LLP, the company's independent auditors regarding the matters identified in the investigation.
"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.
Until the restatements are released, in addition to the financial statements for the periods referenced above, related press releases and shareholder communications describing our financial statements and the report of Crowe Horwath LLP related to the financial statements as of and for the year ended February 29, 2012 should no longer be relied upon.
During the recent unreported quarters ended August and November 2012, the company has worked diligently to continue to support its customers. In addition, the OCZ's product development efforts are on track and it currently expects new product announcements to be made on schedule in the current quarter.
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 OCZ's credit facility with Wells Fargo Capital Finance. The company 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. OCZ has 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 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," added Mr. Schmitt.