Avid said in a regulatory filing that, as expected, the company has received a notification letter from NASDAQ indicating that the NASDAQ Listing Qualifications Hearings Panel has determined to delist Avid’s shares from The NASDAQ Stock Market.
This follows on from the company’s announcement in January 2014 that it was unlikely to regain compliance with its SEC filing requirements for continued listing of its common stock on the NASDAQ Stock Market by the previously reported March 14, 2014 deadline set by the NASDAQ Hearings Panel.
As a result, Avid will cease trading on the NASDAQ effective at the open of business on Tuesday, February 25, 2014.
It should be noted that Avid’s delisting by NASDAQ has nothing to do with the company’s current performance.
At issue is the historic accounting treatment the company applied for certain software upgrades, dating back to 2009, which were made available to certain of its customers at no-charge. Avid management said in August 2013 that it has now determined that these upgrades should have been accounted for as “implied post-contract customer support” under US GAAP accounting rules.
Because of this, the company has not filed financial results, made required regulatory filings (e.g. annual 10-K report), or held an annual meeting of shareholders, as required by the listing rules of the NASDAQ market.
To rectify this situation, Avid has, since February 2013, been conducting an internal forensic investigation into the way it historically accounted for these updates. Last year, the company said that, as a result of this review, it had determined that its financial statements from 2009 – 2011 are no longer reliable, and must be restated “because of errors in the application of US GAAP.”
The problem is that Avid has had a lot of transactions over the years, and each one must be reviewed. Last month, the company said it had made significant progress toward completion of the restatement, including evaluating transactions over an eight-and-a-half year period, encompassing a review of approximately 5 million transaction lines and 700 software releases.
Not only is this a time-consuming process, it’s also expensive. Last month, Avid said its cash expenditures in 2014 related to the ongoing accounting evaluation through completion of the evaluation will amount to approximately $25 million to $34 million.
When this process has been completed, Avid will restate its financial results the fiscal years ended December 31, 2011, 2010 and 2009 and for the quarterly periods ended March 31, 2012 and 2011, June 30, 2012 and 2011, and September 30, 2012 and 2011.
Avid says it intends to complete the restatement and regain compliance with its SEC filing requirements as soon as practical, and is targeting is “targeting mid 2014 for completion of the restatement.”
The company said that as soon as its accounting investigation has been completed and the restatement of its financials has been completed, that intends to “apply for prompt relisting on the NASDAQ Stock Market as early as possible after regaining compliance with the listing requirements.”
In the meanwhile, following its suspension from NASDAQ on February 25, 2014, Avid’s common stock will begin trading on the OTC Markets – OTC Pink Tier under the trading symbol AVID.
Last month, Avid appointed Deloitte & Touche LLP as its new auditor firm to succeed Ernst & Young LLP. According to the company “the decision to change auditors was not the result of any disagreement between the Company and Ernst & Young LLP on any matter of accounting principle or practice, financial statement disclosures, or auditing scope or procedure.”
Avid’s cash balance on December 31, 2013 was approximately $48 million and it had no debt or draw on the available line of credit with Wells Fargo.
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