Human Capital & Careers

Extreme Networks Digs Up Options Errors

The company restates, acknowledging that it should have recognized about $223 million in compensation expense.
Stephen TaubJune 28, 2007

Following a special internal committee found that shortcomings in the way Extreme Networks processes stock-option grants spawned measurement errors, the company announced that it had restated prior financials.

While most of the shortcomings occurred from 1999 through 2001 (fiscal 2000 through 2002), some deficiencies lingered on until fiscal 2004, according to the network infrastructure equipment company. Further, the company should have recorded about $300,000 worth of income tax benefits.

As a result, Extreme has revised its 2006 annual report for each of the four preceding fiscal years. The company also said it included its restated consolidated statements of operations and consolidated balance sheet data for the years ended July 1, 2001, and July 2, 2000 in its 2006 annual report.

Extreme also filed its fiscal 2006 annual report and three most recent quarterly reports, bringing its regulatory filings up to date, and filed its proxy announcing its next annual meeting. As a result, it’s no longer in danger of being delisted from NASDAQ.

The Special committee probe found no evidence of fraud and concluded that none of the company employees involved intended to mislead investors or were aware that the company’s stock-option granting and documentation practices had resulted or would result in a material misstatement, according to the company.

The committee also found no involvement by, among others, the current CFO, chief executive officer, controller, or general counsel in any of the grants for which inaccurate measurement dates were used.