Critical Path Forms Committee to Look Into Financial IrregularitiesCritical Path Inc., a provider of messaging and e-mail software and services, said that its board of directors formed a special committee to look into the company's accounting practices after discovering a number of transactions that "put into question" its fourth-quarter 2000 financial results. Two top executives were also placed on leave.
Trading in Critical Path's stock on the Nasdaq composite index was halted on Friday about 10 minutes after the market opened. The company's stock had plunged more than 60 percent in overnight trading. The stock was halted at $10.06 at 9:09 a.m. EST, after trading as low as $3.88 overnight. The stock's previous 52-week low, according to the Nasdaq, was $8.56.
Company executives were unavailable for comment.
On Jan. 18 the San Francisco-based company reported an unexpected loss of $11.5 million, or a loss of 16 cents per share, for the fourth quarter. Revenue for the quarter was $52 million, up more than 500 percent from $8.2 million in revenue posted a year earlier.
The company now says that these results may have been materially misstated.
Critical Path's board of directors said that effective immediately, it has placed president David Thatcher and William Rinehart, vice president of worldwide sales, on administrative leave. Neither Thatcher nor Rinehart could be reached for comment.
It originally projected that it would turn profitable in the fourth quarter of 2000, but after the unanticipated loss the company said it was forced to postpone its profitability for at least three quarters. Analysts had been expecting Critical Path to post a 1-cent profit.
The fourth-quarter revenue shortfall was blamed on the company's auditors, who would not allow it to recognize $7 million in sales of software that had been licensed for resale. In addition, foreign exchange currency translations affected Critical Path's revenue. The company derives about one-third of its revenue from outside the United States.
Critical Path, which is funded by Internet incubator CMGI Inc., was founded in 1997.