Inventory Liability to Delay RedEnvelope's Annual Report

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RedEnvelope Inc. will delay filing its annual report so it can review an inventory-related liability, the San Francisco-based company said yesterday.

The review is of a $2.2 million inventory-related component of RedEnvelope's accounts payable liability for the fiscal year ended April 3. The company thinks that the liability is overstated and that the required adjustments are likely to decrease its cost of sales, increase its gross margin and decrease its net loss for the affected periods. However, it cannot currently ascertain the amount of such changes.

"Polly Boe, our new chief financial officer who joined us on April 18, uncovered this issue during her review of our accounts," RedEnvelope president/CEO Alison May said in a statement.

RedEnvelope said expects to file its annual report on or before July 20. The company filed with the Securities and Exchange Commission to extend the filing date from July 5.

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