Investigations Prompt L90 to Delay Annual Report
The company is conducting an internal review in response to an SEC investigation and a request for information by Nasdaq. Because of the review, L90 said, it is unable to finalize the financial statements that must be included in its annual report, also known as a 10-K report.
"The company and the audit committee of its board of directors engaged special counsel and a forensic accounting firm to conduct a thorough, comprehensive and detailed examination of the accounting for the company's prior revenues," said Peter Huie, L90's general counsel. "The internal review is progressing as rapidly as possible. Once the internal review is complete, the company will be in a position to file the 2001 10-K."
In February, L90 said it was conducting the internal review because of the inquiries into its finances. As a result, interactive entertainment network eUniverse Inc. in March called off a planned $50 million merger with L90.
L90 at least will have to reimburse eUniverse for certain expenses associated with the failed merger, though details of the termination are subject to negotiation.
Also in March, L90 said it hired an accountant to review its books in relation to its dealings with real estate portal Homestore.com. The accountant is looking into any barter transactions involving L90 to determine whether its revenues may have been overstated or misstated in the second and third quarters of 2001. Subsequently, president/CEO John Bohan resigned and chief financial officer Thomas Sebastian was fired.
Homestore.com reduced its 2000 revenue by $41.4 million and increased its net loss for that period from $115.2 million to $146.1 million after completing an internal audit into the way its accountants booked ad and software sales revenue. The company said the audit revealed that some barter deals had been booked as cash transactions worth $36.4 million. The company also reported that about $5 million in software revenue was improperly booked and should have been deferred.