GUMM IN ACCOUNTING FRAUD HISTORY
Gum Tech restates earnings, sees Q1 loss Thursday, March
26, 1998 12:34 AM PHOENIX, March 25 (Reuters) - Gum Tech International Inc. said late Wednesday it has restated its financial statements for the year ended Dec. 31, 1996, and for the first three quarters of fiscal 1997. Gum Tech said in a news release it also expects a loss of about $1.3 million in the first quarter of 1998 stemming from the costs of its management restructuring and an advertising campaign. The chewing gum maker said it restated its earnings as a result of an inquiry by Nasdaq officials and subsequent discussions with the Securities and Exchange Commission concerning the company's accounting treatment for its barter transactions. The restatement eliminated the financial effect of barter credit transactions, it said. It also resulted in a $665,790 non-cash charge to interest expense related to a beneficial conversion feature in the company's convertible debentures for the quarter ended March 31, 1997. Under the restatement, the company said it has recorded the barter credits in an amount equal to the carrying value of the inventory, which was reduced to zero prior to the exchange. Therefore, no amounts have been recorded for the barter credits, it said. Jeffrey Bouchy, chief financial officer, said: "Even though this restatement has affected our bottom line, it is important for the investment community to realize that this has absolutely no effect on our cash position or on our cash flows." Gum Tech also reported its operating results for 1997, showing a loss on the year of $5.4 million, or $1.12 per share. That compares with the restated loss the year earlier of about $3.4 million, or $0.77 per share. Sales for 1997 totaled about $3.8 million compared to the restated 1996 sales of $3.1 million, it said. The effect of the restatements as originally reported is summarized on the tables below for fiscal 1996 and for the first three quarters of fiscal 1997. Also included is Gum Tech's fiscal 1997 year-end summary. |
