Well, then. This all very awkward for Pat Byrne and Co.
In an 8-K filed late yesterday Overstock.com announced that it would be restating the consolidated financial statements contained in its 2008 annual report, and the those contained in the Company’s last three 10-Q’s: period ended March 31, 2009; June 30, 2009; and September 30, 2009 (unreviewed!).
It goes without saying that those financial statements can no longer be relied upon.
The restatement is a result of errors that Overstock fired Grant Thornton for last year that led to a bit of a cat fight between the firm — who is not mentioned in the filing — and humble servant Patrick Byrne.
The Big O also admitted that it “incorrectly amortized the expense related to restricted stock units based on the actual three year vesting schedule rather than a three year straight line amortization and applied an outdated forfeiture rate in calculating its expense under the plans.” While they were at it, they threw a bunch of other corrections that were “[not] material either individually or in the aggregate,” as the saying goes.
The Company is still mulling over the numbers with both PwC and KPMG so there’s a chance that they could change but as of now, $1.9 million of income is going back to 2008 from 2009 and an increase in expense of $350k in 2008 and $900k in 2009.
But wait! The filing reminds us that “Patrick Byrne, the Company’s Chief Executive Officer, had stated to The New York Observer, ‘that the company is about to report its first annual profit.’ The Company continues to believe that it will report positive net income for fiscal 2009.” Whew! See shareholders? More commitment from your servant.
Sam Antar has been following this story from the very beginning and he is not shy about being vindicated:
Today’s news is a complete vindication of my analysis of Overstock.com’s financial reports and shows that the company willfully engaged in a financial reporting manipulation scheme. The company is restating its financial reports to correct GAAP violations, exactly as I have recommended in this blog. To date, every single initial financial report issued by Overstock.com throughout the company’s entire existence has violated GAAP or some other SEC disclosure rule. The company now has the dubious distinction of having to restate its financial reports three times in the last three years to fix GAAP violations.
We shot Sam an email last night and he simply told us, “I am going out for a glass of fine wine.”
So while this appears to wrap up the SEC’s Division of Corporation Finance investigation, one little problem that still remains is that the SEC’s Enforcement Division has not wrapped up its probe of the company. Yeah; so there’s that. Considering the the track record of the SEC, we’d typically give a company a 50/50 shot of coming out of a probe by the Enforcement Division unscathed but in the case of Overstock, we’ll be going with Schape’s crew.
“What kind of a nut is this guy?” former Wyoming Sen. Alan Simpson said of Norquist.