Novell has uncovered evidence that it incorrectly accounted for 10 years’ worth of stock-based compensation awards following a review of its accounting practices.
The Linux and identity management software vendor initiated a voluntary review of past stock option grants and related accounting issues in August 2006 as the industry was gripped by concern over the practice of backdating options to the point where the stock price was particularly low.
Like many vendors that have uncovered evidence of incorrectly-applied award dates, the company and external investigators have nonetheless failed to find evidence of anyone culpably breaking the law, however.
The investigatory portion of the review, which is now substantially complete, has not identified any intentional wrongdoing by any former or current Novell employees, officers or directors, the company stated in a filing with the Securities and Exchange Commission.
Management believes, however, based on the findings of the review thus far, together with the assistance of management’s separately retained outside legal counsel and forensic accounting firm, that Novell utilized incorrect measurement dates for some of the stock-based compensation awards granted during the review period, November 1, 1996 through September 12, 2006, it said.
Novell added that it has not yet determined with finality the value of stock-based compensation charges related to the problem, or the impact of the charges on its previously-issued financial statements, but it seems likely the company will have some re-filing to do.
As it is, Novell has yet to file its financial reports for the quarters ended July 31, 2006 and January 31, 2007, as well as for the financial year ended October 31, 2006. The company faces delisting from the Nasdaq national market, although a decision on that has been stayed pending further action by the Nasdaq Listing Council.