Thomas Group Announces Update Regarding Investigation of Stock Option Granting Practices and Restatement of Historical Financial
March 16 2007 - 4:25PM
Business Wire
Thomas Group, Inc. (NasdaqGM:TGIS), a leading operations and
process improvement firm, today provided an update on the status of
the ongoing internal investigation of the Company�s stock option
granting practices. As previously announced on February 2, 2007,
the Board of Directors of the Company, with concurrence and
oversight by its Audit Committee, voluntarily initiated a review of
the Company�s historical stock option practices solely in
conjunction with the Company�s assessment of its historical
capitalization documentation, and not in response to any specific
concerns from within the Company about option practices, inquiry
from the Securities and Exchange Commission or any other regulatory
agency. The Company expects to file its Form 10-K for the year
ended December 31, 2006 which will include the final results of
this review by the April 2, 2007 filing deadline. Although the
Company is finalizing its stock option review, at this time the
Company has identified non-cash, stock-based compensation charges
of approximately $200,000 that will impact amounts previously
reported during years 2002 through 2005 and the first three
quarters of 2006. In addition, approximately $2.0 million will be
reclassified from retained earnings to additional paid-in capital
at January 1, 2002 to reflect similar charges relating to options
that were granted between August 19, 1993 (the date of the
Company�s initial public offering) and December 31, 2001. The
Company believes that these charges, resulting from the differences
in accounting measurement dates, will not have an impact on its
historical revenues, cash position or non-stock option related
operating expenses, nor does the Company believe it will have a
material impact on the operations of the Company going forward. The
Company last issued stock options in January 2003, and currently
has no intention to issue stock options in the future. These
non-cash charges not previously recorded in the Company�s financial
statements during the applicable periods are primarily the result
of instances where the Company has determined the actual accounting
measurement dates for certain past stock option grants differed
from the measurement dates previously used in accounting for such
grants pursuant to the requirements of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25).
These charges have the effect of decreasing earnings and retained
earnings, and increasing additional paid-in capital as reported in
the Company�s historical financial statements or reflected in
previously issued financial guidance. As a result of these
findings, on March 15, 2007, the Board of Directors, the Audit
Committee and management of the Company concluded that the Company
will need to restate its financial statements and related footnote
disclosures for its fiscal years ending December 31, 2002 through
2005 and the first three quarters of its 2006 fiscal year. The
Audit Committee and the Board of Directors further concluded on
March 15, 2007 that the Company�s previously issued financial
statements and related auditor�s report for the years 2002 through
2005, and for the first three quarters of 2006 should no longer be
relied upon. In addition, the Company is attempting to determine
the potential impact of differences in measurement dates on the
Company�s tax liabilities that should have been reported during
these same periods. Any additional tax liabilities would also
negatively impact the Company�s historical financial results;
however, because these amounts have not yet been estimated, they
are not included in the above preliminary expense estimates.
Furthermore, any potential tax liabilities identified would likely
be cash-based expenses and impact historical non-stock option
related operating expenses and previously reported tax-based
accruals. These expenses could also negatively impact the Company�s
future financial results. The Company has not yet fully assessed
the impact of these conclusions on its internal controls over
financial reporting. The Audit Committee has discussed the matters
disclosed in this Current Report on Form 8-K with Hein &
Associates, the Company�s registered independent public accounting
firm. As soon as practicable following the completion of the
internal investigation and a review of the conclusions there from
by the Company�s Board of Directors, its Audit Committee and its
independent public accounting firm, the Company intends to include
restated financial statements for the prior periods noted above in
its Form 10-K for the year ended December 31, 2006, expected to be
filed by the April 2, 2007 filing deadline. Thomas Group, Inc.
(NasdaqGM:TGIS) is an international, publicly traded professional
services firm specializing in operational improvements. Thomas
Group's unique brand of process improvement and performance
management services enable businesses to enhance operations,
improve productivity and quality, reduce costs, generate cash and
drive higher profitability. Known as The Results CompanySM, Thomas
Group creates and implements customized improvement strategies for
sustained performance improvements in all facets of the business
enterprise. Thomas Group has offices in Dallas, Detroit, and Hong
Kong. For additional information on Thomas Group, Inc., please go
to www.thomasgroup.com. Safe Harbor Statement under the Private
Securities Litigation Reform Act: Statements in this release that
are not strictly historical are �forward-looking� statements, which
should be considered as subject to the many uncertainties that
exist in the Company�s operations and business environment. These
uncertainties, which include economic and business conditions that
may impact clients and the Company�s performance-oriented fees,
timing of contracts and revenue recognition, competitive and cost
factors, and the like, are set forth in the Company�s filings from
time to time with the Securities and Exchange Commission, including
the Company�s Form 10-K for the year ended December 31, 2005.
Except as required by law, the Company expressly disclaims any
intent or obligation to update any forward-looking statements.
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