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SHOR » Topics » If we fail to make necessary improvements to address a material weakness in our internal control over financial reporting, we may not be able to report our financial results accurately and timely, any of which could harm our business, reputation and causeThis excerpt taken from the SHOR 10-K filed Sep 27, 2007. If we
fail to make necessary improvements to address a material
weakness in our internal control over financial reporting, we
may not be able to report our financial results accurately and
timely, any of which could harm our business, reputation and
cause the price of our common stock to decline.
We had a material weakness in our internal control over
financial reporting as of June 30, 2007 in that we did not
have sufficient internal controls related to the deferral of
revenue for the entire arrangement fees associated with
transactions in which vendor specific evidence of fair value, or
VSOE, does not exist for undelivered product elements.
If VSOE of fair value does not exist for commitments to provide
specified upgrades, services or additional products to customers
in the future, as has been the case from time to time in the
past, we defer all revenue from the arrangement until the
earlier of the point at which VSOE of fair value does exist or
all such elements from the arrangement have been delivered.
A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis.
We are in the process of taking steps intended to remedy this
material weakness, and we will not be able to fully address this
material weakness until these steps have been completed. If we
fail to maintain the number and expertise of our staff for our
accounting and finance functions and to improve and maintain
internal control over financial reporting adequate to meet the
demands of a public company, including the requirements of the
Sarbanes-
Table of Contents
Oxley Act, we may be unable to report our financial results
accurately. If we cannot do so, our business, reputation and
stock price may decline.
Even if we are able to report our financial statements
accurately and timely, if we do not make all the necessary
improvements to address the material weakness, continued
disclosure of our material weakness will be required in future
filings with the SEC, which could cause our reputation to be
harmed and our stock price to decline.
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