Business Context and Reporting Period
Company: Optical Cable Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: September 11, 2007
Subject: Non-reliance on previously issued financial statements due to a price data-entry error discovered during the preparation of the Q2 2007 Form 10-Q.
Key Financial Metrics and Impact
The filing details a material misstatement caused by an incorrect price entry for a large raw material shipment during the quarter ended January 31, 2007. This error resulted in inventory overvaluation and misstated net income/loss figures for the first two quarters of fiscal 2007.
- Q1 2007 (Ended Jan 31): Net loss was understated by approximately $186,000 (reported loss was smaller than actual).
- Q2 2007 (Ended Apr 30): Net income was understated by approximately $172,000 (reported income was less than actual).
- Six Months Ended Apr 30, 2007: Cumulative net loss was understated by approximately $14,000.
- Other Metrics: The filing text does not provide clear values for total revenue, cash flow, margins, debt, or liquidity for the current period.
Material Changes and Corrections
Management conducted extensive testing of bare fiber inventory pricing for periods ending January 31, April 30, and July 31, 2007. No other misstatements were found that were individually or collectively material. The Audit Committee concluded that the error necessitated a non-reliance on specific condensed financial statements, including Balance Sheets and Statements of Operations, Equity, and Cash Flows for the affected periods.
Outlook, Risks, and Management Commentary
Management Action: The error was reported to KPMG LLP (Independent Registered Public Accounting Firm) and the Audit Committee. The Company intends to file Amended Quarterly Reports (Form 10-Q/A) for the periods ending January 31, 2007, and April 30, 2007.
Risks/Contingencies: The primary risk identified is the reliability of historical financial data for the first half of fiscal 2007. The filing does not provide forward-looking guidance or discuss other operational risks.
Investor Verification Checklist
- Verify the upcoming filing of Form 10-Q/A for Q1 and Q2 2007 to obtain corrected financial statements.
- Review the corrected inventory valuation and cost of goods sold figures in the amended reports.
- Confirm that the $14,000 cumulative understatement of net loss for the six-month period is accurately reflected in the restated data.
- Assess whether the data-entry error indicates broader internal control weaknesses beyond the specific raw material shipment.