The Westborough, Massachusetts-based company claimed that the errors are the result of mistakes made in good faith and not the result of any fraud or dishonesty on the part of management.

Whatever the origin of the problem, Applix shares tumbled 15.8% to $1.65 on the news, and with a stock market value of just $20.4m, there will now be a question over its ability to survive as an independent company. The company’s revenue has been on the slide over the past year and in January it sold its CRM business to Platinum Equity LLC for $8.75m.

The problems center on two separate customer agreements, which Applix insists are both valid and the restatement will only defer revenue from the period in which it was originally recognized until a later period. One deal with a reseller will force it to restate financial statements for 2001 and the first three quarters of 2002, while a licensing deal by its German subsidiary will force it to restate its results for the second quarter of 2002 to defer about $340,000 in revenue.

Applix expects the effect of the restatements to reduce revenue in 2001 from $40.3m to about $39.4m, and to increase the net loss for the year from $9.9m to about $10.8m. It will however increase revenue for the first three quarters of 2002 from $26.4m to between $26.4m and $26.8m, and decrease the net loss from $3.2m to between $2.8m and $3.2m.

The restatements and the departure of the CEO will delay the 2002 results, which are now expected in late March. It expects fourth-quarter revenue to be in the range of $9.5m to $10m, compared with the $9.6m recorded in the same period last year.

Applix has appointed director David Mahoney as interim CEO while it hunts for a full-time replacement. Anticipating the wrath of investors at the latest turn of events, it has appointed the company’s largest stockholder and long-term critic Brad Fire onto the board.

Fire, who owns a 12.3% stake in the company, called in December last year for sweeping changes to Applix’s management and strategy. He blamed poor business decisions which have resulted in, and will continue to result in, a substantial drop in performance and stock value. Fire said he believes the company is undervalued due to a chronic neglect of its TM1 product. TM1 is Applix’s core OLAP engine that powers many of its analytic applications.

Source: Computerwire