After announcing Friday that it had delayed the filing of its quarterly report, MaxWorldwide Inc. has been notified by Nasdaq that its common stock will be delisted from the stock market today because of the company’s failure to file the report in a timely manner.
The report involved is a Form 10-Q for the quarter ended June 30, 2002.
“Before we file our 10-Q, we want to ensure that all of our prior filings and reports are correct,” William H. Mitchell, the company’s CFO, said in a statement. “In working with PricewaterhouseCoopers, we discovered misclassifications of certain research and development expenses reported in our prior financial statements. We are reviewing the treatment of these expenses and will likely have our operating results for certain prior periods re-audited.”
The company said that the accounting treatments would not affect its net income for prior reported accounting periods. Its operating results will likely be restated for prior periods. And the firm cautioned that additional misclassifications or errors in reporting might be uncovered as the re-audit continues.
News of the delisting comes as MaxWorldwide struggles to reinvigorate its image, hurt during the time it operated under the L90 Inc. name, by an earlier Securities and Exchange Commission investigation and shareholder lawsuit.
In February, L90 revealed that the SEC had opened an investigation into its financial records and announced that its CFO, Thomas A. Sebastian, had resigned.
At about the same time the Nasdaq stock exchange listing-investigation department requested information from the firm. L90 held off filing its annual 10-K report for 2001 to conduct an internal review of its finances in response to the SEC investigation. The firm said it reduced its revenue by $8.3 million when it restated its results.
The class-action shareholder lawsuit alleged that the firm and some of its officers misrepresented the company’s prospects in an effort to inflate its stock price and engaged in improper “roundtrip” transactions. The status of the lawsuit was unclear at press time.
By March, the president and CEO, John C. Bohan had resigned and Mark Roah, a company founder, also departed citing personal reasons.
In April, the firm received a delisting warning from Nasdaq because it was late in filing its annual report but was able to continue the listing.
For the year ended Dec. 31, 2001, L90 reported a net loss of $52.6 million, an increase from $20.5 million for 2000. Revenue for 2001 was $27.7 million, a decrease from $48.7 million the year before. The firm’s stock was trading at 48 cents late yesterday afternoon.
In reworking its image, L90 brought in Mitchell Cannold in March to replace Bohan as CEO. Cannold said at the time, “I recognize the immediate challenges facing L90, but I also see tremendous potential for the company.
Cannold did not return a phone call for comment.
The firm has since changed its name to MaxWorldwide and moved its headquarters to New York from Los Angeles. It hired a vice president of finance, Steven Kantor, brought on CFO Mitchell and named Peter Sealey as a chief strategy officer. It completed its acquisition of DoubleClick’s North America media business in July for $9.4 million and dismissed Arthur Andersen as its independent auditors, and replacing Andersen with PricewaterhouseCoopers.
The firm recently launched an advertising campaign to boost business in all divisions and brand the firm under its new name.
MaxWorldwide has three divisions — MaxOnline, MaxDirect and MaxCreative.
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