Big shakeup at MMX following accounting investigation

CEO and CFO are out following board investigates firm’s finances.

The Board of top level domain name firm MMX (London AIM: MMX) has concluded an investigation into revenue recognization at the firm. The casualties include the firm’s CEO, CFO, and income statement.

Earlier this month, the board disclosed it was looking into a contract under which it believed revenue was prematurely recognized. The board issued a statement today:

The Board believes that revenue attached to the specific contract has been incorrectly recognised. As previously disclosed, cash of $1.125m was received in connection with the specific contract and revenue of $938,000 was recognised in FY-2019. Following its investigation the Board believes that any cash sums initially received pursuant to this contract ought to have been classified as a deposit against future sales and then recognised as revenue as the Firm’s partner made sales to end-users. To date, the Firm’s partner has made $201,900 of end-user sales under the contract.

The board also discovered two additional contracts that were incorrectly recognized:

In addition to the above, the investigation has identified two additional contracts entered into in FY-2019 totaling $790,000 where receipts were incorrectly categorised as revenue. These contracts were offset with payment contracts that have been recorded as deferred charges or capital expenditures, thereby impacting earnings. The reversal of these amounts will not impact the cash position of the Firm.

The impact on MMX’s financials is as follows:

It’s unclear who the counterparties were on these transactions.

Toby Hall, Chief Executive Officer, and Michael Salazar, Chief Financial Officer, have resigned from the MMX board in the wake of the investigation. They have apparently left the firm, too: Tony Farrow has been named interim Chief Executive Officer and Bryan Disher is the interim CFO.

MMX postponed a £3.0m tender offer it planned for November.