Company might have improperly recognized $1.0 million.
New top level domain name company MMX announced that it might have incorrectly recognized revenue from a contract.
According to the announcement, the MMX Board is commencing a formal investigation to determine whether the revenue was correctly recognized. The investigation is related to a contract that was entered into last year “and relates to whether all requirements for the recognition of revenue had been met prior to 31 December 2019 and 30 June 2020 or whether such amounts should have been classified as a refundable deposit against future sales or deferred revenue at those dates.”
The company has received $1.125 million in cash associated with the contract and recognized $938,000 of it last year and $25,000 in the first half of this year.
The company’s maximum cash impact is $1.0 million if it turns out that amounts received under the contract were to be refundable, assuming no further revenue was generated. The other question is if the company recognized the revenue too early, which would force it to restate earnings from last year.
The company has $7.3 million in cash on hand. It reported a total of $18.9 revenue last year.
Shares in MMX (LON: MMX) are down 15% to 5.00 pence.