In a letter from the SC today, MEMS was given 14 days to adjust the re-issued financial statements dated 7 October 2009. The company was also required to announce to Bursa on the adjustments made, the reasons for the adjustments and its detailed effects on the company’s financial statements.

This move was made following MEMS’ admission in its re-issued financial statements that they are not in compliance with the financial reporting standards, FRS118 “Revenue”.

This is the second time this year that the SC has instructed the company to adjust its financial statements.

The SC had, on 4 August 2009, directed MEMS to rectify and re-issue its financial statements for the financial years ended 31 July 2007 and 31 July 2008 in addition to rectifying and re-announcing to Bursa Malaysia Berhad (Bursa Malaysia) MEMS’ unaudited Condensed Consolidated Income Statements for the six months period ended 31 January 2009.

At the time, the SC directed MEMS to rectify the financial statements by excluding a total of RM49.183 million from its revenue for all the three financial statements. The basis of SC’s directive was that the amount of RM49.183 million was derived from transactions that never took place in the respective financial years and period.

The SC’s investigations revealed that MEMS’s group revenue of RM53.699 million reported in the 2007 financial statements contained a total of RM13.007 million sales which were not transacted. In the 2008 financial statements, MEMS reported a revenue of RM71.994 million which contained a total of RM24.161 million sales which were not transacted. In the financial statements for the six month period ended 31 January 2009, MEMS reported a revenue of RM37.366 million which contained a total of RM12.015 million sales which were not transacted. These sales were recorded in the financial statements of MEMS’ wholly owned subsidiary, Senzpak (M) Sdn Bhd.

The company, while purportedly removing the transactions in question from its financial statements, had, in its reissued financial statements which were announced to Bursa on 7 October 2009, stated that the reissued financial statements were not in compliance with FRS118 “Revenue” due to SC’s directive. The SC views MEMS’ non-compliance with FRS118 “Revenue” very seriously. The SC emphasized that its move to require MEMS to adjust their reissued financial statements is vital to ensure compliance with the financial reporting standards by MEMS which is listed on the ACE Market.