Pinnacle Micro in Irvine Settles Suit Over Accounting Irregularities

Pinnacle Micro Inc., a maker of optical data storage devices for computers, said Tuesday it has agreed to pay about $2.33 million in cash and stock to settle a shareholder lawsuit filed after the company disclosed accounting irregularities last year.

In a news release, the Irvine-based company also expressed caution about its fourth quarter financial results. The price of Pinnacle’s stock fell by $3.75, or 13%, closing at $24.50 per share in heavy trading on the Nasdaq market.

Pinnacle’s insurance carrier will pay $925,000 in cash and the company will distribute common stock valued at $1.4 million to shareholders who filed a suit against the company in November 1994, company officials said. Terms of the settlement are subject to court approval.

The suit stemmed from Pinnacle’s admission last year that about $2 million of the $39.2 million it reported as revenue in 1993 should have been counted as sales in the first quarter of 1994.

A subsequent review by an audit committee found some employees “knowingly adopted or utilized improper procedures” while recording shipments.

“It is unfortunate that settlement of these lawsuits remains the most economical method of dispatching them,” said Bill Blum, chief executive of Pinnacle Micro. “However, I am very pleased that we will soon have this issue completely behind us.”

Pinnacle officials said the company will take a charge to pretax income of $1.4 million in the fourth quarter. The company’s management also signaled fourth quarter results will be hampered by difficulties in obtaining components for one of Pinnacle’s new optical disk drive products. Pinnacle posted earnings of $549,000 on sales of $18.8 million in the fourth quarter last year.

For the first nine months of 1995, Pinnacle reported sales of $62.2 million, up 34% from $46.5 million in the same period a year earlier. But net income totaled $396,000, down from $2.2 million for the first three quarters of 1994.