Vitesse announced that its reported financial statements should not be relied upon and it has engaged an acting chief financial officer

April 27, 2006

3 Min Read

CAMARILLO, Calif. -- Vitesse Semiconductor Corporation (Nasdaq:VTSS) announced today that its Board of Directors has determined that its previously reported financial statements for the three months ended December 31, 2005 and the three years ended September 30, 2005 and possibly earlier periods should not be relied upon. The Board of Directors also determined that the Management Report on Internal Control over Financial Reporting as of September 30, 2005 and the Report of KPMG LLP, the Company's independent registered public accounting firm, relating to the effectiveness of the Company's internal controls over financial reporting and management's assessment thereof as of September 30, 2005, both of which reports are included in the Company's Annual Report on Form 10-K for the year ended September 30, 2005, should not be relied upon.

As previously disclosed, the Company's Board of Directors has appointed a Special Committee of independent directors to conduct an internal investigation relating to past stock option grants, the timing of such grants and other related accounting and documentation issues. The Special Committee is being assisted by independent legal counsel. In the course of its investigation, issues have arisen relating to the integrity of documents concerning the Company's stock option grants.

During the internal investigation, additional issues have arisen concerning the Company's practices in connection with credits issued to or requested by customers (for returned products or otherwise) and the related accounting treatment, as well as the application of payments received to the proper accounts receivable. The Special Committee is reviewing these issues and, pending further investigation, believes that the Company's accounts receivable and revenues may have been misstated during certain periods. Whether the Company's accounts receivable and revenues were misstated and, if so, the extent of such misstatements are still under investigation.

Although the Special Committee's investigation is in its preliminary stages, based on findings to date, the Board of Directors has determined that the Company's previously reported financial statements for the three months ended December 31, 2005 and the three years ended September 30, 2005 and possibly earlier periods should not be relied upon. The Board of Directors also determined that the Management Report on Internal Control over Financial Reporting as of September 30, 2005 and the Report of KPMG LLP relating to the effectiveness of the Company's internal controls over financial reporting and management's assessment thereof as of September 30, 2005, both of which reports are included in the Company's Annual Report on Form 10-K for the year ended September 30, 2005, should not be relied upon.

The Special Committee, with the assistance of independent legal counsel, are working as expeditiously as possible to complete the internal investigation.

The Company also announced that it has engaged Alvarez & Marsal, LLC, and specifically Shawn C.A. Hassel as acting Chief Financial Officer of the Company. Mr. Hassel, a Managing Director with Alvarez & Marsal, brings 12 years of experience as an interim manager and financial advisor to under-valued or under-performing companies and companies in transition.

Vitesse Semiconductor Corp. (Nasdaq: VTSS)

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