Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
On
i. The audited consolidated financial statements for the fiscal years endedMarch 31, 2020 and 2019, andEisnerAmper LLP's report thereon; ii. The unaudited condensed consolidated financial statements as of and for each of the interim periods endedSeptember 30, 2020 and 2019,June 30, 2020 and 2019 andDecember 31, 2019 and 2018 (the "Affected Reports")
The management of the Company has determined that in accordance with FASB ASC Topic 606 section 10-32-26, the Company incorrectly accounted for the cost of cooperative advertising as selling expenses instead of a reduction of the transaction prices recorded in net sales for each of the Affected Reports.
Pursuant to FASB ASC Topic 606 section 10-32-26, if cooperative allowances payable to a customer is a payment for a distinct good or service from the customer, then an entity shall account for the purchase of the good or service in the same way that it accounts for other purchases from suppliers. If the amount of consideration payable to the customer exceeds the fair value of the distinct good or service that the entity receives from the customer, then the entity shall account for such an excess as a reduction of the transaction price. If the entity cannot reasonably estimate the fair value of the good or service received from the customer, it shall account for all of the consideration payable to the customer as a reduction of the transaction price.
The effects of this accounting error do not impact the consolidated balance sheets, statements of cash flows and statements of shareholders' equity for any current or past reporting period. The effects are confined to the consolidated statements of income, MD&A discussions, notes to consolidated financial statements, and management's assessment of internal control of the Affected Reports. The net income or loss reported in the aforementioned reporting periods is not expected to change. The impact of this error is as follows:
? For the years ended
percent, respectively. Correspondingly, selling expenses as a component of
total operating expenses are reduced by the same amounts.
? For the year ended
percentage from 26.8% to 21.2%. Correspondingly, total operating expenses as
originally reported were
approximate 20% reduction in indirect costs. These restatements do not change
the net loss of$2,857,000 previously reported. ? For the year endedMarch 31, 2019 total net sales as originally reported were
percentage from 25.3% to 21.5%. Correspondingly, total operating expenses as
originally reported were
approximate 21% reduction in indirect costs. These restatements do not change
the net income of$631,547 previously reported. ? For the three months and the six months endedSeptember 30, 2020 reported net
sales will be reduced by
an approximate four percent reduction in each period. Total net sales for the
three months ended
and will be restated to
29.0% to 26.1%. Total net sales for the six months ended
originally reported were
reducing the gross profit percentage from 30.0% to 26.8%. Correspondingly, for
the three months and the six months ended
operating expenses will be reduced by
representing a 21 % and an approximate 19% reduction in each period,
respectively. Total operating expenses as originally reported of
will be restated to
Total operating expenses as originally reported of
to
are not changed by these restatements. ? For the three months and the six months endedSeptember 30, 2019 reported net
sales will be reduced by
an approximate five percent reduction in each period. Total net sales for the
three months ended
and will be restated to
28.1% to 24.2%. Total net sales for the six months ended
originally reported were
reducing the gross profit percentage from 26.6% to 22.9%. Correspondingly, for
the three months and the six months ended
operating expenses will be reduced by
representing an approximate 21% and 17% reduction in each period, respectively.
Total operating expenses as originally reported of
to
expenses as originally reported of
for the six months ended
three months ended
months ended
these restatements. ? For the three months endedJune 30, 2020 reported net sales will be reduced by
for the three months ended
and will be restated to
37.1% to 31.5%. Correspondingly, for the three months ended
reported total operating expenses will be reduced by
% reduction. Total operating expenses as originally reported of
be restated to
not changed by these restatements.
? For the three months ended
for the three months ended
and will be restated to
20.5% to 17.6%. Correspondingly, for the three months ended
reported total operating expenses will be reduced by
% reduction. Total operating expenses as originally reported of
be restated to
not changed by these restatements.
The Company is working to complete the restatement of its financial statements for the periods covered in the Affected Reports (the "Non-Reliance Periods"). The Company is still in the process of determining if it will file the restated consolidated financial statements for the Non-Reliance Periods by filing a comprehensive Form 10-K that includes the restated consolidated financial statements and related financial information for the Non-Reliance Periods or filing amendments to each of the Affected Reports. The Company intends to restate the consolidated financial statements for the Non-Reliance Periods as soon as practicable. Accordingly, investors and others should rely only on the financial information and other disclosures regarding the Non-Reliance Periods once the Company restates its consolidated financial statements and not rely on any previously issued or filed registration statements or reports, earning press releases, investor presentations or other communications related thereto covering the Non-Reliance Periods.
Determination of the impact of the errors described above are subject to continued analysis by management and our auditors and could change based on further review and analysis of the Affected Periods. The Company, when restating the previously filed financial statements, may also correct other previously identified errors determined to be immaterial.
The Audit Committee of the Board of Directors and management have begun implementing measures to enhance processes and controls and continue to evaluate appropriate remediation actions. Management continues to assess the effect of the restatements on the Company's internal control over financial reporting and its disclosure controls and procedures. The Company expects to report a material weaknesses following completion of this assessment
The Audit Committee has discussed the foregoing with
Forward Looking Statements
This Current Report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are made only as of the date of this Report. In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "may," "potential," "predicts," "projects," "should," "will," "would," and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from the information contained in the forward-looking statements. The Company cannot assure that the forward-looking statements in this Report will prove to be accurate. The Company cautions its investors not to place undue reliance upon forward-looking statements.
© Edgar Online, source