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RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
 12 Months Ended
Dec. 31, 2023
Accounting Changes and Error Corrections [Abstract]  
RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

2. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

 

In connection with the preparation of our consolidated financial statements for the years ended December 31, 2023 and 2022, the Company identified errors related to revenue and cost recognition in its previously issued (i) consolidated financial statements as of and for the year ended December 31, 2022 included in its Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Period”) and (ii) unaudited condensed consolidated financial statements for the quarters ended March 31, 2022 through September 30, 2023 included in its Quarterly Reports on Form 10-Q for the periods ended March 31, 2022, June 30, 2022, September 30, 2022, March 31, 2023, June 30, 2023 and September 30, 2023 (the “Interim Periods”, which, together with the Annual Period, the “Affected Periods”).

 

During 2022 and 2023, the Company recognized revenues associated with customer contracts with performance obligations satisfied over time (“Over Time Contracts”) using labor hours as the measure of progress. The Company’s underlying estimates of total labor hours required to complete Over Time Contracts were materially different from the actual labor hours required, which was determined to represent an error since the information underlying the estimate was known or knowable as of the balance sheet date and, as a result, the percentage of completion used to recognize revenue in the Affected Periods is materially different from the percentage of completion using actual labor hours incurred. As a result, the Company has restated revenues during the Affected Periods to adjust the percentage of completion based upon the actual labor hours incurred to complete each Over Time Contract (the “Revenues Adjustment”).

 

Additionally, the Company has determined that costs from Over Time Contracts should be recognized as incurred and, as a result, the Company has recorded an adjustment to its consolidated financial statements during the Affected Periods (together with the Revenues Adjustment, the “Restatement Adjustments”), as the Company was previously incorrectly deferring costs incurred to a future period. 

 

The Company evaluated the materiality of these misstatements both qualitatively and quantitatively in accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements in Current Year Financial Statements, and determined the effect of correcting these misstatements was material to the Affected Periods. As a result of the material misstatements, the Company has restated its consolidated financial statements for the Affected Periods in accordance with ASC 250, Accounting Changes and Error Corrections (the “Restated Consolidated Financial Statements”).

 

A reconciliation from the amounts previously reported for the Affected Periods to the restated amounts in the Restated Consolidated Financial Statements is provided for the impacted financial statement line items below for: (i) the consolidated balance sheet as of December 31, 2022; (ii) the consolidated statement of operations for the year ended December 31, 2022; (iii) the consolidated statement of changes in stockholders’ equity for the year ended December 31, 2022; and (iv) the consolidated statement of cash flows for the year ended December 31, 2022. The amounts labeled “Restatement Adjustments” represent the effects of the Restatement Adjustments.

The following table presents the effects of the Restatement Adjustments on the Company’s consolidated balance sheet as of December 31, 2022:

 

   Stated   Adjustments   Restated 
   December 31, 2022 
   As Previously   Restatement   As 
   Stated   Adjustments   Restated 
ASSETS            
Current assets               
Accounts receivable, net  $11,139   $(1,129)  $10,010 
Inventories, net  $8,748   $(658)  $8,090 
Total current assets  $33,036   $(1,787)  $31,249 
Total assets  $37,175   $(1,787)  $35,388 
LIABILITIES AND STOCKHOLDERS’ EQUITY               
Current liabilities               
Deferred revenue  $10,665   $(6)  $10,659 
Total current liabilities  $18,962   $(6)  $18,956 
Total liabilities  $20,242   $(6)  $20,236 
Stockholders’ equity               
Accumulated deficit  $(15,950)  $(1,781)  $(17,731)
Total stockholders’ equity  $16,933   $(1,781)  $15,152 
Total liabilities and stockholders’ equity  $37,175   $(1,787)  $35,388 

 

 

The following table presents the effects of the Restatement Adjustments on the Company’s consolidated statement of operations for the year ended December 31, 2022:

 

   Stated   Adjustments   Restated 
   For the Year Ended 
   December 31, 2022 
   As Previously   Restatement   As 
   Stated   Adjustments   Restated 
Revenues  $27,000   $(1,122)  $25,878 
Cost of goods sold  $22,393   $659   $23,052 
Gross profit  $4,607   $(1,781)  $2,826 
Loss from operations  $(4,029)  $(1,781)  $(5,810)
Loss before taxes  $(3,631)  $(1,781)  $(5,412)
Net loss  $(3,638)  $(1,781)  $(5,419)
                
Loss per share - basic and diluted  $(0.37)  $(0.19)  $(0.56)

 

The following table presents the effects of the Restatement Adjustments on the Company’s consolidated statement of changes in stockholders’ equity for the year ended December 31, 2022:

 

   As Previously   Restatement   As 
   Stated   Adjustments   Restated 
    (unaudited)    (unaudited)    (unaudited) 
Balance - January 1, 2022  $19,552   $-   $19,552 
Net loss  $(3,638)  $(1,781)  $(5,419)
Balance - December 31, 2022  $16,933   $(1,781)  $15,152 

 

The following table presents the effects of the Restatement Adjustments on the Company’s consolidated statement of cash flows for the year ended December 31, 2022:

 

   Stated   Adjustments   Restated 
   December 31, 2022 
   As Previously   Restatement   As 
   Stated   Adjustments   Restated 
Cash flows from operating activities:               
Net loss  $(3,638)  $(1,781)  $(5,419)
Changes in operating assets and liabilities:               
Accounts receivable  $(8,570)  $1,129   $(7,441)
Inventories  $(4,589)  $658   $(3,931)
Deferred revenue  $8,243   $(6)  $8,237 
Net cash used in operating activities  $(5,772)  $-   $(5,772)

 

The remainder of the notes to the Company’s consolidated financial statements have been updated and restated, as applicable, to reflect the impact of the Restatement Adjustments described above.

 

See Note 4 - Restatement of Previously Issued Unaudited Interim Condensed Consolidated Financial Statements for details of the effect of the Restatement Adjustments on the Interim Periods.