iCoreConnect Inc. (ICCT), a Nevada-based cloud software and technology company, has announced the restating of its previously issued financial statements for the fiscal years 2021 and 2022. The company’s management and Audit Committee determined that the restatements were necessary due to improper accounting treatment of certain warrants, which were issued with “down round provisions.” These provisions required the adjustment of the exercise price and an increase in the number of shares underlying the warrants when new securities were issued at a lower price per share.
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The Restatements Affect the Company’s Financial Statements
The restatements affect the company’s audited financial statements for the years ended December 31, 2021, and 2022, which were originally filed with the SEC on March 23, 2023. Additionally, the unaudited financial statements for the quarters ended September 30, 2021, March 31, 2022, June 30, 2022, and September 30, 2022, have also been restated. The company’s management has advised that investors should no longer rely upon the financial statements included in the impacted filings.
Reason for the Errors and Impact on Financial Reports
The errors stemmed from the company’s failure to properly account for the down round provisions when the criteria for revaluation were met. The company applied ASU 2017-11, Simplifying Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity, to determine the appropriate accounting treatment. The restatements increased the Net Loss Attributable to Common Stockholders and the Net Loss per share, basic and diluted. However, the restatements did not impact the company’s Balance Sheets, Statement of Changes in Shareholders’ Equity (Deficit), or Statements of Cash Flows.
Identified Deficiencies and Steps Taken by the Company
Management identified deficiencies in the company’s corporate governance practices and internal control over financial reporting related to the accounting treatment for complex financial instruments. The company did not have appropriate controls in place to monitor the issuance of instruments with down round features and understand the impact on equity holders.
iCoreConnect’s management is working to address the identified deficiencies and weaknesses to ensure proper accounting treatment in future financial reports. As part of its efforts, the company is amending its Annual Report on Form 10-K/A, making the appropriate modifications to reflect the restatements. This includes updating sections pertaining to Risk Factors, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Financial Statements and Supplementary Disclosures, Controls and Procedures, and Exhibits to Financial Statement Schedules.
Important Information for Investors
Investors should carefully review the amended annual report, along with iCoreConnect’s other filings with the SEC, for a full understanding of the company’s financial performance and risk factors. It is crucial for investors to remain informed about iCoreConnect’s efforts to address the identified deficiencies and enhance its financial reporting processes moving forward.
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