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On October 21, 2019, the board of directors of Pareteum Corporation (the “Company”) determined that the Company’s financial statements which were included in its annual report for the year ended December 31, 2018 and quarterly reports for the quarters ended March 31, 2019 and June 30, 2019 (collectively, the “Non-Reliance Periods”) should no longer be relied upon. Similarly, related press releases, earnings releases, and investor communications describing the Company’s financial statements for the Non-Reliance Periods should no longer be relied upon. The Company will restate financial statements for the Non-Reliance Periods in advance of filing the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2019.
The decision to restate these financial statements is based on the Company’s conclusion that certain revenues recognized during 2018 and 2019 should not have been recorded, during that period. For certain customer transactions, the company may have prematurely or inaccurately recognized revenue. These restatements should not impact historical cash or cash equivalents based upon the current review. At the present time, the restatements are expected to impact Revenue, Cost of Service, Operating Income, Net Loss, Accounts Receivable and other Balance Sheet line items. While the Company’s analysis is still underway, the Company currently estimates the revenue impact for the full year 2018 to be a reduction of approximately $9 million. For the first half of 2019, the Company currently estimates the revenue impact to be a reduction of approximately $24 million.
At this time, the Company has not fully completed its review and the expected financial impact of the restatement described above is preliminary and subject to change. The Company cannot predict the aggregate amount of revenue that will ultimately be restated, whether additional periods beyond those referenced above will be affected, and the final outcome or timing of the Company's filing of restated financial statements for the affected annual and quarterly periods. Until the full magnitude of these transactions is analyzed and understood, the company cannot provide forward guidance, and we expect the second half and full year 2019 will be materially below current analysts’ estimates.
The Company cannot at this time estimate when the restatement will be completed and filed on Form 10-K/A for the year ended December 31, 2018 and the interim periods cited above. The Company will continue to diligently pursue completion of the restatement and intends to make upcoming quarterly filings as soon as reasonably practical.
Because the Company has not yet fully completed its review, the expected financial impact of the restatement described above is preliminary and subject to change. There can be no assurance that the final reported adjustments will not differ materially from the estimated amounts discussed in this current report, or that additional adjustments will not be identified.
The audit committee has discussed the matters disclosed pursuant to this Item 4.02 with Squar Milner LLP, the Company’s independent accountant
22-10-2019, 05:55 PM
