through the fourth quarter of fiscal 2018. The Special Committee also found that these business and sales practices may have resulted in the Company recognizing revenue for certain transactions
prior to satisfying the criteria for revenue recognition required under U.S. Generally Accepted Accounting Principles (“GAAP”).
On
September 14, 2018 and as previously disclosed, the Board concluded that the Company’s previously issued consolidated financial statements and other financial data for the fiscal years ended March 31, 2015, March 31, 2016 and
March 31, 2017 contained in its Annual Reports on Form
10-K,
and its condensed consolidated financial statements for the quarters and
year-to-date
periods ended June 30, 2015, September 30, 2015, December 31, 2015, June 30, 2016, September 30, 2016, December 31, 2016,
June 30, 2017 and September 30, 2017 contained in its Quarterly Reports on Form
10-Q
(collectively, the
“Non-Reliance
Periods”) should no longer be
relied upon because of misstatements described further below. The Board also determined that the Company’s disclosures related to such financial statements and related communications issued by or on behalf of the Company with respect to the
Non-Reliance
Periods, including management’s assessment of internal control over financial reporting and disclosure controls and procedures, should no longer be relied upon. The determination by the Board (the
“Non-Reliance
Determination”) was made upon the recommendation of the Audit Committee, as a result of the investigation described above and after consultation with the Company’s management team.
The Company has determined that the accounting treatment historically applied by the Company for certain transactions occurring during the
Non-Reliance
Periods was not appropriate and inconsistent with the business and sales practices identified in the investigation, which resulted in the Company recognizing revenue for those transactions prior to
satisfying the criteria for revenue recognition required under GAAP. Revenue recognized prematurely will be recognized in different historical periods or, where the criteria for recognition of revenue under GAAP have not yet been satisfied, may be
recorded in future periods upon satisfaction of the criteria required by GAAP. Based on its preliminary analysis, which is subject to change, the Company estimates that: (i) as of September 30, 2017, the end of the last fiscal quarter
publicly reported by the Company, there was between approximately $25 million and $35 million of prematurely recognized revenue in the historical periods that may be recognized in periods subsequent to that date upon satisfaction of the
criteria required by GAAP; and (ii) as of September 30, 2018, the end of its most recently completed fiscal quarter, there was between approximately $15 million and $25 million of prematurely recognized revenue in the historical
periods that may be recognized in future periods upon satisfaction of the criteria required by GAAP. Additionally, other known misstatements will be corrected in connection with the restatement of the Company’s historical financial statements.
The Company’s management has retained separate advisors to assist it with an assessment of the accounting matters related to the Special Committee
investigation, including the periods identified by the Special Committee and prior to those covered by the SEC subpoena, including the determination and quantification of misstatements in these periods. This assessment is ongoing, and although
sufficient information is available to support the determination made by the Board and discussed above, the Company has not yet made any findings on the specific amounts to be set forth in the restated results.
In addition, the Company is evaluating the impact of the misstatements described above on its internal control over financial reporting and disclosure
controls and procedures, and expects to report one or more material weaknesses in internal control over financial reporting related to this matter and to report that its internal control over financial reporting and disclosure controls and
procedures were not effective as of the
Non-Reliance
Periods, as applicable, as well as in subsequent periods until such material weakness or weaknesses are remediated. The Company has begun to implement, will
continue to implement and will continue to evaluate additional remedial measures based on the findings from the investigation.
In connection with the
investigation, the
Non-Reliance
Determination and the misstatements described above, the Company and its advisors are performing additional work related to the periods included within the Form
10-Q,
which might result in adjustments to the financial statements and related disclosures included therein.
As a
result of these developments, the Company has been unable to complete its preparation and review of its Form
10-Q
in time to file within the prescribed time period without unreasonable effort or
expense. While the Company continues to work expeditiously to conclude this review and file the Form
10-Q
as soon as practicable, the Company does not anticipate filing such Quarterly Report on
Form 10-Q
within the five day extension provided by Rule
12b-25(b). The
Company will continue to devote the resources necessary to address the
Non-Reliance
Determination and to complete the
Form 10-Q,
the Annual Report on Form
10-K
for the fiscal year ended March 31,
2018, including management’s assessment of internal control over financial reporting, and the Quarterly Reports on Form
10-Q
for the fiscal quarter ended December 31, 2017 and June 30, 2018, as
soon as practicable.