Nasdaq issues warning to Inspired over late filing of Q3 results
Inspired earlier this month said it needed more time to complete its financial statements for the three months to 30 September 2023. The provider also said work was ongoing to restate certain previously issued financial statements.
Nasdaq has now contacted Inspired over the issue saying the late filing places it in breach of Nasdaq Listing Rule 5250(c)(1). This references failure to file its Form 10-Q for Q3, which sets out its financial performance in the quarter.
Inspired said the notification does not have any immediate effect on the listing of securities on Nasdaq. However, the provider has been given 60 calendar days, or until 22 January 2024, to either file the form or submit a plan to regain compliance with Nasdaq Listing Rules.
Should Nasdaq accept the plan, Inspired may be given an extension to file the Form 10-Q. This could be for up to 180 calendar days from the filing’s due date, or until 7 May 2024.
However, should Inspired fail to regain compliance with Nasdaq Listing Rules, its common stock will be subject to delisting from Nasdaq.
Why is Inspired late filing its Q3 results?
Upon announcing the delay earlier in November, Inspired highlighted a number of concerns. These included accounting errors relating to compliance with US GAAP in connection with accounting policies for capitalising software development costs.
These errors relate primarily to the application of relevant accounting standards to projects. Inspired said it is currently reviewing other financial statement line items and accounting policies to ensure compliance.
According to Inspired, the errors were flagged in financial statements for financial periods commencing 1 January 2021. As such, it said these statements can no longer be relied upon and should be restated.
“Similarly, any previously issued or filed reports, press releases, earnings releases, investor presentations or other communications of the company describing the company’s financial results or other financial information relating to the subject periods should no longer be relied upon,” Inspired said.
“Additionally, the reports of Marcum LLP, the company’s former independent registered public accounting firm, on the company’s consolidated financial statements for 2021 and 2022 likewise should no longer be relied upon.”
“Material weaknesses” in financial reporting
Based on these findings, Inspired said one or more additional “material weaknesses” exist in its internal control over financial reporting. This, it added, means it will implement changes to remediate these identified weaknesses.
As a result, Inspired intends to restate consolidated financial statements for the periods of concern. These plans were detailed to the US Securities and Exchange Commission on 8 November.
Inspired sought to allay any investors’ fears over the situation. The provider said it does not believe the planned changes will impact its cash position or overall business plan. However, it added that it could place a timeline on when the amended reports would be filed.
Net profit down in Q2 despite revenue growth at Inspired
Inspired’s most recent set of results were published in August, covering Q2 and the first half to 30 June 2023.
Revenue in Q2 was 12.3% higher at $80.1m (£63.2m/€73.2m) following growth across all business areas. However, a rise in costs meant net profit for the quarter dropped 85.4% to $2.3m, although adjusted EBITDA edged up from $26.1m to $26.2m.
As for the first half, revenue was $146.4m, up 11.0% year-on-year. Spending was higher year-on-year, resulting in net profit declining 53.6% to $3.9m for the six months.