Business Context and Reporting Period
Company: Retractable Technologies, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 10, 2015
Subject: Non-reliance on previously issued financial statements for the three and six months ended June 30, 2015.
Key Financial Metrics and Material Changes
The filing does not provide current revenue, profit, cash flow, or debt figures. Instead, it details a material accounting error discovered during the preparation of the September 30, 2015, financial statements that impacts the previously reported data for the period ended June 30, 2015.
- Inventory Error: Raw materials inventories were understated by $596,000 as of June 30, 2015.
- Expense Error: Cost of goods sold (COGS) was overstated by $596,000 for the three and six months ended June 30, 2015.
- Root Cause: An incorrect summation of individual inventory amounts in a spreadsheet-based subsidiary ledger.
- Impact: The error resulted in the understatement of net income for the affected periods.
Guidance, Outlook, and Management Commentary
Remediation and Restatement: The Company, in consultation with its Audit Committee and independent registered public accounting firm, has concluded that investors should no longer rely on the Original Report (Form 10-Q filed August 14, 2015). The Company will file a Form 10-Q/A to restate the unaudited condensed financial statements for the affected periods as soon as possible.
Internal Controls: The Company identified a material weakness in its internal controls as of June 30, 2015, related to the spreadsheet error. Steps are being taken to remediate this weakness.
Future Filings: Management anticipates being in a position to timely file the Form 10-Q for the quarterly period ended September 30, 2015.
Investor Verification Checklist
- Verify the filing of the Form 10-Q/A to confirm the restated financial figures for the periods ended June 30, 2015.
- Review the specific details of the remediation plan for the identified material weakness in internal controls.
- Monitor the timely filing of the Form 10-Q for the quarter ended September 30, 2015.
- Assess the impact of the $596,000 COGS adjustment on previously reported earnings per share and gross margins.