Business Context and Reporting Period
This Form 8-K, dated May 27, 2016, is filed by Tecnoglass Inc. (Tecnoglass Holdings Inc.), a Cayman Islands corporation with principal executive offices in Barranquilla, Colombia. The report addresses a material non-reliance on previously issued financial statements following a review by the Audit Committee and the independent registered public accounting firm, PricewaterhouseCoopers Ltda. (PWC).
Key Financial Metrics and Material Changes
The filing does not provide specific revenue, profit, cash flow, or debt figures for the current period. Instead, it details material accounting errors requiring the restatement of:
- Audited financial statements for fiscal years ended December 31, 2014 and 2013.
- Quarterly reports (Form 10-Q) for the quarters ended March 31, 2015, June 30, 2015, and September 30, 2015.
Identified non-cash errors include:
- Accounting for the fair value of warrants exercised for ordinary shares (Q3 2015).
- Classification and presentation of deferred tax assets and liabilities.
- Classification of shipping and handling costs.
- Presentation of related party revenue versus third-party revenue.
- Classification of purchases and sales of investments in cash flow statements.
- Incorrect accounting for "earnout shares," which will be recorded as a liability with fair value changes recognized in the income statement.
- Resulting impacts on Earnings Per Share (EPS).
Management states that while these errors are material to the balance sheet and consolidated statements of operations, they will have no impact on the Company's Total Cash Flow from Operating Activities.
Guidance, Outlook, and Risks
Outlook and Filing Timeline: Management is working to finalize the Annual Report on Form 10-K for the fiscal year ended December 31, 2015. The Company expects to complete this filing well before the June 17, 2016, target date stipulated by NASDAQ.
Internal Controls: Management is assessing the impact of these matters on internal control over financial reporting as of December 31, 2015. Conclusions regarding the effectiveness of disclosure controls and procedures will be reported in the 2015 Form 10-K.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Specific risks cited include delays in filing required periodic reports, the potential for additional restatements for other accounting issues, and adverse effects on the business resulting from the restatement process.
Investor Verification Checklist
- Verify the filing of the restated Annual Report on Form 10-K for 2013 and the amended 2015 Form 10-K.
- Monitor the submission of amended quarterly reports (Form 10-Q) for the first three quarters of 2015.
- Confirm the Company meets the June 17, 2016, NASDAQ deadline to avoid delisting risks.
- Review the upcoming 2015 Form 10-K for the final assessment of internal control over financial reporting.
- Check for any additional disclosures regarding the accounting treatment of "earnout shares" and warrant exercises.