Forian Inc. revealed plans to restate its financial statements for multiple periods, citing a technical accounting adjustment related to revenue recognition. The company's Audit Committee determined that previously issued financial statements from 2021 through 2024 should no longer be relied upon, triggering a comprehensive restatement process.
The restatement stems from the application of Accounting Standards Codification (ASC) 606, which governs revenue recognition from customer contracts. Management identified that certain contract minimum payments should be recognized on a straight-line basis over the contract's duration, rather than individually in the year the minimum fee applies.
Despite the accounting adjustment, Forian emphasized that the restatement would result in an increase to previously reported revenues and net income and would not impact the company's actual cash flows. The technical correction applies to a limited number of contracts where variable fees are earned based on customer sales thresholds.
Forian remains confident in its financial outlook, maintaining its original revenue projection of $19 million to $20 million for the year ending December 31, 2024. The company also expects its Adjusted EBITDA to remain within the previously announced range of negative $0.5 million to positive $0.5 million.
The restatement will delay the filing of Forian's Annual Report on Form 10-K, with the company expecting to submit the document within a 15-calendar-day extension period provided by SEC regulations. Consequently, the previously scheduled earnings conference call has been deferred until the first quarter 2025 financial results are available.
This accounting adjustment underscores the complexity of financial reporting in technology and analytics sectors, where revenue recognition can involve nuanced interpretations of accounting standards. While the restatement might raise initial investor concerns, Forian's maintenance of its financial projections suggests confidence in the company's underlying business performance.
