Inspired, a gaming technology provider, recently announced its need for more time to finalize its financial statements for the third quarter ending on September 30, 2023.
The company also revealed ongoing efforts to restate certain previously issued financial statements.
This delay prompted Nasdaq to issue a notice, citing a violation of Nasdaq Listing Rule 5250(c)(1), as Inspired had not filed its Form 10-Q for Q3, which details its financial performance in that quarter.
The notification from Nasdaq, while not immediately affecting Inspired’s listing on the exchange, imposes a 60-calendar day deadline, ending on January 22, 2024, for Inspired to either submit the missing form or present a plan to regain compliance with Nasdaq Listing Rules.
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If Nasdaq accepts the plan, Inspired might receive an extension of up to 180 calendar days from the original filing due date, extending until May 7, 2024.
Failure to regain compliance could lead to the delisting of Inspired’s common stock from Nasdaq.
Inspired attributed the delay to various concerns, including accounting errors related to compliance with US Generally Accepted Accounting Principles (GAAP) in connection with accounting policies for capitalizing software development costs. These errors mainly stemmed from the application of accounting standards to various projects. Inspired is currently reviewing other financial statement line items and accounting policies to ensure compliance.
The errors were identified in financial statements starting from January 1, 2021, rendering these statements unreliable and necessitating their restatement.
Additionally, any previously issued reports, press releases, investor presentations, or other communications regarding financial results for those periods should no longer be relied upon.
Reports by Marcum LLP, Inspired’s former independent registered public accounting firm for 2021 and 2022, should also no longer be trusted.
Inspired acknowledged the presence of one or more “material weaknesses” in its internal control over financial reporting and pledged to make the necessary changes to address these issues.
The company intends to restate consolidated financial statements for the affected periods and shared these plans with the US Securities and Exchange Commission on November 8.
Despite these challenges, Inspired reassured investors that the planned changes would not impact its cash position or overall business plan.
However, it did acknowledge that a timeline for the amended reports would be established.
In its most recent results, covering Q2 and the first half of 2023, Inspired reported a 12.3% increase in Q2 revenue to $80.1 million, driven by growth across all business areas.
However, higher costs led to an 85.4% drop in net profit for the quarter to $2.3 million, although adjusted EBITDA increased from $26.1 million to $26.2 million.
For the first half, revenue reached $146.4 million, up 11.0% year-on-year, while net profit declined by 53.6% to $3.9 million due to increased spending.