Unify Corp. officials said that an accounting error would force the company to restate its financial results for the fiscal year ended April 30, 2007, as well as for the quarters ended January 31, 2007 and July 31, 2007.The announcement comes less than two week after the company reported its results for the quarter ended October 31.
The maker of application development and data management software said the error is related to the accounting for the company’s November 2006 acquisition of Gupta Technologies. The acquisition was part of a purchase and exchange agreement whereby, in addition to acquiring Gupta, Unify also sold its Insurance Risk Management division, the company explained.
The software company noted that it deems the error to be a significant control deficiency relative to the process of accounting for complex non-routine transactions. “In the future, the company will engage an outside accounting expert to advise it regarding any complex non-routine transactions to ensure accounting entries are properly recorded,” it stated.
In accounting for the purchase and exchange transaction, the company incorrectly capitalized $384,000 in future payments as direct costs of the sale and acquisition, instead of indirect costs that should have been expensed, Unify noted in a regulatory filing.
Unify said the error was identified by its auditors, Grant Thornton LLP, as a part of routine discussions with the company during their quarterly review of the company’s financial statements for the most recent quarter, which the company filed with the Securities and Exchange Commission on November 29.
The restatement increases the company’s loss from discontinued operations for fiscal 2007 and for the quarter ended January 31, 2007 by $384,000. The adjustment also increases the net loss by the same amount. The restatement also decreases the amount reported as goodwill by $384,000 as of April 30, and for the quarters ended January 31 and July 31.
In the November 29 regulatory filing, Unify disclosed that management believe the would amount to $734,000, but that it would have no impact on the equity position of the company. However, it its most recent filing, the company said it determined that $350,000 of the accrued expense for future payments had been properly expensed, leaving only a balance of $384,000 to be expensed.