SAN DIEGO, CALIFORNIA, September 29, 2004 — Acceris Communications Inc. (OTCBB:ACRS) today announced that it will be restating its prior financial statements to correct for an error.
Management has concluded that the accounting principles as set forth in Emerging Issues Task Force Issue No. 00-27 (“EITF 00-27”), regarding Beneficial Conversion Features (“BCF”), had not been properly applied in current and prior years to its convertible debentures issued in March 2001. The initial determination of the BCF in 2001 at the issue date was correct. However, adjustments to the number of shares and their conversion price were made under the debentures’ anti-dilution provisions. The various anti-dilution events and their respective impacts on the number of shares and the conversion price were disclosed in the Company’s previous public filings. However, the principles under EITF 00-27 also require a redetermination of the BCF at each date an anti-dilution event occurred. This redetermination was not completed in prior reporting periods. Additionally, the accumulation of unpaid interest costs on these same convertible debentures has been deemed to be interest paid in kind (“PIK”); such interest also contains a conversion feature which once assessed as PIK interest required the determination of a BCF. This determination was not made by the Company in its prior reportings.
This matter was raised by the Company’s recently appointed independent auditors, BDO Seidman, LLP (“BDO”), in the course of their review of the Company’s prior public filings. After discussions among the Company’s management, BDO, and the Company’s prior auditors, PricewaterhouseCoopers, LLP (“PwC”), the Company’s management concluded that a correction of the prior accounting on this matter was required. The Company’s management brought the matter for consideration before the Audit Committee and the full Board of Directors of the Company. Having considered the circumstances underlying the accounting errors and their effects upon the Company’s prior filings, and having discussed the matter with the BDO and PwC representatives as well as the Company’s management, the Audit Committee concluded that the previously issued financial statements should not be relied upon and approved and authorized the Company’s management to amend certain previously filed public reports. Therefore, in connection with the foregoing, the Company’s management will shortly (i) file its Quarterly Report on Form 10-Q for the second fiscal quarter of 2004, and (ii) amend previously filed Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q for all fiscal years and quarters since the fourth quarter of 2002.
The correction of these errors results in an increase in deemed interest expense and net loss, in all reporting periods from the fourth quarter of 2002 through the first quarter of 2004, and a reduction in reported liabilities and stockholders’ deficit in all reporting periods from the fourth quarter of 2002 through the first quarter of 2004. The effect of these errors, by reporting period, is detailed below.
The Company has filed a Form 8-K with the Securities and Exchange Commission detailing the impact of this error and has also indicated that it expects to amend existing securities filings accordingly and to become current in its filings shortly.
The Company urges investors not to rely on the financial information included in the Company’s prior public reports for the affected fiscal periods filed pursuant to the Securities Exchange Act of 1934, as amended, until it restates such financial information and files the affected public reports with the U.S. Securities and Exchange Commission.
