Revision

9 Months Ended

Jun. 30, 2020

17. Revision

Prior to the issuance of the Company’s consolidated financial statements for the third quarter ended June 30, 2020, the Company concluded that its previously issued consolidated financial statements for the first quarter ended December 31, 2019 and second quarter ended March 31, 2020 contained accounting errors with respect to the application of ASC 842 (Leases) and the reserve against an operating lease receivable.

In the first quarter ended December 31, 2019, the Company determined the collection of future operating lease revenue from a customer was less than probable and ceased recognizing additional rental revenue while the existing operating lease receivable was deemed by the Company to be collectible. In the second quarter ended March 31, 2020, the Company recorded a reserve against the operating lease receivable to bad debt expense due to a subsequent determination that collection of the receivable had become less than probable. In accordance with the guidance of ASC 842, when collectability of the rental payments is not deemed probable then lease revenue is limited to cash received with an off-setting adjustment through rental revenue for any existing operating lease receivables and recording a reserve against operating lease receivables as an increase to bad debt expense is not permitted. As such, the outstanding operating lease receivable should have been reversed against rental revenue in the first quarter ended December 31, 2019 rather than recognized as bad debt expense in the second quarter ended March 31, 2020.

The Company has revised its unaudited consolidated balance sheet at December 31, 2019, its unaudited statements of operations for the three months ended December 31, 2019, and its unaudited statements of operations for the three and six months ended March 31, 2020 to correct the identified errors. The Company concluded that these financial statements should be revised because of the accounting errors with respect to its application of ASC 842. The revision had no net impact on cash flows from operating activities for the three months ended December 31, 2019 and for the three and six months ended March 31, 2020.

The impact of the correction of the errors on our unaudited consolidated balance sheet at December 31, 2019 was as follows (in thousands):

	As of December 31, 2019
	As Reported			Adjustment			Revised
Current assets:
Cash and cash equivalents	$	10,141		$	—		$	10,141
Trade accounts and financing receivables, net		35,198			(7,993	)		27,205
Inventories		23,907			—			23,907
Property held for sale		691			—			691
Prepaid expenses and other current assets		1,971			—			1,971
Total current assets		71,908			(7,993	)		63,915
Non-current inventories		19,223			—			19,223
Rental equipment, net		66,985			—			66,985
Property, plant and equipment, net		31,615			—			31,615
Goodwill		5,008			—			5,008
Other intangible assets, net		9,630			—			9,630
Deferred cost of revenue and other assets		807			—			807
Total assets	$	205,176			(7,993	)	$	197,183

Total liabilities	$	26,461		$	—		$	26,461
Stockholders’ equity:
Preferred stock		—			—			—
Common stock		137			—			137
Additional paid-in capital		89,250			—			89,250
Retained earnings		104,519			(7,993	)		96,526
Accumulated other comprehensive loss		(15,191	)		—			(15,191	)
Total stockholders’ equity		178,715			(7,993	)		170,722
Total liabilities and stockholders’ equity	$	205,176		$	(7,993	)	$	197,183

The impact of the correction of the error on our unaudited consolidated statement of operations for the three months ended December 31, 2019 was as follows (in thousands):

	Three Months Ended December 31, 2019
	As Reported			Adjustment			Revised
Revenue:
Products	$	9,083		$	—		$	9,083
Rental		16,615			(7,993	)		8,622
Total revenue		25,698			(7,993	)		17,705

Cost of revenue		15,208			—			15,208

Gross profit		10,490			(7,993	)		2,497

Total operating expenses		10,320			—			10,320

Income (loss) from operations		170			(7,993	)		(7,823	)

Other income (expense), net		(39	)		—			(39	)

Income (loss) before income taxes		131			(7,993	)		(7,862	)
Income tax expense		1,420			—			1,420
Net loss	$	(1,289	)	$	(7,993	)	$	(9,282	)

Loss per common share:
Basic	$	(0.10	)	$	(0.59	)	$	(0.69	)
Diluted	$	(0.10	)	$	(0.59	)	$	(0.69	)

The impact of the correction of the error on our unaudited consolidated statements of operations for the three and six months ended March 31, 2020 was as follows (in thousands):

	Three Months Ended March 31, 2020									Six Months Ended March 31, 2020
	As Reported			Adjustment			Revised			As Reported			Adjustment			Revised
Revenue:
Products	$	9,517		$	—		$	9,517		$	18,600		$	—		$	18,600
Rental		16,390			—			16,390			33,005			(7,993	)		25,012
Total revenue		25,907			—			25,907			51,605			(7,993	)		43,612

Cost of revenue		18,002			—			18,002			33,210			—			33,210

Gross profit		7,905			—			7,905			18,395			(7,993	)		10,402

Operating expenses:
Selling, general and administrative		6,066			—			6,066			12,063			—			12,063
Research and development		4,225			—			4,225			8,521			—			8,521
Change in estimated fair value of contingent consideration		972			—			972			972			—			972
Bad debt expense		8,124			(7,993	)		131			8,151			(7,993	)		158
Total operating expenses		19,387			(7,993	)		11,394			29,707			(7,993	)		21,714

Loss from operations		(11,482	)		7,993			(3,489	)		(11,312	)		—			(11,312	)

Other income, net		285			—			285			246			—			246

Loss before income taxes		(11,197	)		7,993			(3,204	)		(11,066	)		—			(11,066	)
Income tax expense		607			—			607			2,027			—			2,027
Net loss	$	(11,804	)	$	7,993		$	(3,811	)	$	(13,093	)	$	—		$	(13,093	)

Loss per common share:
Basic	$	(0.87	)	$	0.59		$	(0.28	)	$	(0.97	)	$	—		$	(0.97	)
Diluted	$	(0.87	)	$	0.59		$	(0.28	)	$	(0.97	)	$	—		$	(0.97	)