Hooper Holmes Inc. said it board's audit committee concluded that restatement of the company's unaudited interim financial statements included in the Form 10-Q for the quarter ended June 30, 2017, and the Form 10-Q for the quarter ended Sept. 30, 2017, was required to correct an error in Hooper's accounting.
During the first quarter of 2017, the company properly accrued an expense of $250,000 that became payable upon issuance of a fairness opinion by the company's investment banker related to its merger with Provant Health Solutions LLC. When the merger closed on May 11, 2017, an additional $500,000 investment banking fee became payable, but the company failed to accrue the additional amount due to an oversight. Both fees arose under the Hooper's engagement letter with the investment banker, but the company never received an invoice for either portion of the fee and neither portion has been paid.
As a result of the pending restatements, the company is unable to complete its financial statements and file its annual report on Form 10-K for the year ended Dec. 31, 2017, by the prescribed due date for such filing. Hooper expects to make the filing on or before the expiration of the 15 calendar-day extension period.
In addition, the company appointed James Fleet chief restructuring officer pursuant to an engagement letter with PMCM LLC, an affiliate of Phoenix Management Services, where he has been working for about 20 years. During PMCM's engagement, Fleet will provide senior executive leadership to the company with all officers reporting to him.
Fleet's principal duties in the immediate term is to establish a working capital plan, with the broader mandate to include developing and implementing plans to restructure the company's balance sheet, operating expense structure and overall strategies in an effort to resolve the going concern assessment that has been reported regarding the audited financial statements for the years ended Dec. 31, 2015, and Dec. 31, 2016, and which is anticipated to continue in effect when the company issues its audited financial statements for the year ended Dec. 31, 2017.