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EDGAR FILINGS
Year 2006 / October 20
FREESTAR TECHNOLOGY CORPORATION (FSRT.OB)
Non-Reliance on Previous Financials, Audits or Interim Review
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
On July 21, 2006, the management of FreeStar Technology Corporation (the "Company") filed amendments to its reports on Form 10-KSB for the twelve months ended June 30, 2005 and 2004, and its Forms 10-QSB for the three months ended September 30, 2005 and 2004; December 31, 2005 and 2004; and March 31, 2006 and 2005 (collectively, the "Prior Reports"). These amendments were filed in order to correct an error in the Prior Reports that was discovered in connection with a comment raised by the Securities and Exchange Commission ("SEC") in their review of our Exchange Act filings on Form 10-KSB for the year ended June 30, 2005. This error involved the incorrect classification in the Prior Reports of the amortization of software costs in sales, general, and administrative expense, rather than in cost of revenue expense.
On October 16, 2006, upon further review of these errors and after discussion with the Company's independent public accounting firm, the Company made the determination that the financial statements contained in the Prior Reports should not be relied upon and should be restated.
The amounts of the reclassifications of expense from sales, general, and administrative expenses to cost of revenue for each of the periods are as follows:
Twelve months ended June 30, 2005:
Amount of reclassification:
Cost of revenue as originally filed:
Cost of revenue as amended:
SGA expenses as originally filed:
SGA expenses as amended: |
$ |
404,163
1,290,906
1,695,069
21,704,104
21,299,941 |
Twelve months ended June 30, 2004:
Amount of reclassification:
Cost of revenue as originally filed:
Cost of revenue as amended:
SGA expenses as originally filed:
SGA expenses as amended: |
$ |
356,937
1,227,915
1,584,852
7,131,560
6,774,623 |
Three months ended March 31, 2006:
Amount of reclassification:
Cost of revenue as originally filed:
Cost of revenue as amended:
SGA expenses as originally filed:
SGA expenses as amended: |
$ |
95,358
268,435
363,793
2,431,821
2,336,463 |
Three months ended March 31, 2005:
Amount of reclassification:
Cost of revenue as originally filed:
Cost of revenue as amended:
SGA expenses as originally filed:
SGA expenses as amended: |
$ |
118,989
359,071
478,060
6,808,362
6,689,373 |
Three months ended December 31, 2005:
Amount of reclassification:
Cost of revenue as originally filed:
Cost of revenue as amended:
expenses as originally filed:
SGA expenses as amended: |
$ |
95,875
348,941
444,816
1,979,927
1,884,052 |
Three months ended December 31, 2004:
Amount of reclassification:
Cost of revenue as originally filed:
Cost of revenue as amended:
SGA expenses as originally filed:
SGA expenses as amended: |
$ |
88,102
258,380
346,482
1,515,843
1,427,741 |
Three months ended September 30, 2005:
Amount of reclassification:
Cost of revenue as originally filed:
Cost of revenue as amended:
SGA expenses as originally filed:
SGA expenses as amended: |
$ |
84,745
413,811
498,556
1,109,199
1,024,454 |
Three months ended September 30, 2004:
Amount of reclassification:
Cost of revenue as originally filed:
Cost of revenue as amended:
SGA expenses as originally filed:
SGA expenses as amended: |
$ |
86,778
169,915
256,693
1,173,181
1,086,403 |
There was no effect on net loss, assets, or liabilities or earnings per share related to this restatement for any of the periods.
The amendments filed on June 21, 2006 to the Prior Reports corrected the software amortization expense error described above. We will file amendments number 2 to the Prior Reports to add additional explanatory disclosures and to update our disclosure regarding our controls and procedures. Other than such additional disclosures, the financials statements that will be filed in amendments number 2 will be unchanged from the financial statements filed with amendments number 1 on July 21, 2006.
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