Like the dutiful school kid who asks permission to turn in his homework late, Neoforma got its hand slapped earlier this month.
The San Jose, Calif.-based e-commerce company got hit with a delisting notification from the Nasdaq exchange after it delayed filing its second-quarter financial statements with the Securities and Exchange Commission. The delay stemmed from two tricky accounting questions that prompted Neoforma to voluntarily consult with the SEC about the proper way to handle the issues (July 29, p. 26). After consulting with the SEC, Neoforma said earlier this month it would change one of the two accounting practices.
Neoforma said it expects to file its amended quarterly statement for the first quarter of 2002 and its second-quarter statement within a two-week time frame and will request an appeal hearing that should derail the threatened delisting.
The restatement will reflect a change in the amortization of the equity issued to VHA and University HealthSystem Consortium. Neoforma is the e-commerce partner of Novation, the joint group purchasing organization of VHA and UHC. The restatement will effectively wipe out the vast majority of Neoforma's revenue from the first quarter of 2002 on, although Neoforma officials said the change would be offset by an equal reduction of noncash operating expenses. As a result, the restatement will have no effect on net income or cash flow, they said. The majority of the amortization will likely be completed during 2005, officials said.
"Their cash flow growth rate through 2002 is phenomenal, and operationally the business is sound," said Sean Weiland, a research analyst for W.R. Hambrecht & Co. "I think Neoforma had the best intentions."