Wiz Technology Losses Go From Bad to Worse

Troubled discount software supplier Wiz Technology Inc. has restated its fiscal second-quarter financial results to reflect a far bigger loss than previously reported.

Due to methods that were “inconsistent with generally accepted accounting principles,” the company said it was restating its loss for the three months ended Jan. 31 to $1.77 million, or 20 cents a share. The company had earlier reported a loss of $924,687, or 10 cents a share, for the quarter.

In a press release, the company said it was restating the results because it recorded $2 million in revenue from the sale of two intranet contracts as an asset. Instead, the transaction should have been recorded as a “footnote disclosure” in the second quarter, it said, and the revenue recognized as the cash is received.

Wiz also said it was recognizing $195,000 in previously unrecorded liabilities, and was increasing its allowance for “doubtful accounts” by $200,000. An additional $112,115 in sales commissions would be stated as selling, general and administrative expenses, rather than as a cost of revenue, it said.

The changes resulted in Wiz restating its total losses for the first half of its fiscal year to $2.02 million from the previously reported $1.17-million loss.

Wiz hired an outside accounting firm in December after its previous auditor quit, citing reservations about the financial information it received from the company.

However, the current auditor, Cacciamatta Accountancy Corp. in Irvine, was not involved in the restating of Wiz’s second-quarter results, according to the company’s president, Danilo Cacciamatta. As the outside auditor, the accounting firm reviews only the full-year financial statements, he said.

Also on Monday, Wiz reported a loss of $420,231, or five cents a share, for its fiscal third quarter ended April 30, resulting in a year-to-date loss of $2.44 million, or 27 cents a share. Revenue for the nine-month period was $2.5 million, down 60% from $6.3 million in revenue a year before.

The company attributed the decline in revenue to its refocusing of sales efforts on smaller customers to keep costs down.

Founded in 1991, Wiz got its start selling software through nontraditional retailers such as grocery chains, drugstores and gift shops. A recent analyst’s report said the company had veered from its smaller customers to concentrate on chains such as CompUSA, but realized it was a costly mistake and recently began shifting back to its core market.

In February, the company’s stock was delisted from the American Stock Exchange for failing to meet earnings requirements and not filing its financial statements in a timely manner. Its stock, which now trades on the electronic bulletin board, closed on Monday unchanged at 8 cents a share.

The company is also facing a shareholder lawsuit, filed in March, which alleges that Wiz issued false financial statements. The complaint claims that Wiz used an inflated share value to acquire another software company.