NMS Communications says it will restate its Q2 filings due to a $500,000 revenue recognition error

October 20, 2005

2 Min Read

FRAMINGHAM, Mass. -- NMS Communications (NASDAQ: NMSS - News) today announced that it will restate its financial statements for the second quarter of 2005 (which ended on June 30, 2005) due to a revenue recognition error in the approximate amount of $500,000.

The error is related to the sale to one customer of the company's MyCaller(TM) ringback offering that was recorded in Q2. The Company recently concluded that full customer acceptance did not occur in Q2. Accordingly, revenue in the second quarter was about $500,000 less, and operating profit and net income were about $250,000 less, than previously reported. We expect to record approximately $415,000 of the revenue and $205,000 of the earnings in the company's Q3 results, and approximately $85,000 of the revenue and $45,000 of the earnings in Q4. As a result, previously issued financial statements for the second quarter of 2005 should not be relied upon.

The error was recently discovered by NMS' Finance group and promptly reported to the Audit Committee of the Board of Directors and to the company's independent registered public accounting firm. The error was the result of a material weakness in internal controls and procedures over the recording of revenue in accordance with Generally Accepted Accounting Principles. The Audit Committee has hired outside experts to investigate the error and to determine whether other accounting errors have been made. The investigation is underway.

Subject to any changes resulting from the investigation, the company reaffirmed its previously issued guidance of annual revenues of $105 million to $110 million and earnings per share from $0.00 to $0.05. The company plans to announce its final Q3 2005 results on November 1, 2005 as previously announced and, pending the completion of the investigation referred to above, to file a restated Q2 10Q and its Q3 2005 10Q on a timely basis.

NMS Communications Corp.

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