News Column

CIRQUE ENERGY, INC. FILES (8-K/A) Disclosing Non-Reliance on Previous Financials, Audits or Interim Review

July 9, 2014



During the year ended December 31, 2012, the Company issued convertible promissory notes ("Notes") as described in Note 9 of the Notes to the Financial Statements on Form 10-K for the year ended December 31, 2012, which was filed with the Securities and Exchange Commission (the "SEC") on April 17, 2013.

The Notes were originally accounted for in accordance with ASC 480, Liabilities - Distinguishing Liabilities from Equity. On April 8, 2014, the Company's current auditor, Silberstein Ungar, PLLC ("Silberstein") informed the Company, and the Company's board of directors (the "Board") subsequently determined, that is not appropriate to account for the Notes under ASC 480 as the monetary value is not predominately based on one of three factors in ASC 480-10-25-14 due to the underlying volatility of the Company stock and the conversion formula of the Notes and that the conversion feature of the Notes should instead be accounted for in accordance with ASC 815, Derivatives and Hedging.

The application of ASC 815 results in the recognition of a derivative liability for the conversion feature embedded in the Notes. The net impact of correcting the errors resulted in an increase in total liabilities of $38,627, an increase in accumulated deficit during the development stage of $38,627 and an increase in net loss of $38,627.

As a result, the Board concluded that the Company's financial statements previously filed with the SEC should no longer be relied upon. The Company intends to file restated consolidated financial statements for the year ended December 31, 2012 to correct these errors in the accounting for the Notes. The Company's predecessor auditors, De Joya Griffith, LLC, declined to issue an opinion on these restated consolidated financial statements.

In order to provide financial statements that can be relied upon, on June 20, 2014 the Board engaged the successor auditors, Silberstein to re-audit the December 31, 2012 financial statements. Silberstein had been previously engaged to audit the December 31, 2013 financial statements. When filed, the December 31, 2013 financial statements will reflect the financial statements to be restated for the period ended December 31, 2012.

While the Company cannot presently make a definitive determination regarding which interim financial statements included in any of the quarterly reports will need to be restated, the Company presently believes that the interim financial statements included in the quarterly reports filed with respect to the periods ended September 30, 2012, March 31, 2013, June 30, 2013 and September 30, 2013 will need to be restated and are thus no longer to be relied upon.

Both the restated financial statements for the period ended December 31, 2012 and any interim financial statements that the Company determines must be restated will be filed as soon as practicable.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Edgar Glimpses

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters