Press Release
Form 8-K for CREATIVE VISTAS INC
November 18, 2005
Non Reliance on Prev 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 November 17, 2005, Creative Vistas, Inc., an Arizona
corporation (the Company), determined that as the result
of ongoing discussions with the SEC staff regarding
the Companys registration statement on form SB-2 concerning
the accounting for its convertible term note, warrants
and options for the purchase of shares of common stock
issued on September 30, 2004, the Company will have
to restate its Consolidated Balance Sheet and Statement
of Operations for the year ended December 31, 2004 and
the periods ended September 30, 2004, March 31, 2005
and June 30, 2005.
Until the Company has restated and reissued its results
for the applicable periods, investors and other users
of the Companys SEC filings are cautioned not to rely
on the Companys financial statements for the year ended
December 31, 2004 and periods ended September 30, 2004,
March 31, 2005, and June 30, 2005, to the extent they
are affected by the accounting issues described above.
The Company has not completed its assessment of the
effect of the change in accounting treatment related
to the September 2004 convertible term note on the financial
statements noted above. The Company intends to (i) file
a formal response to the SECs accounting comments related
to the Companys registration statement on Form SB-2,
(ii) respond to any additional accounting comments issued
by the SEC, and (iii) file a restatement of financial
statements of the annual report for the year ended December
31, 2004 and quarters ended September 20, 2004, March
31, 2005 and June 30, 2005. All readers of this Current
Report are urged to review such restated results of
operations upon their issuance.
As a result of the foregoing, the Company will not
be able to file its Quarterly Report on Form 10-QSB
(the 10-QSB) for the period ended September 30, 2005
with the SEC in a timely fashion. The Company filed
a Form 12b-5 Notification of Late Filing on November
15, 2005 making its 10-QSB due on November 21, 2005.
It appears at this time that the Company will not be
able to file its 10-QSB by that date and that the filing
will be delinquent. The Company intends to file the
10-QSB as soon as possible, incorporating the accounting
changes discussed with the SEC.
On September 30, 2004, the Company entered into a series
of agreements with Laurus Master Fund, Ltd. (Laurus)
whereby we issued to Laurus (i) a secured convertible
term note (the Note) in the amount of $4.5 million,
(ii) a maximum revolving credit facility of $3 million,
(iii) related options to purchase up to 1,499,997 shares
of common stock of the Registrant at a price of two-thirds
of a cent per share (the Option), and (iv) a seven year
warrant to purchase up to 2,250,000 shares of common
stock of the Registrant at a price of $1.15 per share
(the Warrant). The principal amount of the Note bears
interest at the prime rate plus two percent with a minimum
rate of six percent. The minimum monthly payment on
the Note is $100,000, plus the monthly interest payment,
and must be paid in either cash, the common stock of
the Company or a combination thereof, depending on the
occurrence of certain criteria. Upon the occurrence
of certain conditions, Laurus has the option to convert
the entire principal amount of the Note, together with
interest thereon into shares of the Company's common
stock at a conversion price of $1 per share, provided
that such conversion does not result in Laurus beneficially
owning more than 4.99% of our outstanding shares of
common stock.
During its review of the Companys registration statement
on Form SB-2, the SEC staff initiated discussions with
the Company about the Companys accounting for the convertible
term note, warrants and options issued to Laurus including
discussions regarding the method used to account for
the convertible term note, warrants and options, including
whether or not (i) the convertible term note is a conventional
convertible debt, (ii) the convertible term note contained
a beneficial conversion feature which should be accounted
for under EITF 98-5 and EITF 00-27, or whether the conversion
option is a derivative requiring bifurcation (iii) the
warrants and options should be accounted for as liabilities
and (iv) there are other embedded derivatives requiring
bifurcation .
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As a result of these discussions with the SEC staff
and the Companys ongoing analysis of the September 30,
2004 transactions as described above, the Company has
preliminarily determined that the convertible term note
is not a conventional convertible debt. The warrants
and options which were previously recorded as beneficial
conversion features will be eliminated from the balance
sheet and the amortization of beneficial conversion
features will be eliminated from results of operation.
Those warrants and options will be valued along with
any other embedded derivatives in the convertible term
note requiring bifurcation at each balance sheet date.
In addition, the warrants and options issued should
be accounted for as liabilities and marked to market
at each balance sheet date. This change may have a material
impact on the financial position and the results of
operations and earnings per share for the relevant quarters
and the year ended December 31, 2004.
The Company cautions that its discussions with the SEC
staff are ongoing, as a result of which there can be
no assurance that the adjustments described above will
in fact be the final adjustments that the Company determines
are required.
The Company intends to file the amended financial statements
with the SEC as soon as possible after the completion
of its discussions with the SEC staff.
The authorized officers of the Company have discussed
with the Companys independent accountant the matters
disclosed in this filing pursuant to Item 4.02(a) and
the Companys Board of Directors has approved the filing
of this Form 8-K.
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