Item 4.02 Non-Reliance on Previously Completed Interim Review
On August 12, 2008, the officers of American Security Resources Corp. (the “Company”) concluded that the financial statements included in the Form 10-K for the period ended December 31, 2007 should not be relied upon because of a failure to recognize an agreement dated December 18, 2007 with a distributor for a warrant to purchase 40,000,000 shares of the Company’s common stock, which is exercisable at the lower of $0.03 or the lowest closing price at any time prior to the exercise and expires on December 18, 2008 (the “Warrant”).
On August 8, 2008, the Company was informed of the error regarding the Warrant from its independent accountant in preparation for filing the Form 10-Q for the period ended June 30, 2008. Officers and Directors of the Company have discussed this issue with the independent accountant and came to the conclusion on August 12, 2008, that the financial statements included in the Form 10-K for the period ended December 31, 2007 should no longer be relied upon.
As the result of this error, we are restating our financial statements included in the Form 10-K for the period ended December 31, 2007 and the in the Form 10-Q for the period ended March 31, 2008 and associated disclosures to include the cost associated with the Warrant. The error resulted in the understatement of non-cash expenses and a corresponding understatement of net loss by $719,022, for the year ending December 31, 2007 and for the Period of Re-Entering the Development Stage to December 31, 2007. The restatement impacted certain line items within cash flows from operations, but had no effect on total cash flows from operations and did not impact cash flows from financing or investing activities. This restatement had no impact on the balance sheets, statements of operations or the net decrease in cash and cash equivalents reported in the statements of cash flows for any periods reported prior to October 1, 2007.
An amendment to the Annual Report on Form 10-K for the period ended December 31, 2007 correcting the error, will be filed in the near future.
Item 8.01 Other Events
On August 14, 2008, the United States District Court for the District Court of Oregon ordered the dismissal of Relion, Inc.’s lawsuit against our subsidiary Hydra Fuel Cell Corporation, which alleged patent infringement issues, with prejudice and ordered Relion, Inc. to pay Hydra Fuel Cell Corporation costs in the amount $11,517.49. In addition, Relion, Inc. was ordered to refund $7,396 in sanctions previously assessed against Hydra Fuel Cell Corporation.
