Capital Art, Inc. (OTCMKTS:CAPA) Files An 8-K Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim ReviewItem 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
On February 14, 2018, the Board of Directors of Capital Art, Inc. (the “Company”) determined, upon the recommendation of the Company’s management, that the Company should restate its previously issued financial statements for the year ended December 31, 2016, to correct the accounting for certain transactions contained therein, as discussed below. Accordingly, the financial statements contained in the Company’s Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on November 24, 2017 should no longer be relied upon in its present format.
The restatement relates to an error concerning the sale of a 50% ownership of the Company’s photographic copyrights of certain celebrity archival images and the right to receive 50% of the future share of income derived from the assigned images to third parties in exchange for a lump sum payment. The proceeds from the sale were erroneously recorded as revenue. The Company determined that these amounts should be recorded as debt in accordance with ASC 470-10-25 and 470-10-35, and to amortize the amounts under the interest method as described under ASC 835-30, Interest Method. The effect of the correction is to increase liabilities by $349,818 and increase net loss by the same amount.
Restated financial statements for the year ended December 31, 2016 will be included in the Company’s annual report on Form 10-K for the year ended December 31, 2016, which the Company expects to file on or before March 1, 2018.
The Company’s Board of Directors discussed the matters disclosed in this Item 4.02 with the Company’s independent registered public accounting firm, Malone Bailey LLP.
