News that Poseidon Concepts must restate its fin

Last week,  Short Report told you about how short sellers were having a field day by targeting oil field services company  Poseidon Concepts Corp. ( TSX: T.ONR ,  Stock Forum )

On February 14, 2012, the stock plunged 69% to 27 cents after the company announced that up to $106 million of its $148.1 million revenue for nine months ended September 30, 2012 should not have been recorded as revenue on its financial statements.

The Calgary-based company went on to say that financial results for the first three quarters of 2012 must be restated, while adding that all previous guidance with respect to its business can no longer be relied upon.

These admissions came less than a month after law firms in Calgary and Toronto filed a proposed class action suit against the company and certain officers and directors on behalf of persons who acquired securities of Poseidon prior to December 27, 2012.

They include participants in an $82 million bought deal financing, comprised of 6.4 million shares, priced at $13 a share, and led by a syndicate that included  National Bank Financial Inc.

The bought deal financing was priced well below the 52-week high of $16.88.

Here is an update on the situation.

On Wednesday, Poseidon said that as a result of the need to restate the first, second, and third quarter 2012 financial statements, the company is currently in default under its loan agreement dated June 29, 2012.

“The company is in discussions with its syndicate of lenders, regarding short and long term support, which is subject to negotiation, credit approval and revised loan terms, which are yet to be determined,’’  the company said in a press release.

In addition, as a result of the requirement to restate its financial statements, the Alberta Securities Commission has issued a cease trading order against the company.

The cease trading order prohibits all trading or purchasing in company securities until the cease trading order has been revoked or varied by the Commission.

At the 27-cent trading level, Poseidon currently has a market cap of $21.9 million, based on 81 million shares outstanding.

Meanwhile, New York law firm  Tripp Levy announced on February 16 that it has been retained to represent Poseidon shareholders and has launched a lawsuit on behalf of people who bought the securities prior to February 14, 2013.

The lawsuit alleges that, among other things, Poseidon Concepts made statements that were materially false and misleading regarding Poseidon Concepts’ financial position, financial performance and cash flows, and that they overstated the company’s incomes and reported inflated assets.

These allegations remain unproven until such times as they are tested in a court of law.