Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities
Exchange
Act of 1934
Date
of
Report (Date of earliest event reported): May 1, 2008
ARROW
RESOURCES DEVELOPMENT, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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1-9224
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56-2346563
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
No.)
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Carnegie
Hall Tower
152
W. 57th
Street
New
York, New York 10019
(Address
of principal executive offices)
(212)
262-2300
(Registrant’s
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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In
May
2006, the Company was advised that it was alleged to be in default of a
settlement agreement entered into in January of 2005 by CNE, its predecessor
company, related to the release of unrestricted, freely-tradable, non-legend
shares of stock. In August 2006, the plaintiffs, alleging the default, obtained
a judgment in the 17th Judicial Circuit Court Broward County, Florida for
approximately $1,000,000.
On
November 13, 2007, legal counsel engaged by Management in the matter
commenced
an action on the Company’s behalf in the above Circuit Court seeking to vacate
and set aside the 2006 judgment asserting claims under Rule 1.540(b) of the
Florida Rules of Civil Procedure. On May 1, 2008 the Company was advised that
the description of the above litigation was incorrectly described and treated
in
the Company’s Form 10-KSB for the year ended December 31, 2007. This 10-KSB
report was filed with the SEC on April 15, 2008. As a result, the Company
determined that the description of the litigation required correction, that
the
amount of a judgment in the litigation of approximately $1,000,000 that had
been
entered in
the
17th Judicial Circuit Court Broward County, Florida
against
the Company should have been reserved against in the Company’s financial
statements for the year ended December 31, 2007, which was included in the
Form
10-KSB, and that these financial statements should no longer be relied upon.
The
Company’s Chief Executive Officer discussed this matter with KBL, LLP (“KBL”),
the Company’s independent auditors, on or about May 12, 2008. Based thereon, KBL
advised the Company that the audit report issued by KBL for the Company’s
financial statements for the year ended December 31, 2007 should
no
longer be relied upon.
The
Company’s counsel in the matter indicated, in his evaluation, that the Company
has only a limited chance of having the 2006 judgment opened by the Court
because Florida law provides very narrow grounds for opening a judgment once
a
year has passed from its entry. The Courts are generally reluctant to disturb
final judgments and the Company’s grounds for opening the judgment depend on the
Court’s adopting a somewhat novel argument regarding such matters. If,
however, the Court does open the default judgment, the Company will then have
the opportunity to defend the 2006 action and, in such event, our counsel
believes that the Company has a reasonable chance of succeeding in defending
that claim, at least in part, based on the documents he has reviewed.
The
Company intends to file an amendment to its Form 10-KSB shortly for the year
ended December 31, 2007 in which it will accrue a liability for the $1,053,385
for this matter in the financial statements as of December 31, 2007, and it
will
revise the description of the litigation each time it appears to read as
follows:
In
May 2006, the Company was advised that it was alleged to be in default of a
settlement agreement entered into in January of 2005 by CNE, its predecessor
company, related to the release of unrestricted, freely-tradable, non-legend
shares of stock. In August 2006, the plaintiffs, alleging the default, obtained
a judgment in the 17th Judicial Circuit Court Broward County, Florida for
approximately $1,000,000. On November 13, 2007, legal counsel engaged by
Management commenced
an action on the Company’s behalf in the above Circuit Court seeking to vacate
and set aside the 2006 judgment asserting claims under Rule 1.540(b) of the
Florida Rules of Civil Procedure. Our counsel’s evaluation is that the Company
has only a limited chance of having the 2006 judgment opened by the Court
because Florida law provides very narrow grounds for opening a judgment once
a
year has passed from its entry. The Courts are generally reluctant to disturb
final judgments and the Company’s grounds for opening the judgment depend on the
Court’s adopting a somewhat novel argument regarding such matters. If, however,
the Court does open the default judgment, the Company will then have the
opportunity to defend the 2006 action and, in such event, our counsel believes
that the Company has a reasonable chance of succeeding in defending that claim,
at least in part, based on the documents he has reviewed. As
of
December 31, 2007, the Company has accrued $1,053,385 related to this
matter.
The
amendment will also include a revision of the Company’s financial statements for
the year ended December 31, 2007 to reflect a reserve for the $1,053,385
judgment plus accrued interest.
The
Company has provided KBL with a copy of this report prior to the time it has
filed the report. Appended hereto as Exhibit 16.1 is a letter from KBL
acknowledging that they have seen this report and the disclosures therein and
they agree with the statements made by the Company in response to this Item
4.02.
Item
9 Financial Amendments and Exhibits.
16.1 Letter
from Registrant’s Certifying Accounts.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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ARROW
RESOURCES DEVELOPMENT, INC.
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Date:
May 16, 2008
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By: |
/s/ Peter
J.
Frugone |
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Peter
J. Frugone, Chief Executive Officer
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