CMON Limited has posted more information on its website about one of the three audit issues that are delaying its 2019 financial statements, a delay which led to the suspension of trading in the stock (see “Annual Report Delayed, Trading Suspended in CMON”). The clarification was related to the company’s statement in a public filing that one of the three audit issues was related to “other information as required by the auditors for their audit procedures on certain audit issues including ‘going concern.’” CMON revealed that the going concern issue was triggered by the way Kickstarter projects are booked prior to fulfillment, which results in more current liabilities being booked than current assets at times during the process.
“This happens for CMON from time to time since we record funds received from Kickstarter as both a liability and an asset - the money is an asset we received from our backers, but it is also a liability we owe to them that is not fulfilled until we ship our products,” the company said in its statement. “Since we use the funds to pay for molds, production and development of those products, and some of these are considered ‘Non-Current assets,’ the asset column goes down as we use the money to fulfill the development of the game. Once we ship the game, the project goes back into the black because we can take the liability for the Kickstarter funds off the books. The tricky part is when this crosses a financial reporting year, which happens often for Kickstarter projects, and if that happens it automatically triggers this technical nomenclature, and if you review our prospectus you will see we have reported this in the past.”
The company did not address either of the other two audit issues or why the three issues resulted in a delay in its financial statements, but it did reassure its Kickstarter backers and other stakeholders of its prospects. “Please rest assured that despite the current state of the world, CMON is and will be in the business of making great games for many years to come.”
CMON also provided an update on projects in the pipe, three of which are being delayed by the coronavirus pandemic. Packing of Time Machine in the company’s U.S. hub has been delayed due to lockdown, and deliveries are delayed in Europe. Munchkin Dungeon and Project Elite are en route to fulfillment centers but will face delays in Europe due to coronavirus lockdowns.