Sun River Energy’s Auditor Resigns

Sun River Energy’s Auditor Resigns

By Dan Lonkevich
January 09, 2012 3:13 AM PST

Sun River Energy (SNRV), the PIPE issuer that is involved in multiple lawsuits to take back restricted stock from contractors and other investors, said its auditor LBB Associates Ltd.LP resigned on Dec. 21.

The oil and gas company offered no explanation for the resignation.

The announcement was made in a securities filing on Dec. 29 in which Sun River also said it expects to complete a search for a replacement within two weeks.

Dallas-based Sun River said in the filing that during its two most recent fiscal years ended April 30, 2010 and 2011, LBB’s reports on the company’s financial statements did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.

Sun River reported a $7.3 million net loss in the fiscal year end April 30, 2011, compared with a loss of $3.3 million, in the same period of 2010. For the six months ended Oct. 31, 2011, Sun River posted a net loss of $5.5 million, compared with a loss of $1.5 million, a year earlier.

“There were no disagreements between the company and LBB on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of LBB would have caused LBB to make reference to the subject matter of the disagreement in connection with its reports on the company’s financial statements,” Sun River said in the filing.

Representatives of Sun River and of LBB couldn’t be reached for comment.

Sun River shares fell 13.8%, or 20 cents, to $1.25 on Jan. 6. They have traded as high as $5.17 and as low as 51 cents over the past year.

The resignation of Sun River’s auditor comes as the company has begun to sever ties with Harry McMillan, a former consultant and major shareholder. The company accuses him of disclosing confidential information to a third party. Sun River also has said it intends to sue McMillan and his consulting firm Cicerone Corporate Development to take back $1.7 million in illegal short-swing profits.

McMillan was the driving force in Sun River’s strategy of suing contractors and other investors to take back shares of restricted stock. In several countersuits filed against Sun River, those contractors and investors have accused McMillan and Sun River of stock manipulation by using litigation to prevent investors from selling shares on the open market.

The company has denied the allegations of stock manipulation. It settled in one of the lawsuits in December. The terms of the settlement with Mirador Consulting were not disclosed.