SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q/A
Amendment
No. 1
o QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended September 30, 2005
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from _________
to _________
Commission
file number 1-10262
HARKEN
ENERGY CORPORATION
(Exact
name of registrant as specified in its charter)
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Delaware
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95-2841597
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(State
or other jurisdiction
of
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(I.R.S.
Employer
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incorporation
or
organization)
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Identification
No.)
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180
State Street, Suite
200
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Southlake,
Texas
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76092
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(Address
of principal executive
offices)
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(Zip
Code)
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Registrant's
telephone number, including area code (817)
424-2424
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes xNo
o
Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Rule
12b-2 of the Exchange Act). Yes
xNo
o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes oNo
x
The
number of shares of Common Stock, par value $0.01 per share, outstanding as
of
December 31, 2005 was 223,575,732.
EXPLANATORY
NOTE
This
Amendment No. 1 on Form 10-Q is being filed to amend Part I Item 4. of Harken’s
Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2005,
filed on November 9, 2005 (the “Original 10-Q”). This Amendment No. 1 does not
otherwise alter the disclosures set forth in the Original 10-Q and does not
reflect events occurring after the filing of the Original 10-Q. This Amendment
No. 1 is effective for all purposes as of the date of the filing of the Original
10-Q.
ITEM
4. CONTROLS AND PROCEDURES
(a)
Evaluation
of disclosure controls and procedures.
As
of the
end of the period covered by this report, and under the supervision and with
the
participation of management, including the Company’s Chief Executive Officer and
Chief Financial Officer, the Company evaluated the effectiveness of the design
and operation of these disclosure controls and procedures. Based on this
evaluation and based on the error in the Company’s accounting for certain
preferred stock exchange transactions, the Company’s Chief Executive Officer and
Chief Financial Officer have concluded that the Company’s disclosure controls
and procedures were not effective as of the end of the period covered by this
quarterly report.
The
Company entered into and closed three separate transactions to redeem certain
shares of its Series G1, Series G2 and Series G4 Preferred stock during the
quarter ended September 30, 2005. In accounting for these transactions, the
Company inadvertently used the liquidation value (rather than the carrying
value) in its calculation of dividends to preferred holders. This calculation
was made for determining the increase or decrease to net income attributed
to
common stockholders.
The
Company engaged two third party accounting consultants to assist it in
determining the proper accounting treatment for these transactions. It was
determined that these redemptions should be treated similarly to preferred
stock
dividends in accordance with EITF Topic D-42, “The Effect on the Calculation of
Earnings per Share for the Redemption or Induced Conversion of Preferred Stock,”
and EITF Topic D-53, “Computation of Earnings per Share for a Period That
Includes a Redemption or an Induced Conversion of a Portion of a Class of
Preferred Stock”.
Based
on
the above, Company personnel prepared detailed calculations of the effect on
net
income attributed to common stock associated with the redemption of these
preferred shares. In accordance with the Company’s policies and procedures, its
Chief Financial Officer reviewed the calculations, and, additionally, the
Company engaged one of the third party consultants to review the calculations
as
an additional level of review. While not part of its control procedures, the
Company specifically engaged its auditors to review the accounting memoranda
and
calculations, in draft form, both at the local partner level and at the
technical accounting partner level. The Company, however, failed to reference
its calculations underlying these transactions to the related accounting advice
received. Had the Company performed this additional procedure, it would have
located the calculation error as part of its internal control structure and
its
journal entries would have been correct.
As
the
Company’s auditors were completing their quarterly review of the Company’s
September 30, 2005 Form 10-Q, they discovered the calculation error. The error
resulted in a material adjustment of the Company’s Form 10-Q draft which was
corrected prior to filing its final Form 10-Q. In assessing the internal control
implications of the error, the Company determined that the error met the
criteria for a material weakness and disclosed it accordingly. In deciding
to
disclose this as a material weakness, the Company considered the fact that
its
existing internal control procedures failed to detect the error and its overall
impact on its financial statements.
(b) Changes
in internal controls.
Previously,
during 2005, the Company hired additional experienced accounting personnel,
specifically the Global Assistant Controller and the GEM Vice President -
Finance and Chief Financial Officer, as part of our efforts to remediate the
material weakness that existed in the Company’s internal control over financial
reporting for complex transactions at December 31, 2004. During the quarter
ended September 30, 2005, the Company’s remediation efforts continued through
the hiring of the GEM Financial Reporting Manager and the Global Financial
Analyst, third party review of complex transactions and further realignment
of
financial reporting duties and responsibilities.
The
Company’s existing internal controls over financial reporting include preparing
a quarterly summary list of complex transactions, preparing accounting memos
for
each of these transactions describing the proper US GAAP application and
forwarding the accounting memos and related calculations (if applicable) to
its
third party consultants. The Company will now add an additional procedure where
all journal entries and related calculations which underlie these complex
transactions are referenced to the supporting accounting literature and
accounting memoranda.
The
items
described above represent changes in the Company’s internal control over the
financial reporting during the quarter ended September 30, 2005 that materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
ITEM
6. Exhibits and Reports on Form 8-K
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*31.1 |
Certificate
of the Chief Executive Officer of Harken Energy Corporation pursuant
to
section 302 of the Sarbanes-Oxley Act of
2002.
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*31.2 |
Certificate
of the Chief Financial Officer of Harken Energy Corporation pursuant
to
section 302 of the Sarbanes-Oxley Act of
2002.
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*32.1 |
Certificate
of the Chief Executive Officer, as required by Section 906 of the
Sarbanes-Oxley Act of 2002.
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*32.2 |
Certificate
of the Chief Financial Officer, as required by Section 906 of the
Sarbanes-Oxley Act of 2002.
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* Filed
herewith
HARKEN
ENERGY CORPORATION
SIGNATURES
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 thereunto
duly authorized.
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Harken
Energy
Corporation |
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(Registrant) |
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| Date:
January 30, 2006 |
By: |
/s/ Anna
M.
Williams |
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Vice
President-Finance and |
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Chief
Financial Officer |