Even so, the toxic debt isn't stopping filings.
Look through the last couple years of filings from Cyclone and you'll see lots of toxic debt and derivative costs reported.
All the auditors have to do is tally it up and report it on the balance sheets. The only things that would stop them from doing so would be if there are no records (unlikely), or a company desperate to keep shareholders from knowing just how bad the situation is.
For instance, a company that selectively doesn't update webpages so potential shareholders can't find out how badly the stock is diluted or how the management team consists of just two people, would be the kind that avoids honest reporting of financials.
I'm too lazy to look it up right now, but Cyclone had reported upping the number of authorized shares from 900 million to 2 billion. Then Frankie said in a notice to shareholders it had been upped again, but never said what the new number is. The reason given was to cover guarantees on convertible notes (i.e., toxic debt).
Probably billions of shares have been pledged to the creditors and derivative accounting would require a value be placed on that huge amount of stock, and that value be listed as a liability on the balance sheet. Harry and Frankie were probably shocked at just how badly underwater they are and are refusing to accept the auditor's reporting.
Yes, Chris Nelson presided over Cyclone's financial crash and burn, but it was Harry and Frankie squandering the money raised by the toxic debt while not delivering on any of their promises of working products that led to this cratering.
