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Form 8-K for SYSTEMS OF EXCELLENCE INC filed on 18 Nov 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Sections 13 of 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 25, 1996
SYSTEMS OF EXCELLENCE, INC.
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(Exact name of registrant as specified in its charter)
Florida 0-20788 65-0126945
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
Tysons Dulles Plaza
1420 Spring Hill Road, Suite 155, McLean, Virginia 22102
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(Address of Principal Executive offices)
Registrant's telephone number, including area code: (703) 734-9200
Registrant's Former Name or Address: N/A
ITEM 4. Changes in Registrant's Certifying Accountant
The information in this Item 4 and elsewhere in this Form 8-K is provided by Registrant's present management (see Items 5 and 6 below), and is based upon information obtained by present management as a result of diligent inquiry during the short time present management has been in place, from Registrant's records, and from accountants, counsel and others who were associated with Registrant from time to time during the periods referred to herein. Neither Registrant's President and Chief Executive Officer nor members of Registrant's current Board of Directors other than Mr. Ken Walther, who resigned as Registrant's President effective November 1, 1996, were affiliatedwith Registrant in such capacities prior to approximately October 24, 1996 and as a result, do not have personal knowledge of the events reported herein which occurred prior to that date.
On or about September 18, 1996, confirmed by letter dated September 20, 1996, Weinberg, Pershes & Company, P.A. ("WPC") advised Registrant of the need to expand "significantly" the scope of its audit. WPC had been engaged as Registrant's Independent Certifying Accountant on or about July 2, 1996, to among other things, audit Registrant's balance sheet as of February 29, 1996 and Registrant's related statements of operations, retained earnings, and cash flows for the year then ended. The basis of WPC's September 18, 1996 advice to Registrant is more fully set forth in WPC's letter to Registrant dated September 20, 1996 and delivered to Mr. Huttoe, on behalf of Registrant on or about that date, a copy of which is included herewith, and hereby incorporated by reference.
On or about September 25, 1996, David M. Goldstein, Esq., believed by Registrant's present management to have been counsel for Registrant at thetime, formally notified WPC that its services as Registrant's Independent Certifying Accountant was no longer required. Upon information and belief, Registrant's present management believes that Mr. Goldstein was instructed to advise WPC by Registrant's then Chief Executive Officer and one of Registrant's two (2) directors, Charles O. Huttoe.
On September 21, 1996, Registrant under the direction and control of Mr. Huttoe, was caused to appoint M. S. Finkel & Co., CPA, purportedly as Independent Certifying Accountant to replace WPC. In connection with such appointment, on or about September 30, 1996, Registrant filed a Report on Form 8-K with the Securities and Exchange Commission ("SEC"), disclosing the change of Registrant's accountants and stating that there had been no disagreements with WPC "on any matters of accounting principals or practices, financial statement disclosure or auditing scope or procedure or any reportable events".
The September 30, 1996 Form 8-K disclosure was incorrect and as mentioned above there were disagreements between WPC and Registrant. As a result of, and in connection with the replacement of WPC by M.S. Finkel & Co., WPC was dismissed as Registrants certifying accountants effective September 21, 1996.
M. S. Finkel & Co. prepared Registrant's balance sheet as of February 29, 1996 and Registrant's related statements of operations, shareholders equity, and cash flows for the year then ended, which were included in Registrant's Form 10-KSB filed with the SEC on or about September 24, 1996.
On or about October 4, 1996, the SEC issued a Formal Order of
Investigation (See Item 5 hereof). On or about October 10, 1996, Registrant, by action of Mr. Huttoe and Maria Iacovelli, purportedly engaged the services of Feldman, Radin & Co., P.C. Registrant has been unsuccessful in its attempts to contact M.S. Finkel & Co., and as a result, does not know whether there were any disagreements between Mr. Huttoe and M. S. Finkel & Co., and/or Registrant and M.S. Finkel & Co., regarding any accounting issues. On October 18, 1996, Mr. Kenneth Walther, then President of Registrant (see Items 5 and 6 below), in a press release issued by Registrant, stated that Feldman, Radin & Co., P.C.had been engaged to re-audit the financial statements included in Registrant's Form 10-KSB for the period ended February 29, 1996 because Registrant lacked confidence in such financial statements, which were prepared and purportedly
subjected to an audit by M.S. Finkel & Co. Registrant is unaware of any action undertaken in connection with Registrant by Feldman, Radin & Co., P.C. as a result of the aforementioned appointment.
On November 6, 1996, Registrant reached agreement with WPC to
re-engage WPC as Registrant's Independent Certifying Accountants to: 1) complete its audit of the balance sheet of Registrant as of February 29, 1996 and the related statements of operations, stockholders' equity, and cash flows
for the year then ended, including the expanded scope of such audit as
indicated in WPC's letter to Registrant dated September 20, 1996; 2) render consulting services and advice to Registrant, and in particular, advice regarding Registrants periodic filings in 1996; and 3) audit Registrant's balance sheet as of February 28, 1997, and the related statements of
operations, stockholders' equity, and cash flows for the year then ended.
As a result of the foregoing, on November 7, 1996, Registrant informed Feldman Radin & Co., P.C. that Registrant had decided to re-engage its former auditors to complete its accounting requirements. There was no disagreement between Registrant and Feldman, Radin & Co., with respect to any accounting issues. A copy of this Form 8- K will be provided to Feldman Radin & Co.
Nothing in connection with Registrant's re-engagement of WPC and termination of a relationship, if any, with Feldman, Radin & Co., P.C., should be viewed as casting any aspersions on Feldman, Radin & Co. P.C.
ITEM 5. Other Events
a. Forms S-8
On or about September 24, 1996, Registrant, as a result of
instructions from Mr. Huttoe, filed approximately 16 registration statements on Forms S-8 with the SEC with respect to a total of approximately 39,577,538 shares of Registrant's common stock. Each
of the Forms S-8 caused to be filed with the SEC by Mr. Huttoe, reflected that the shares of Registrant's common stock referred to in the respective Forms S-8 were issued to the recipient as compensation for services rendered to Registrant. Registrant, as of the date of this report, does not have sufficient information available to it to determine, among other things, the exact nature or extent of the services, if any, rendered to Registrant by the persons named in the aforementioned Forms S-8, whether those services, if any,
were actually rendered, or the value, fair market or otherwise, of the
services, if any, rendered to Registrant by the recipient of the shares named in the Forms S-8 as the recipient. However, in certain cases, Registrant has determined that certain shares of Registrant's common stock referred to in the
Forms S-8 were not issued for services rendered to Registrant, certain shares were issued for cash payments to Registrant, and certain shares may have been issued to nominees of Mr. Huttoe. Registrant's new management is conducting an inquiry regarding, among other things, the facts surrounding the Forms S-8 and Mr. Huttoe's actions with respect thereto. Registrant has also commenced
efforts to determine the property of the issuance of such shares and whether any of the aforementioned shares or the value thereof, can be recovered by Registrant.
b. Prior Periodic Reports.
On or about September 24, 1996, Registrant filed with the SEC, Registrant's Form 10-KSB for the year ended February 29, 1996, and Registrant's Form 10-QSB for the quarterly period ended May 31, 1996. Registrant lacks confidence in the financial information and other disclosures in both of those
period reports and has retained the services of accountants (see Item 4 hereof), new counsel and others to investigate and determine the facts and recommend remedial steps, if any, and if appropriate.
c. SEC Investigation
On or about October 4, 1996, the SEC issued a private formal order of investigation concerning Registrant, the various filings made by it with the SEC, trading in Registrant's securities, and the actions of Mr. Huttoe with respect thereto. Registrant has and continues to voluntarily and actively cooperated with the SEC in connection with its investigation.
d. SEC Ordered Suspension of Trading
On October 7, 1996, the SEC temporarily suspended trading in
Registrant's securities for a period of fourteen (14) days. In its press release regarding the suspensions, the SEC stated:
"The Commission [SEC] ordered this trading suspension because of questions raised as to the adequacy and accuracy of
publicly-disseminated information concerning, among other things: (1) SOE's [Registrant] reported financial condition; (2) the existence and value of services rendered to SOE in exchange for stock issued by SOE; (3) whether stock was issued by SOE to consultants without registration; (4) the reasons for changes in SOE's independent
accountants; and (5) SOE's sales of its video teleconferencing products. The Commission determined that the public interest and the protection of investors requires a suspension of trading in SOE securities."
As noted in this Form 8-K, Registrant's current management has taken
various steps to investigate and resolve these issues.
e. New Management
Registrant's present management has been advised that on October 10 1996, Mr. Huttoe and Ms. Iacovelli as Registrant's Board of Directors, among other things, appointed Walther and David Bruggeman as directors of Registrant, elected Mr. Walther as Chief Executive Officer of Registrant to replace Mr. Huttoe who was either going to resign from such capacity with Registrant or
taking an administrative leave of absence from association with Registrant and appointed new accountants (see Item 4, hereof). Registrant's present management also has been advised that on that same day, October 10, 1996, Mr. Huttoe advised Registrant that he would resign as a director of Registrant and Ms. Iacovelli advised Registrant that she resigned as Registrant's corporate
secretary and director.
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