Here's the latest from SEXI - makes interesting reading, huh?
There are also a couple of fresh press releases from DowJones and
PR_Newswire that you might find worthwhile.
Glenn
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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 Registrants 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
affiliated with 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 the time, 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 0. 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 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 an 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 or 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 or 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.
Apparently, Mr. Huttoe did not formally resign as director of Registrant on October 10, 1996. On October 24,
1996, Mr. Huttoe approved and accepted the appointment of new directors of Registrant, including David
Bruggeman, Thomas G. Clines, Kathleen S. Connell, Michael P. Hegarty, William H. Sullivan and Kenneth W.
Walther. On October 30, 1996, Mr. Huttoe confirmed in writing to Registrant that he resigned as a director of
Registrant.
By letter dated October 31, 1996. Mr. Bruggeman, Registrant's Vice President of Product Management, declined
appointment to Registrant's Board of Directors. By letter dated November 4, 1996, Mr. Khan confirmed that he
declined appointment to Registrant's Board of Directors.
On November 1, 1996, Registrant's Board of Directors, consisting of five (5) directors - Thomas G. Clines,
Kathleen S. Connell, Michael P Hegarty, William A. Sullivan and Kenneth Walther, among other things, elected
Ms. Connell as chairperson of the Board of Directors, accepted the resignation of Mr. Walther as President and
Chief Executive officer of Registrant, elected Mr. Thomas G. Clines as President and Chief Executive Officer of
Registrant, determined to re-engage WPC as Registrant's Certifying Accountant (see Item 4 hereof) and
confirmed Mr. Huttoe's resignation as an officer and director of Registrant.
f . SEC Complaint
On November 7, 1996, the SEC filed a Complaint and, among or-her things, a Motion for Temporary Restraining
Order naming, among others, Mr. Huttoe, his wife, mother, other entities and Registrant as defendants. A Copy of
the SEC's Complaint, (without exhibits) is included herewith. The SEC's Complaint. among other things, seeks to
enjoin the various defendants from a variety of activities and further seeks monetary disgorgement and monetary
penalties from Mr. Huttoe and others but not Registrant. The SEC's action was filed in the United States District
Court for the District of Columbia (Civil Action No. CV 96 02543 GK).
On November 7, 1996. after a hearing on the SEC's motion "or temporary restraining order, the Court granted the
SEC's motion. A copy of the Court's order is included herewith. As can be seen by the SEC's complaint and the
Court's Order, the SEC does not seek monetary penalties or sanctions from Registrant.
ITEM 6. Resignations of Registrant's Directors.
Registrant believes that on October 10, 1996, Mr. Huttoe announced that he would resign as a director of
Registrant (see Item 5) and that Ms. Iacovelli did resign as a director of Registrant. Mr. Huttoe provided
Registrant with a written resignation dated October 30, 1996.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit No. Document Description
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99.1 Letter from Weinberg, Pershes & Company, P.A., dated September 20, 1996.
99.2 Complaint filed in Civil Action no. CV 96 02543 GK, pending in the United States District Court for the
District of Columbia and styled SECURITIES AND EXCHANGE COMMISSION V. CHARLES 0.
HUTTOE, HUTTOE & ASSOCIATES, INC., WORD CORPORATION, NATIONAL TRADING
SERVICES, INC., KAREN PURVIS, TAMMY JO PERKINS, JOSEPHINE BROOKS, SGA GOLDSTAR
RESEARCH INC., THEODORE R. MELCHER. JR., SHANNON B. TERRY, SYSTEMS OF
EXCELLENCE, INC., APLHA SECURITIES, LTD. AND DUNBAR HOLDINGS, LTD.
99.3 Order Granting Plaintiff's Request for Temporary Restraining order, Asset Freeze, and other Relief, entered
in Civil Action No. 96-02543 GK, pending in the United States District Court for the District of Columbia.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused
this report to be signed on it's behalf by the undersigned hereunto duly authorized.
Systems of Excellence, Inc.
By: /s/Tom Clines
Tom Clines, President |
