HEY FOLKS NEWS!!! This may be old news on our proud co, I do not have time to follow the thread all the time.
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.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 0-20788 65-0126945
--------------------------------------------------------------------------------
(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
--------------------------------------------------------
(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 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 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.
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 other
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 for 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
----------- --------------------
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 O. 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 its behalf
by the undersigned hereunto duly authorized.
SYSTEMS OF EXCELLENCE, INC.
By: /s/ TOM CLINES
-----------------------------------
Tom Clines, President
Date: November 15, 1996.
EXHIBIT INDEX
Exhibit No. Document Description
----------- --------------------
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 O. 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.
EXHIBIT 99.1
WEINBERG, PERSHES & COMPANY, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
September 20, 1996
Systems of Excellence, Inc.
2600 Douglas Road
Suite 607
Coral Gables, Florida 33134
Gentlemen:
As you know, on or about July 2, 1996, Weinberg, Pershes & Company, P.A.
("WPC") was retained by Systems of Excellence, Inc. (the "Company") to audit
the Company's balance sheet as of February 29, 1996 and the Company's related
statements of operations, retained earnings, and cash flows for the year then
ended. WPC was also retained to provide consulting services to the Company
with respect to all accounting and tax matters related to proposed
acquisitions, tax matters and other general matters.
In the course of our audit of the Company we have become aware of information
indicating that certain acts of the Company may not have been in conformity
with state and federal law. The purpose of this letter is to advise you of our
statutory obligations under Section 10A of the Securities Exchange Act of 1934
(the "1934 Act"), in connection with our audit of the Company's balance sheet
and to advise you that, based on our preliminary findings, we have concluded
that the Company may have committed illegal acts, as defined in Section 10A of
the 1934 Act, which may have a material effect on the Company's financial
statements and which require that timely and appropriate remedial action be
taken by the Company. A copy of Section 10A of the 1934 Act is enclosed for
your review.
Based on information developed to date by WPC in the course of our audit, we
have determined the following:
1. The Company has not filed the following reports required to be filed
under the federal securities laws:
a. Form 10-Q for the quarter ended May 31, 1996;
b. Form 10-Q for the quarter ended August 31, 1996; and
c. Form 10K for the fiscal year ended February 29, 1996.
2. The Company may have (i) increased the number of authorized shares of
its common stock, (ii) issued shares of its common stock to members of
the public, and (iii) made substantial acquisitions without a vote of
the Company's shareholders and without following proper corporate
formalities, as required by Florida law.
Systems of Excellence, Inc.
September 20, 1996
Page 2
3. The Company may have failed to comply with requirements of the
Florida's Business Corporation Act by failing to hold shareholders'
meetings and elections and that certain acts of the Company which
required votes of the Company's shareholders were approved only by the
Company's Board of Directors.
4. The Company may have failed to notify its transfer agent of all of its
authorized and issued shares of common stock. Although the Company's
records indicate that in August, 1996 approximately 80,000,000 shares
of the Company's common stock were authorized and approximately
58,000,000 shares of its common stock were issued and outstanding, the
Company's transfer agent, American Securities Transfer & Trust, Inc.,
was only aware of 30,000,000 authorized common shares of the Company
and 23,702,270 issued and outstanding shares.
5. The Company may have issued shares of the Company's common stock to
members of the public pursuant to S-8 registration statements under
the Securities Act of 1933 which may not have been filed with the SEC
as required by federal regulations and statutes. In certain of those
instances, registration of shares on an S-8 Registration Statement may
not have been permissible because the Company may not have been
current in its filings with the SEC at the time such statements were
allegedly filed.
6. Through June 1996, the Company apparently issued a significant number
of shares of its common stock to various individuals and companies for
services provided by such persons and entities. Serious questions
exist concerning the compensation paid, and the consideration
received, by the Company for these services.
7. The Company also issued shares of its common stock to members of the
public pursuant to a private placement memorandum. The investors who
received such shares also received promissory notes signed by the
Company. Serious questions exist concerning this private placement.
8. The Company may also have issued shares of its common stock to certain
of its officers and directors without shareholder approval. Serious
questions exist concerning the issuance of such shares.
Systems of Excellence, Inc.
September 20, 1996
Page 3
PLEASE ADVISE US, AS SOON AS PRACTICABLE, WHAT REMEDIAL ACTIONS THE COMPANY
WILL TAKE WITH RESPECT TO EACH OF THE ABOVE NUMBERED PARAGRAPHS.
You should be aware that, pursuant to Section 10A of the 1934 Act, if we
conclude that (i) any or all of the above possible illegal acts has a material
effect on the financial statements of the Company, (ii) the senior management
has not taken, and the board of directors has not caused senior management to
take, timely and appropriate remedial actions with respect to the detected
possibly illegal acts, and (iii) the failure to take remedial action is
reasonably expected to warrant a departure from a standard report of ours, when
made, or warrants resignation from this engagement, under Section 10A of the
1934 Act, we must, as soon as practicable, directly report our conclusions to
the Company's board of directors. Pursuant to Section 10A of the 1934 Act, the
Company must then inform the Securities & Exchange Commission ("SEC") within
one business day after receipt of our report and provide us with a copy of the
Company's notice to the SEC. If we do not receive a copy of such notice before
the expiration of the one day period, we are required to furnish the SEC with a
copy of our report no later than one business day following the business day we
fail to receive a copy of the Company's notice to the SEC.
Your prompt reply to this letter is requested.
Sincerely,
WEINBERG, PERSHES & COMPANY, P.A.
EXHIBIT 99.2
UNITED STATES DISTRICT COURT
DISTRICT OF COLUMBIA
___________________________________________________
:
SECURITIES AND EXCHANGE COMMISSION, :
450 FIFTH STREET, N.W. :
WASHINGTON, D.C. 20549, :
:
PLAINTIFF, : CIVIL ACTION NO. 96-
:
:
V. :
:
CHARLES O. 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., :
ALPHA SECURITIES LTD., AND :
DUNBAR HOLDINGS LTD., :
:
DEFENDANTS. :
:
___________________________________________________:
COMPLAINT
Plaintiff Securities and Exchange Commission alleges:
SUMMARY
1. This case involves an on-going fraudulent scheme in which
defendant Charles Huttoe, Chairman of the Board and Chief Executive Officer of
Systems of Excellence, Inc. ("SOE" or the company), caused SOE to engage in a
massive unregistered distribution of the company's stock. The stock price was
manipulated to artificial heights with materially false and misleading press
releases issued by SOE, under Huttoe's direction, and through fraudulent stock
promotion by SGA Goldstar Research,
Inc. SOE issued the unregistered stock to recipients controlled by Huttoe, and
to accounts controlled by Theodore R. Melcher, Jr., and Shannon Terry, SGA
Goldstar's principals.
2. Huttoe and Terry and, on information and belief, Melcher, then
quickly sold their SOE stock to an unsuspecting public, not disclosing that the
prices were grossly inflated due to their own unlawful activities. Huttoe
alone amassed at least $9.7 million in aggregate unlawful profits thereby.
3. Huttoe later engaged in a massive cover-up, once his scheme
began to unravel, to create the false impression that the shares had been
properly registered on Form S-8, a Commission form which allows the
registration of company stock issued to company employees and consultants. As
part of the cover-up scheme, Huttoe fabricated bogus Forms S-8 and forged
consultant agreements, and later had them filed with the Commission.
4. By knowingly or recklessly engaging in this conduct,
defendants directly or indirectly violated, are violating, and unless
restrained will violate the antifraud, registration, and filing provisions of
the federal securities laws, specifically, Sections 5(a), 5(c), 17(a), and
17(b) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. Sections
77e(a), 77e(c), 77q(a), and 77q(b)], Sections 10(b), 13(a), 13(b)(2)(A),
13(b)(2)(B), 13(b)(5), and 16(a) of the Securities Exchange Act of 1934
("Exchange Act") [15 U.S.C. Sections 78j(b), 78m(a), 78m(b)(2)(A),
78m(b)(2)(B), 78m(b)(5), and 78p(a)], and Rules 10b-5, 12b-20, 13a-1, 13a-11,
13a-13, 13b2-1, 13b2-2, 16a-2, and 16a-3, thereunder [17 C.F.R. Sections
240.10b-5, 240.12b-20, 240.13a-1, 240.13a-11, 240.13a-13, 240.13b2-1,
240.13b2-2, 240.16a-2, and 240.16a-3].
- 2 -
JURISDICTION
5. This Court has jurisdiction of this action pursuant to Section
22(a) of the Securities Act [15 U.S.C. Section 77v(a)], and Section 27 of the
Exchange Act [15 U.S.C. Section 78aa], and 28 U.S.C. Section 1331.
6. The Commission brings this action pursuant to authority
conferred upon it by Section 20(b) of the Securities Act [15 U.S.C. Section
77t(b)], and Section 21(d)(1) of the Exchange Act [15 U.S.C. Section
78u(d)(1)].
7. Defendants, directly or indirectly, have made use of the means
and instrumentalities of interstate commerce, or of the mails, or of the
facilities of a national securities exchange in connection with the acts,
practices, and courses of business alleged herein.
DEFENDANTS
8. CHARLES O. HUTTOE, age 49, resides in Miami, Florida. Since
1994, he has served as Chairman of |
