SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 3, 1998
GATEWAY DATA SCIENCES CORPORATION
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(Exact name of registrant as specified in its charter)
ARIZONA 0-27776 86-0527788
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(State or other (Commission File No.) (IRS Employer ID No.)
jurisdiction of incorporation)
4802 E. Ray Road, Suite 23-286, Phoenix, Arizona 85044
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (602) 968-7000
3410 E. University Drive, Suite 100, Phoenix, Arizona 85034
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(Former address, if changed since last report)
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GATEWAY DATA SCIENCES CORPORATION
FORM 8-K
CURRENT REPORT
ITEM 4 CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Effective April 3, 1998, Gateway Data Sciences Corporation (the
"Company") accepted the resignation of Arthur Andersen LLP ("Arthur Andersen")
as its certifying accountants. Arthur Andersen's report on the Company's
financial statements for the fiscal year ended January 31, 1997, contained a
disclaimer of opinion, which included the following language:
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1, the Company had negative cash
flow from operations of $2,612,680 for the year ended January
31, 1997, is in default of the terms of its line of credit
agreement, does not have any readily available financing, is
engaged in material litigation with a significant customer,
recorded a net loss of approximately $700,000 (unaudited) for
the six months ended July 31, 1997, and has not yet generated
sufficient revenue from its software products to fund its
ongoing operations. Additionally, its IBM reseller agreement
expired in July 1997. These factors raise substantial doubt
about the Company's ability to continue as a going concern.
Management's plans with regards to these matters are also
described in Note 1. The consolidated financial statements do
not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and
classification of liabilities that might result should the
Company be unable to continue as a going concern.
Because of the possible material effects of the matters
discussed in the preceding paragraph, we are unable to express,
and do not express, an opinion on the financial statements
referred to above.
During the term of Arthur Andersen's engagement, there were no
disagreements between the Company and Arthur Andersen on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which disagreements, if not resolved to the satisfaction of
Arthur Andersen, would have caused it to make reference to the subject matter of
the disagreements in connection with its report, except for the following:
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(a) Arthur Andersen reported to the Company that, in the
course of their review of the unaudited financial
statements for the six months ended July 31, 1997,
they identified irregularities or weaknesses in the
Company's system of internal controls in the areas of
(i) debt compliance; (ii) compliance with payroll
withholding statutes; (iii) unauthorized sale of
assets; and (iv) misapplication of certain cash
receipts.
(b) Arthur Andersen reported to the Company that, in the
course of their audit of the Company's financial
statements for the fiscal year ended January 31, 1997
and their review of the unaudited financial statements
for the six months ended July 31, 1997, they
discovered various conditions that they believed
constituted material weaknesses in the Company's
internal controls. These conditions consisted of (i)
weaknesses in forecasting internal cash requirements;
(ii) weaknesses in policies and procedures to ensure
the accurate timing, classification, and recording of
significant transactions; and (iii) weaknesses in
maintaining formal documentation regarding
acquisitions and dispositions of assets. The Company
has previously reported these conditions and various
steps the Company was taking to address these
conditions in its Annual Report on Form 10-KSB for the
year ended January 31, 1997 and Quarterly Reports on
Form 10-QSB for the quarters ended April 30, 1997 and
July 31, 1997.
ITEM 5. OTHER EVENTS.
On February 23, 1998, the Company filed a petition for protection from
creditors under Chapter 11 of the U.S. Bankruptcy Code. The filing was made in
the U.S. Bankruptcy Court in the District of Arizona in Phoenix, Arizona
This action was a result of cash flow problems following the ongoing
litigation between the Company and a large customer over payments totaling more
than $3.8 million due the Company under a completed contract and the resulting
financial damage that has been caused to the Company. The Company intends to
continue to serve its customers and hopes to successfully reorganize while
continuing to pursue its claim in the litigation.
ITEM 7. EXHIBITS.
Exhibit No. Description of Exhibit
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16 Letter Re: Change in Certifying Accountant
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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 hereunto duly authorized.
April 30, 1998 GATEWAY DATA SCIENCES CORPORATION
By: /s/ Michael M. Gordon
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Michael M. Gordon
President
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ARTHUR
ANDERSEN
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Arthur Andersen LLP
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Suite 300
501 North 44th Street
Phoenix, AZ 85008
602 286 2000
April 30, 1998
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
We have read Item 4 included in the attached Form 8-K dated April 3, 1998 of
Gateway Data Sciences Corporation to be filed with the Securities and Exchange
Commission and are in agreement with the statements contained therein.
Very truly yours,
/s/ Arthur Andersen LLP
