SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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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): June 28, 2000
Pacific Gateway Exchange, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-21043 94-3134065
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(State or other jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
500 Airport Boulevard, Suite 340
Burlingame, California 94010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 375-6700
(Not Applicable)
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(Former name or former address, if changed since last report)
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Item 4. Changes in Registrant's Certifying Accountant
On June 28, 2000, PricewaterhouseCoopers LLP
("PricewaterhouseCoopers"), the independent auditors of Pacific Gateway
Exchange, Inc. (the "Company"), informed the Company that it declined to
stand for reelection as the Company's auditors for fiscal year 2000.
The audit reports of PricewaterhouseCoopers on the financial statements
of the Company for the past two years contain no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles, except that its report for the year
ended December 31, 1999 included a going concern explanation.
PricewaterhouseCoopers' opinion in the report for the year ended December
31, 1999 stated that the accompanying consolidated balance sheets and the
related consolidated statements of operations, cash flows, and changes in
stockholders' equity presented fairly, in all material respects, the
financial position of the Company and subsidiaries as of December 31, 1999
and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
the accounting principles generally accepted in the United States, but
expressed substantial doubts regarding the Company's ability to continue as
a going concern. During the Company's two most recent fiscal years and through
June 28, 2000, there have been no disagreements between PricewaterhouseCoopers
and the Company with respect to any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
In May 2000, PricewaterhouseCoopers identified to the Company's Audit Committee
certain events which PricewaterhouseCoopers believes indicate certain
material control weaknesses at the Company. These identified events were
the failure of the Company's internal control structure to detect certain
errors relating to cost capitalization and the recent departure of several
employees in the Company's accounting department. The Audit Committee
discussed these matters with PricewaterhouseCoopers and asked for the
assistance of PricewaterhouseCoopers in correcting any deficiencies.
The Audit Committee, the Board of Directors and the Company immediately
took steps to remedy these situations. In particular, the Company retained
Development Specialists Inc. ("DSI"), a nationally recognized business
consulting and restructuring firm, and charged DSI with the mandate to
ensure that the accounting and financial reporting functions of the Company
meet all applicable industry standards for generating accurate and reliable
financial information for management, the Board of Directors and the
stockholders. A member of DSI is now serving as the Company's acting chief
financial officer. In addition, the Company is trying to hire necessary
accounting personnel. The Company is now conducting a search for a new
accounting firm.
The Company has authorized PricewaterhouseCoopers to respond fully to
the inquiries of the Company's successor accountants, when appointed,
concerning the Company's internal controls. PricewaterhouseCoopers has
indicated that it will cooperate fully in effecting an orderly transition,
including by sharing work papers. Except as described above, none of the
reportable events described in Item 304(a)(1)(v) of Regulation S-K occurred
with respect to the Company within the two most recent fiscal years and
through the interim period.
The Company has requested PricewaterhouseCoopers furnish it with a
letter addressed to the SEC stating whether or not it agrees with the above
statements. Such letter will be filed with the SEC on Form 8-K/A promptly
following receipt.
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SIGNATURES
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 thereunto duly authorized.
Dated: July 6, 2000 PACIFIC GATEWAY EXCHANGE, INC.
By: /s/ John R. Hanzel
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John R. Hanzel
Acting Chief Financial Officer
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