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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: March 10, 1999
Complete Wellness Centers, Inc.
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(Exact Name of Registrant as specified in its Charter)
Delaware 0-22115 52-1910135
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
or corporation) Identification No.)
666 11th Street, NW, Suite 200
Washington, D.C. 20001
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (202) 639-9700
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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
(a) On March 4, 1999 the Registrant terminated Ernst & Young LLP
("E&Y"), as the Registrant's independent public accountants
and auditors, a capacity in which that firm had served for
approximately three years, and selected Amper, Politziner &
Mattia to replace E&Y in this role. The decision to change the
Registrant's accountants and auditors was approved by the full
Board of Directors.
During the most recent fiscal year and the subsequent period
through March 4, 1999, the date on which E&Y was terminated as
the Registrant's independent public accountants and auditors,
there were no disagreements between the Registrant and E&Y on
any matter relating to accounting principles or practices,
financial statement disclosure, or auditing scope or
procedures, which if not resolved to E&Y's satisfaction would
have caused it to make reference to the subject matter of
disagreement in connection with its report. In addition, Ernst
& Young, LLP's report on the Registrant's financial statements
for the fiscal year ended December 31, 1997 contained no
adverse opinions or disclaimers of opinion, nor were such
reports qualified as to audit scope or accounting principles.
No "reportable events" as defined in Item 304(a)(1)(v) of
Regulation S-K occurred during the Registrant's two most
recent fiscal years and the subsequent interim period through
March 4, 1999.
In connection with its 1997 year-end audit of the Registrant's
financial statements, in March 1998, E&Y presented a report to
the Audit Committee of the Board of Directors of the
Registrant describing certain material weaknesses, referred to
below, in the Registrant's internal control structure. The
Registrant carefully reviewed its internal controls in light
of E&Y's report and in view E&Y's recommendations.
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In response to the foregoing the Registrant implemented a
program to address this problem. The details are as follows:
* Complete the current computer system network
which will allow CWC to automatically source
from each clinic the financial and
operational data required for timely and
accurate reporting.
* Alter the clinic programs to include a "bug"
which will cause the software to lock-up if
access to the data is not permitted by the
clinic.
* Freeze the clinic lock-box and withhold all
cash after a warning letter from corporate
counsel when a clinic is non-compliant in
submitting or allowing access to financial
or operating data.
* Compare on a timely basis all financial and
operational results to the approved
corporate budget and require detailed
explanations for any significant variances
from that budget.
* The addition of appropriate personnel to the
corporate staff, within budget guidelines,
to analyze and report data to management in
a timely manner.
* Establish an executive committee, comprised
of the appropriate subsidiary and corporate
managers, which meets once a month to review
all corporate guidelines and processes to
ensure established policies are adhered to.
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1. E&Y recommended that the Registrant establish a mechanism or procedures
that will enable management to obtain timely financial and operational
information from its affiliated entities (i.e. automatic freeze of the
Medcorp's lock-boxes if complete information is not provided with a certain
time period or late submissions are a routine occurrence, require all
Medcorps to use wide area network and approved software to track and
account for all transactions, increase frequency and breadth of CWC
employees' site visits, etc.) and, evaluate its existing affiliates and
Medcorps to determine which, if any, should be deemed non-compliant and the
affiliation agreement terminated.
2. E&Y recommended that the Registrant adopt a uniform set of billing
practices at all clinics and that compliance with those practices be
monitored through a routine inspection program by corporate level employees
or designees (i.e. and internal audit function). In addition, they
recommended that the enforcement should be such that any Medcorp not
following Registrant's policies should be subjected to (i) increased review
(i.e. on-site vs. off-site, monthly or bi-monthly reviews of billing
practices depending on the level of non-compliance, etc.), (ii) incur
additional financial and operational oversight by the Registrant, and (iii)
be subjected to management's review of the appropriateness to continue the
Medcorp's affiliation with the Registrant's.
In response to the foregoing, the Registrant has implemented a program to
provide better teaching, a higher percentage of chart reviews, more site
visits, "whistle-blower" rewards and an internal/external audit of patient
records on a quarterly basis. Additionally, the Registrant established an
executive review committee whose responsibility is to decide whether to
suspend operations of any clinic that is not in compliance with the
Registrant's established billing policies.
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The Registrant has authorized E&Y to respond fully to the inquiries of
Amper, Politziner & Mattia. The Registrant has provided E&Y with a copy of
the disclosures contained in this Form 8-K, and has requested that E&Y
furnish the Registrant with a letter addressed to the Securities and Exchange
Commission stating whether it agrees with the statements made by the
Registrant herein.
(b) As stated above, on March 4, 1999, the Registrant appointed the
accounting firm of Amper, Politziner & Mattia as the Registrant's
independent public accountants and auditors, effective immediately.
During the Registrant's two most recent fiscal years and the subsequent
interim period through March 4, 1999, Amper, Politziner & Mattia was
not consulted with respect to any of the items referred to in Item
304(a)(2) of Regulation S-K.
Item 7. EXHIBITS
Exhibit 16.1 Letter from Ernst & Young, LLP to the Securities and Exchange
Commission concerning its termination as the Registrant's
principal accountant.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereto duly authorized.
Date: March 10, 1999.
Complete Wellness Centers, Inc.
By: /s/ Joseph Raymond, Jr.
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Joseph Raymond, Jr.
Chairman & CEO
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Exhibit 16.1
March 10, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Complete Wellness Centers, Inc.
File No. 0-22115
Gentlemen:
We have read Item 4 of Form 8-K of Complete Wellness Centers, Inc., dated March
10, 1999, and agree with the statements contained therein.
Very truly yours,
/s/ Ernst & Young LLP
