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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) NOVEMBER 8, 1999
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BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 000-23889 76-0553110
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
4900 HOPYARD ROAD, SUITE 200, PLEASANTON, CALIFORNIA 94566
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (925) 251-0000
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INAPPLICABLE
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(Former name or former address if changed since last report)
Exhibit Index located on page [ ]
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
On November 8, 1999, Deloitte & Touche, LLP ("D & T") resigned as the
principal accountant to audit the Company's financial statements.
The reports of D & T on the financial statements for the years ended
December 31, 1998 and December 31, 1997 did not contain any adverse opinion or a
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope, or accounting principles.
During the Company's fiscal years ended December 31, 1998 and December 31,
1997, and the period subsequent to December 31, 1998 preceding D & T's
resignation, there were no disagreements between the Company and D & T on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement(s), if not resolved to the
satisfaction of D & T, would have caused D & T to make a reference to the
subject matter of the disagreement (s) in connection with its report on the
Company's financial statements.
By letter dated March 30, 1999 (the "Management Letter"), D & T advised the
Company and the Audit Committee of the Company's Board of Directors that in
planning and performing their audit for the year ended December 31, 1998, they
had noted certain matters involving the Company's internal control and its
operation that they considered to be material weaknesses under standards
established by the American Institute of Certified Public Accountants. Material
weaknesses involve matters coming to their attention in which the design or
operation of one or more of the internal control components does not reduce to a
relatively low level the risk that misstatements caused by error or fraud in
amounts that would be material in relation to the financial statements being
audited may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions. The following material
weaknesses were noted in the Management Letter: inadequate overall internal
control design; absence of appropriate reviews and approvals of transactions,
accounting entries, or systems output; inadequate procedures for appropriately
assessing and applying accounting principles; inadequate provisions for the
safeguarding of assets; and failure to perform tasks that are part of a sound
system of internal control, such as preparation of timely account
reconciliations. D & T discussed each of the material weaknesses identified in
the Management Letter with the Company's management and with the Audit Committee
of the Company's Board of Directors. The Company has authorized D & T to discuss
the subject matter of each material weakness identified in the Management Letter
with the successor independent accountant subsequently engaged as the principal
accountant to audit the Company's financial statements. The Company did not
disagree with D & T's identification of material weaknesses in the Management
Letter and has taken steps to address each such material weakness.
On September 24, 1999, the Company's Board of Directors and D & T were
informed by a Company officer that the borrowing base calculation in the
Company's August 1999 Collateral Report, which is required to be provided to the
Company's lender in connection with the Company's line of credit, was prepared
with certain adjustments that were known not to be in accordance with the terms
of the credit agreement and that the Company was in default under the
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credit agreement, as a result of which the lender would have the right to
terminate the line of credit and demand immediate repayment of all amounts
outstanding thereunder. The borrowing base calculation and adjustments were
reviewed with the lender on September 27, 1999. The Company cured the default on
October 4, 1999, and the default has not recurred.
The Company's Board of Directors determined to conduct an independent
investigation of the information which had been received on September 24, 1999.
The initial report regarding the independent investigation confirmed such
information. At the time of D & T's resignation, the Company's Board of
Directors was continuing the independent investigation to follow up on certain
questions not addressed by the initial report. The Company expects that none of
the matters identified as a result of the independent investigation will have
any material effect on the Company's financial statements.
The Company has requested a letter from D & T as to whether D & T agrees or
disagrees with the above statements. As of the date of filing of this report on
Form 8-K, the Company has not yet received such letter.
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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 hereunto duly authorized.
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
By: /s/ DONALD W. ROWLEY
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Donald W. Rowley, Chief Financial Officer
and Secretary
Dated: November 16, 1999
