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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 (Date of earliest event reported): May 6, 1996
ARABIAN SHIELD DEVELOPMENT COMPANY
(Exact name of registrant as specified in its charter)
Delaware 0-6247 75-1256622
(State or other (Commission (I.R.S.
jurisdiction of File Number) Employer
incorporation) Identification
No.)
10830 N. Central Expressway, Suite 175
Dallas, Texas 75231
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 692-7872
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FORM 8-K
CURRENT REPORT
Item 4. Changes in Registrant's Certifying Accountant
(a) Previous independent accountants
(i) On May 6, 1996, Price Waterhouse LLP resigned as the independent
accountants of Arabian Shield Development Company.
(ii) The reports of Price Waterhouse LLP on the financial statements for the
past two fiscal years contained no adverse opinion or disclaimer of opinion and
were not qualified as to audit scope or accounting principle. The reports for
the past two years were modified as to uncertainty concerning (1) substantial
doubt about the Company's ability to continue as a going concern since its
primary source of cash flow is fully dedicated to repayment of debt and funding
of refinery operations and there is no cash flow from any of its other
activities, (2) the fact that a substantial portion of the Company's total
assets is comprised of mineral acquisition, exploration and development costs
in Saudi Arabia which have been deferred, and the fact that none of the related
projects have been developed for commercial operation yet and significant
expenditures, for which the Company must obtain financing, will be necessary
before commercial operation can be commenced, (3) repayment of an $11 million
loan from the Saudi Arabian government is in default, and the Company is
attempting to reschedule payment of the loan, and (4) the ability of the
Company's refining subsidiary to fully repay short-term notes payable and
current portions of long-term obligations totaling $3.8 million from internally
generated funds. The Company has not guaranteed these debt obligations and the
financial statements do not include any adjustments that might be necessary
should the refining subsidiary be unable to satisfy its current obligations in
an orderly manner.
(iii) The Company's Audit Committee did not participate in or approve the
decision to change independent accountants as the change was due to the
resignation of Price Waterhouse LLP.
(iv) (A) In connection with its audits for the two most recent fiscal years and
through May 6, 1996, there have been no disagreements with Price Waterhouse LLP
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 Price Waterhouse LLP would have caused them to
make reference thereto in their report on the financial statements for such
years, except that, after the 1995 Annual Report was filed, the Company feels
that the following statement in the Notes to Consolidated Financial Statements
for the 1995 fiscal year should not have been included:
1. Note 2. Going Concern -
The following sentences were added by Price Waterhouse LLP, without
the knowledge and consent of the President and CEO of the Company, which the
Company feels are untrue, misleading, unnecessary and could be damaging to
the Company's credibility:
"The Company is dependent on the services of its president.
In the event his services discontinue, the ability of the Company to continue
its activities in Saudi Arabia is uncertain."
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On March 25, 1996, Price Waterhouse LLP sent the President and CEO of the
Company the draft of the Consolidated Financial Statements of 1995, for his
review and comments, before going to print within the Company's annual report
for 1995. No comments were sent back by the President since the contents were
considered to be a fair presentation. However, on receipt of the Company's
annual report for 1995 as filed, it was noticed that Price Waterhouse LLP had
added a new statement in the " Note 2. Going Concern" section of the Notes to
Consolidated Financial Statements. This statement was added by Price
Waterhouse LLP without the knowledge, review and approval of the Company's
President.
On May 3, 1996, the President of the Company wrote Price Waterhouse LLP, that
the above mentioned statement, which was also inserted at their instructions in
the Management Discussion and Analysis section, was untrue, reckless,
misleading and damaging to the Company's credibility and the value of its
stock. In his letter, the President of the Company enumerated the reasons for
his characterization of the statement and his deep concern. He asked that
Price Waterhouse LLP inform the Company's shareholders and market makers of the
Company's opinion in this matter in order to avoid any damages to the Company's
credibility and the value of its stock, which the Company feels will result if
the statement is allowed to stand. On May 6, 1996 Price Waterhouse LLP sent a
letter to the Company in which it indicated that the client-auditor
relationship between it and the Company had ceased.
(iv) (B) The Company's Audit Committee has not discussed these disagreements
with Price Waterhouse LLP.
(v) During the two most recent fiscal years and through May 6, 1996, there have
been no reportable events (as defined in Regulation S-K Item 304(a)(1)(v)).
(vi) The Company has requested that Price Waterhouse LLP furnish it with a
letter addressed to the SEC stating whether or not it agrees with the above
statements. A copy of such letter, dated May 13, 1996, is filed as an exhibit
to this Form 8-K.
(b) New independent accountants
(i) The Company has not yet engaged successor independent accountants.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(16) Letter re Change in Certifying Accountant
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SIGNATURE
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.
ARABIAN SHIELD DEVELOPMENT COMPANY
By: /s/ DREW WILSON, JR.
-----------------------------------
Drew Wilson, Jr.
Secretary/Treasurer
Date: May 13, 1996
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
16 Letter Re Change in Certifying Accountant
</TABLE>
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EXHIBIT 16
[PRICE WATERHOUSE LLP LOGO]
May 13, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
Subject: Arabian Shield Development Company
----------------------------------
We have read Item 4 of Arabian Shield Development Company's Form 8-K dated
May 6, 1996 and, except as stated below, are in agreement with the statements
contained in paragraph 4(a) therein.
With respect to the disclosure referred to in Item 4(a)(iv)(A)1, it is Price
Waterhouse LLP's belief that such disclosure, which had been suggested by Price
Waterhouse LLP, had been reviewed and accepted by the Company.
In addition, because it appears that the Company may believe that certain
sentences in its 1995 financial statements are "untrue" and "misleading", Price
Waterhouse LLP has advised the Company that it should consult with its outside
counsel regarding any amendments which may be necessary to the Company's
filings with the Commission.
Yours very truly,
[PRICE WATERHOUSE LOGO]
