SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A (No. 1)
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 15, 1997
GREENTREE SOFTWARE, INC
(Exact Name of Registrant as Specified in Charter)
NEW YORK
(State or Other Jurisdiction of Incorporation)
0-12094 13-2897997
(Commission File Number) (IRS Employer
Identification No.)
7901 Flying Cloud Drive, Eden Prairie, MN 55344
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(612) 941-1500
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ITEM 4. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.
On May 15, 1997, the Board of Directors of the Registrant authorized the
Company to engage Price Waterhouse LLP ("PW") rather than KPMG Peat Marwick LLP
("KPMG") as the Registrant's independent public accountants for the fiscal year
ending May 31, 1997, subject to the Chief Financial Officer of the Registrant
confirming acceptance by PW of such appointment and notifying KPMG. On May 15,
1997, the Registrant advised KPMG and PW of its decision. On May 15, 1997,
PW advised the Registrant that it accepted the appointment and the company
officially engaged PW as its independent public accountants for the fiscal year
ending May 31, 1997.
KPMG served as the Registrant's independent public accountants and
auditors since November 21, 1994. KPMG was dismissed by the Board of Directors
as of May 15, 1997. The Registrant's decision to employ PW rather than KPMG was
the result of the Registrant's decision to move its executive offices to Eden
Prairie, Minnesota, upon the hiring of Mr. Mooney as Chief Executive Officer,
and the fact that the Registrant wanted to utilize the services locally of a
large independent public accounting firm which had particular expertise in the
software industry.
In each of the past two fiscal years, KPMG in its report noted that,
although the financial statements had been prepared assuming that the
Registrant will continue as a going concern, the Registrant has suffered
recurring losses from operations that raise substantial doubt about its ability
to continue as a going concern. Such firm also stated that the financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
There were no disagreements with KPMG, whether or not resolved, on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which, if not resolved to that firm's
satisfaction, would have caused it to make reference to the subject matter of
the disagreements in connection with its report. The Company notes that in
connection with the fiscal year 1996 audit, certain matters concerning the
Company's internal controls were brought to the Company's attention in a letter
to the Board of Directors dated September 11, 1996. These concerns were
discussed with the former accountants and addressed by the Board of Directors
of the Company. All required adjustments were made in the Company's internal
controls and financial statements in connection with the audit. KPMG's audit
opinion was not qualified as to these matters and no disagreement existed
between the Company and KPMG with respect to these issues. The Company has
authorized KMPG to repond fully to the inquiries of PW concerning the internal
control issues raised in the management letter.
Neither the Registrant nor any person acting on its behalf, prior to the
engagement of PW, consulted PW regarding the application of accounting
principles to a specific completed or contemplated transaction, or the type of
audit opinion that might be rendered on the Registrant's financial statements.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS.
Exhibit 16.1 Letter from KPMG to the Securities and Exchange
Commission, dated May 28, 1997 and received on
May 29, 1997
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.
GREENTREE SOFTWARE, INC.
By: /s/ Joseph D. Mooney
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Name: Joseph D. Mooney
Title: Chief Executive Officer
Dated: June 2, 1997
KPMG PEAT MARWICK LLP
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Greentree Software, Inc. (herein
referred to as the "Registrant", "Company" and/or "Greentree") and, under the
date of September 11, 1996, we reported on the consolidated financial
statements of Greentree Software, Inc. as of May 31, 1996 and 1995, and for the
years then ended. Our report contained an explanatory paragraph that stated
that "the accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Notes 1 and 5 to the
financial statements, the Company has incurred substantial losses from
operations, has a working capital deficit, an accumulated deficit, and a
liquidity deficiency, and is currently party to two lawsuits, one of which
involves its rights to continue to sell its primary product. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1 to the financial statements. These financial statements do not include
any adjustments that might result from the outcome of this uncertainty."
On May 15, 1997 we were notified that our appointment as principle accountants
was terminated. We have read Greentree Software, Inc.'s statements included
under Item 4 of its Form 8-K dated May 15, 1997, and filed as of May 22, 1997,
and we agree with such statements, except that:
1. In connection with our responsibilities under Statement on Auditing
Standards No. 61. Communication with Audit Committees, we furnished the
Company a letter addressed to the Audit Committee of the Board of
Directors, dated September 11, 1996. While the Company indicated in its
Form 8-K that "...no 'reportable events' occurred within the Registrant's
two most recent fiscal years...", included in this letter, among other
things, in a section entitled "Internal Control", were the following
comments:
In planning and performing our audit of the financial statements of
Greentree we considered internal control in order to determine our
auditing procedures for the purpose of expressing our opinion on the
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financial statements and not to provide assurance on internal
control. However, we noted certain matters which we consider to be
reportable conditions under standards established by the American
Institute of Certified Public Accountants ("AICPA"). Reportable
conditions are matters coming to our attention that, in our
judgment, relate to significant deficiencies in the design or
operation of internal control, and could adversely affect
Greentree's ability to record, process, summarize and report
financial data consistent with the assertions of management in the
financial statements. Our consideration of internal control would
not necessarily disclose all matters in internal control that might
be reportable conditions.
A material weakness is a reportable condition in which the design or
operation (or lack thereof) of specific internal controls does not
reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material to the financial
statements of Greentree may occur and not be detected within a
timely period by employees in the normal course of performing their
assigned functions.
During the course of our audit, we need the matters below which we
believe are reportable conditions, and in certain instances material
weaknesses, in internal control. These matters include the
following:
(1) Segregation of Duties
Due to the Company's relatively small number of employees,
segregation of duties does, for the most part, not exist.
Without segregation of duties, an entity is more susceptible to
'management override', and has diminished safeguard controls
over assets, including cash. We recommend that duties be
segregated, to the extent possible, in the more sensitive areas
to reduce any risk of loss to the Company.
<PAGE>
(2) Record Retention
During the course of our audit, we noted that the Company was
unable to deliver to us many requested documents from its
files. In such instances, it was necessary for Company
personnel to obtain requested documents from attorneys or other
third parties. We recommend that the company establish and
maintain a record retention process as part of an effective
internal control structure.
(3) Revenue Recognition
During fiscal 1996, the Company recognized certain revenues
prior to completing all of its significant obligations.
Additionally, we noted instances when the then Chief Financial
Officer recognized revenue based upon instructions from senior
management, without sufficient supporting paperwork. In both
instances, these revenues were reversed during the audit
process. We recommend that an appropriate individual be
identified to review all potential sales prior to recording to
ensure that such transactions comply with revenue recognition
criteria established by the AICPA's Statement of Position 91-1
Software Revenue Recognition and that the documentation of such
transactions is complete.
We also noted that the Company did not obtain signed license
agreements on a substantial majority of product shipments
during fiscal 1996. The Company in prior years had followed the
practice of obtaining such agreements prior to recording
revenue. We recommend that signed license agreements be
obtained by the Company in all practical instances, consistent
with its prior practice.
These conditions were considered in determining the nature, timing,
and extent of the audit rests applied in our audit of the financial
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statements as of and for the year ended May 31, 1996, and this
letter does not affect our report dated September 11, 1996 on such
financial statements. We have not considered Greentree's internal
control structure since the date of our report.
In a later section of the letter entitled "Disagreements with
Management", we indicated that:
There were no disagreements with management on financial accounting
and reporting matters that, if not satisfactorily resolved, would
have caused a modification to our report on Greentree's 1996
financial statements.
2. We are not in a position to agree or disagree with Greentree's statements
that:
a. On May 15, 1997, the Board of Directors of (Greentree), authorized
the Company to engage Price Waterhouse LLP ...as the Registrant's
independent public accountants for the fiscal year ending May 31,
1997, subject to the Chief Financial Officer of the Registrant
confirming acceptance by (Price Waterhouse LLP) of such appointment
and notifying (KPMG Peat Marwick LLP):
b. On May 15, 1997, the Registrant advised ...(Price Waterhouse LLP) of
its decision;
c. On May 15, 1997, (Price Waterhouse LLP) advised the Registrant that
it accepted the appointment and the Company officially engaged (Price
Waterhouse LLP) as its independent public accountants for the fiscal
year ending May 31, 1997;
d. The Registrant's decision to employ (Price Waterhouse LLP) rather
than (KPMN Peat Marwick LLP) was the result of the Registrant's
decision to move its executive offices to Eden Prairie, Minnesota,
upon the hiring of Mr. (Joseph) Mooney as Chief Executive Officer,
<PAGE>
and the fact that the Registrant wanted to utilize the services
locally of a large independent public accounting firm which had
particular expertise in the software industry;
e. ... no 'reportable events' occurred within the interim period ending
on May 15, 1997, prior to (KPMG Peat Marwick LLP's) dismissal;
f. Neither the Registrant nor any person acting on its behalf, prior to
the engagement of (Price Waterhouse LLP), consulted (Price Waterhouse
LLP) regarding the application of accounting principles to a specific
completed or contemplated transaction, or the type of audit opinion
that might be rendered on the Registrant's financial statements.
Very truly yours,
KPMG PEAT MARWICK LLP
St. Petersburg, Florida
May 28, 1997
cc: Mr. Joseph Mooney
Greentree Software, Inc.
