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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Original Report: November 27, 1996
Date of Amendment: January 8, 1997
INNOVATIVE TECH SYSTEMS, INC.
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(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
Illinois 33-17856-C 65-0071222
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(State or other (Commission File No.) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
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444 Jacksonville Road, Suite 200
Warminster, Pennsylvania 18974
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(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (215) 441-5600
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Item 4: Changes in Registrant's Certifying Accountant.
On November 22, 1996, the Registrant dismissed Coopers & Lybrand,
L.L.P., independent accountants, who had previously been engaged as the
Registrant's principal accountant to audit the Registrant's financial
statements. Coopers & Lybrand's dismissal was intended to be effective as of
December 2, 1996 and Coopers & Lybrand continued to provide services to the
Registrant through November 27, 1996 in connection with the filing by the
Registrant of an Amendment to its Form 10-Q filed with respect to the period
ended July 31, 1996.
The Registrant disputes the accuracy of the statement made in the
letter of Coopers & Lybrand attached hereto as Exhibit 16.1(a) concerning the
resignation of Coopers & Lybrand prior to its dismissal. It is the
Registrant's position that Coopers & Lybrand did not notify the Registrant's
president of its intention to resign until after Coopers & Lybrand had been
notified that the Registrant's letter of dismissal had been sent. Written
confirmation as to the termination of the client-auditor relationship between
the Registrant and Coopers & Lybrand was not issued by Coopers & Lybrand until
November 27, 1996 (see Exhibit 16.1(b) attached hereto). The Registrant has
not received any other form of written notification from Coopers & Lybrand
concerning its resignation as the Registrant's principal accountant.
The Registrant is currently in the process of interviewing candidates
to replace Coopers & Lybrand as the Registrant's principal accountant with
responsibility for auditing the Registrant's financial statements.
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The decision to change accountants was approved by the Registrant's
Board of Directors. The former accountant's report on the Registrant's
financial statements for either of the past two years did not contain an
adverse opinion or a disclaimer of opinion, nor was either report qualified as
to uncertainty, audit scope or accounting principles.
It is the Registrant's position that, during the Registrant's two most
recent fiscal years and subsequent interim periods, there were no disagreements
with the former accountant 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 the former accountant,
would have caused it to make a reference to the subject matter of the
disagreements in connection with its reports. The Registrant takes exception
to the "reportable event" noted in the letter of Coopers & Lybrand attached
hereto as Exhibit 16.1(a) for the following reasons:
1. On the date the Registrant filed its Form 10-Q for
the fiscal period ended July 31, 1996, a partner at Coopers & Lybrand advised
the Registrant that information had come to Coopers & Lybrand's attention that
it had concluded materially impacted the fairness of the unaudited,
management-prepared financial statements included in such Form 10-Q.
2. The item in the financial statements which was in
issue was the presentation as a gain of the extinguishment of debt payable to
certain former shareholders of a company acquired by the Registrant.
3. In determining the proper presentation to be used for
such item, the Registrant had repeatedly consulted with Coopers & Lybrand and
had been advised that the extinguishment of such debt was properly shown as a
gain.
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4. Based upon Coopers & Lybrand's advice, the Registrant
prepared the Form 10-Q for the period ended July 31, 1996 and showed the
extinguishment of the debt as a gain.
5. After the Registrant received notification from
Coopers & Lybrand that the debt owed to the former shareholders of the company
acquired by the Registrant should have been recorded at its fair value at the
time of acquisition and, upon extinguishment of such debt, no gain or loss
should have been recorded, the Registrant further investigated, in consultation
with Coopers & Lybrand, the correct financial statement presentation for such
item and concurred with Coopers & Lybrand's revised recommendation.
6. The Registrant prepared an Amendment to its Form 10-Q
for the fiscal period ended on July 31, 1996 which was forwarded to Coopers &
Lybrand for its review and approval on November 22, 1996 and filed with the
Securities and Exchange Commission on November 27, 1996.
7. Based upon the foregoing chronology of events and
discussions which took place between the Registrant's management and Coopers &
Lybrand at the time the original Form 8-K to which this Amendment relates was
filed, the Registrant maintains that, at the time of Coopers & Lybrand's
dismissal, there were no unresolved issues between the Registrant and Coopers &
Lybrand concerning financial statement preparation or disclosure or financial
reporting.
Item 7: Financial Statements and Exhibits.
Exhibit 16.1(a): Letter of Coopers & Lybrand, L.L.P. dated December 10, 1996
Exhibit 16.1(b): Letter of Coopers & Lybrand, L.L.P. dated November 27, 1996
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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.
DATED: January 8, 1997
INNOVATIVE TECH SYSTEMS, INC.
By: /s/ Louis J. Desiderio
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Louis J. Desiderio,
Vice President and Chief Financial
Officer
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[COOPERS & LYBRAND LETTERHEAD]
EXHIBIT 16.1(a)
December 10, 1996
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the statements made by Innovative Tech Systems, Inc. (copy
attached), which we understand have been filed with the Commission, pursuant to
Item 4 of Form 8-K as part of the Company's Form 8-K report for the month of
November 1996. We do not agree with the statements concerning our Firm
contained in such Form 8-K due to the omission of the following reportable
event:
Coopers & Lybrand L.L.P. advised the registrant that information
has come to its attention that it has concluded materially impacts the
fairness of the financial statements issued covering the fiscal period
ended July 31, 1996, subsequent to the date of the most recent financial
statements covered by an audit report, that, unless resolved to its
satisfaction, could prevent it from rendering an unqualified audit
report on the financial statements for the year ending January 31, 1997.
The registrant reflected a gain from extinguishment of debt in
its financial statements filed on Form 10-Q for the fiscal period ended
July 31, 1996. Such debt was payable to certain former shareholders of
a company acquired by the registrant. Coopers & Lybrand L.L.P. advised
the registrant that such debt should have been recorded at its fair
value at the time of acquisition and upon extinguishment of the debt, no
gain or loss would result.
Due to Coopers & Lybrand L.L.P.'s resignation, the issue has not
been resolved to its satisfaction prior to its resignation.
In addition to the above event, the registrant stated in its report on Form 8-K
that, "On November 22, 1996, the Registrant dismissed Coopers & Lybrand,
L.L.P., independent accountants, who had previously been engaged as the
Registrant's principal accountant to audit the Registrant's financial
statements. Coopers & Lybrand's dismissal is to be effective as of December 2,
1996." Such dismissal occurred after Coopers & Lybrand L.L.P. verbally
notified the registrant's president on November 22, 1996 of its intention to
resign.
Very truly yours,
/s/ COOPERS & LYBRAND L.L.P.
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Coopers & Lybrand L.L.P.
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[COOPERS & LYBRAND LETTERHEAD]
EXHIBIT 16.1(b)
November 27, 1996
Mr. John M. Thompson
President and Chief Operating Officer
Innovative Tech Systems, Inc.
444 Jacksonville Road
Suite 200
Warminster, PA 18974
Dear Mr. Thompson:
This is to confirm that the client-auditor relationship between Innovative Tech
Systems, Inc. (Commission File Number 33-17856-C) and Coopers & Lybrand L.L.P.
has ceased.
Very truly yours,
/s/ COOPERS & LYBRAND L.L.P.
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Coopers & Lybrand L.L.P.
cc: Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 11-3
450 Fifth Street, N.W.
Washington, D.C. 20549
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