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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) November 26, 1996
RYKA INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-16611 04-2958132
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(State of other jurisdiction (SEC File Number) (IRS Employer
of incorporation) Identification No.)
555 South Henderson Road, Suite B, King of Prussia, PA 19406
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(Address of principal executive offices)
Registrant's telephone number, including area code (610) 337-2200
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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.
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RYKA Inc. ("RYKA" or the "Company") engaged Margolis & Company P.C. as its
independent accountant and to audit its financial statements for the years ended
December 31, 1993, 1994 and 1995. As a result of a mutual decision between RYKA
and Margolis & Company P.C., RYKA accepted the resignation of Margolis & Company
P.C. on November 26, 1996, effective as of such date. Also on November 26, 1996,
effective as of such date, the Audit Committee of the Board of Directors and the
Board of Directors of RYKA appointed Deloitte & Touche as RYKA's independent
accountant to succeed Margolis & Company P.C.
Except for the opinion that there is "substantial doubt about the Company's
ability to continue as a going concern," the reports of Margolis & Company P.C.
on the financial statements of RYKA for the years ended December 31, 1993, 1994
and 1995 did not contain an adverse opinion or a disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope, or accounting
principles.
During the conduct of the audits of the two most recent fiscal years of
RYKA, and all subsequent interim periods preceding the resignation of Margolis &
Company P.C. and the engagement of Deloitte & Touche, there was no disagreement
with Margolis & Company P.C. on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Margolis & Company P.C.,
would have caused it to make reference to the subject matter of the disagreement
in connection with its report.
Except as set forth below, during the conduct of the audits of the two most
recent fiscal years of RYKA, and all subsequent interim periods preceding the
resignation of Margolis & Company P.C. and the engagement of Deloitte & Touche,
Margolis & Company P.C. has not advised the Company (i) that the internal
controls necessary for the Company to develop reliable financial statements do
not exist; (ii) that information has come to the attention of Margolis & Company
P.C. that has led it to no longer be able to rely on management's
representations, or that has made it unwilling to be associated with the
financial statements prepared by management; (iii) of the need to expand
significantly the scope of its audit, or that information has come to the
attention of Margolis & Company P.C. during such time period that if further
investigated may (A) materially impact the fairness or reliability of either a
previously issued audit report or the underlying financial statements, or the
financial statements issued or to be issued covering the fiscal period(s)
subsequent to the date of the most recent financial statements covered by an
audit report, or (B) cause it be unwilling to rely on management's
representations or be associated with the registrant's financial statements; or
(iv) that information has come to the accountant's attention that it has
concluded materially impacts the fairness or reliability of either (A) a
previously issued audit report or the underlying financial statements, or (B)
the financial statements issued or to be issued covering the fiscal period(s)
subsequent to the date of the most recent financial statements covered by an
audit report.
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On November 15, 1996, Margolis & Company P.C. indicated to the Company that
it was unwilling to be associated with the interim financial statements prepared
by the Company for the third quarter of 1996 to be included in the Company's
Quarterly Report on Form 10-Q for such quarter because of the improper
recognition of revenue and related expenses that occurred for the first, second
and third quarters of 1996 and the impact that such recognition of revenue and
related expenses would have on the Company's interim financial statements for
such periods. In its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, as filed with the Securities and Exchange Commission on
November 19, 1996, the Company reclassified certain revenue and related expenses
for the first, second and third quarters of 1996 that had been previously
reported in the Company's Quarterly Reports on Form 10-Q for the first and
second quarters of 1996 and in the Company's press release, dated November 7,
1996, relating to the third quarter of 1996. In addition, on November 19, 1996,
the Company issued a press release that reported the reclassification of such
revenue and related expenses. The Company also stated that it will file Forms
10-QA for the first two quarters of 1996.
The facts and circumstances surrounding the improper recognition of revenue
and related expenses for the first, second and third quarters of 1996 were
discussed among Margolis & Company P.C., management of the Company and the Audit
Committee of the Board of Directors of the Company. The decision to change
accountants was approved by the Audit Committee of the Board of Directors and
the Board of Directors of the Company. RYKA has authorized Margolis & Company
P.C. to respond fully to the inquiries of Deloitte & Touche concerning the
subject matter disclosed herein.
The letter from Margolis & Company P.C. required by Item 304(a)(3) of
Regulation S-K concerning its agreement or disagreement with the disclosures
made in this Report on Form 8-K is filed as Exhibit B hereto.
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Item 7. Exhibits.
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Exhibit A: Letter from Blank Rome Comisky & McCauley to Margolis &
Company P.C. requesting they furnish RYKA with a letter
addressed to the Securities and Exchange Commission
stating whether they agree with the statements made by
RYKA in this Current Report on Form 8-K.
Exhibit B: Letter from Margolis & Company P.C. with respect to the
statements made by RYKA in this Current Report on Form
8-K.
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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.
RYKA INC.
DATE: December 4, 1996 By: /s/ Michael G. Rubin
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Michael G. Rubin
Chief Executive Officer
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Exhibit A
[BLANK ROME COMISKY & McCAULEY LETTERHEAD]
(215) 569-5544
December 3, 1996
VIA FACSIMILE
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Margolis & Company P.C.
401 City Avenue
Suite 600
Bala Cynwyd, PA 19004
Attention: Gerald A. Shantzer
Re: RYKA Inc.
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Gentlemen:
On behalf of RYKA Inc. ("RYKA"), enclosed is a copy of RYKA's Form 8-K
regarding "Change in Registrant's Certifying Accountant". Please furnish
to us your letter, addressed to the Securities and Exchange Commission
("SEC"), which indicates that you have read and agree with the disclosure
under Item 4 of the Form 8-K, assuming, of course, you agree. Since your
letter must be filed with the SEC, your prompt attention is appreciated.
If you have any questions, please contact me or, in my absence,
Jennifer Heller of this firm at (215) 569-5467.
Sincerely,
/s/ Arthur H. Miller
ARTHUR H. MILLER
Enclosure
cc: Michael G. Rubin
Steven A. Wolf
Jennifer Heller, Esquire
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EXHIBIT B
[LETTERHEAD OF MARGOLIS & COMPANY P.C.]
December 3, 1996
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Gentlemen:
We have read the statements made by Ryka Inc. (copy attached), which we
understand will be filed with the Commission pursuant to Item 4 of Form 8-K as
part of the Company's Form 8-K report dated November 27, 1996. We agree with the
statements concerning our firm in such Form 8-K.
Very truly yours,
/s/ Margolis & Company P.C.
MARGOLIS & COMPANY P.C.
