:
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDED FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report Original 8-K (Date of earliest event reported) MAY 9, 1997
Date of Report this amended 8-K June 23, 1997
3D IMAGE TECHNOLOGY, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 33-27627 76-0265438
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(State or Other (Commission (I.R.S. Employer
Jurisdiction File Number) Identification No.)
of Incorporation)
5172-G Brook Hollow Parkway, Norcross, Georgia 30071
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(Address of Principal Executive Offices) (Zip Code)
(770) 416-8848
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Registrant's telephone number, including area code
(Former Name or Former Address, If Changed Since Last Report)
ITEM 4. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
On May 9, 1997, Ernst & Young LLP ("Ernst & Young") resigned as auditors of
the Company.The report of Ernst & Young on the Company's financial
statements for the year ended December 31, 1996 stated that the Company's
financial statements had been prepared assuming that the Company
would continue as a going concern, but contained an uncertainty
paragraph stating that there was substantial doubt about the Company's
ability to continue as a going concern based upon the deficiency in
working capital and recurring operating losses, without any
committed sources of equity capital.
In connection with the audits of the Company's financial statements for
each of the two fiscal years ended December 31, 1995 and December 31, 1996,
and in the subsequent interim period, there were no disagreements between
Ernst & Young
and the Registrant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures which,
if not resolved to the satisfaction of Ernst & Young would have caused Ernst
& Young to make reference to the matter in their report.
Ernst & Young issued a material weakness letter to the Company for the year
ended December 31, 1996 due to internal control deficiencies in the
following areas: recording of accounts payable, assessing the allowance for
doubtful accounts, and ensuring proper sales cut-offs.
The material weakness letter to the Company identified an internal control
deficiency in the recording of accounts payable due to the company's failure
to record all vendor invoices when the invoices were received , and the
company's recording of invoices without considering the applicable period for
matching purposes. As a result, approximately $336,000 in accounts payable
had not been accrued for the year ending December 31, 1996 when Ernst & Young
began its audit procedures. The accounts payable were properly accrued in the
audited financial statements of the Company as reported in the Company's Form
10K for the fiscal year ended December 31, 1996, in accordance with
Ernst & Young's comments.
Ernst & Young's material weakness letter to the Company also identified an
internal control deficiency in assessing the allowance for doubtful accounts,
because the company did not have formal procedures in place for such an
analysis on an on-going basis. As a result, an additional reserve of $100,000
was recorded for the fiscal year ended December 31, 1996 associated with the
company's Asian customer base.
Finally, the material weakness letter identified internal control
deficiencies relating to ensuring proper sales cut-offs. This deficiency
resulted from incorrect reporting of a significant transaction occurring
near the end of the fiscal year, due primarily to communication problems
between the company and its Asian affiliate. As a result, approximately
$300, 000 of the sales transaction was appropriately reversed and
not reported on the Company's audited financial statements for the fiscal
year ended December 31, 1996, included in the Company's Form 10KSB for that
period.
No committee of the Board of Directors of the Company discussed these
internal control deficiencies with Ernst & Young, as the company does not
have an audit committee. On May 9, 1997 Ernst & Young communicated the
material weekness to a majority of the Board of Directors at that time and
to the current president of the Company, Mr. Bruce Herstowski. The Company
has authorized Ernst & Young to respond fully to any inquiries of the
Company's new auditors regarding these deficiencies, although the Company has
not yet identified or engaged a successor accounting firm. To the best knowlodge
of management of the Company,
there have been no transaction or events in the current year similar to
those described in Ernst & Young's material weakness letter.
The Company has requested Ernst & Young to furnish a letter within ten
business days from the date of this filing addressed to the Commission
stating whether it agrees with the above statements, and, if not,
stating the respects in which it does not agree.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amended report to be signed on
its behalf by the undersigned hereunto duly authorized.
3D Image Technology, Inc.
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(Registrant)
Date: June 23, 1997 /s/ Bruce Herstowski
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President
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