UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECOND 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 Amended 8-K June 23, 1997
Date of this Amended 8-K July 21,1997
3D IMAGE TECHNOLOGY, INC.
-------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 76-0265438 33-27627
--------------- ---------------- ------------
(State or Other (I.R.S. Employer (Commission
Jurisdiction Identification No.) File Number)
of Incorporation)
5172-G Brook Hollow Parkway, Norcross, Georgia 30071
---------------------------------------------- -------
(Address of Principal Executive Offices) (Zip Code)
(770) 416-8848
-------------------
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 it's
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 weaknesses 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 knowledge 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.
On June 23, 1997, The Company requested Ernst & Young to furnish a
letter within ten business days from that date to the Commission
stating whether it agrees with the above statements, and, if not,
stating the respects in which it does not agree. A copy of that
letter dated July 18, 1997 is filed as Exhibit 1 to this second
Amended Form 8-K.
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.
--------------------------------
(Registrant)
Date: July 23, 1997 /s/ Bruce
Herstowski
--------------------
President
EXHIBIT NO. DESCRIPTION OF EXHIBIT
1 Letter from Ernst & Young LLP
to the
Securities and Exchange
Commission
Dated July 18, 1997
Ernst
& Young LLP
Suite
2800
600
Peachtree Street, N.E.
Atlanta, GA 30308-2215
404
874-8300
<PAGE>
EXHIBIT I TO AMENDED FROM 8-K
July 18, 1997
Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read Item 4 of Amended Form 8-K dated June 23,
1997, of 3D Image Technology, Inc. and are in agreement
with the statements contained in paragraphs one through
six, the first three sentences in paragraph seven, and
paragraph eight therein. We have no basis to agree or
disagree with other statements of the registrant
contained therein.
Regarding the registrant's statement concerning the lack
of internal control to prepare financial statements,
included in the third, fourth, fifth and sixth paragraphs
of Item 4 therein, we had considered such matters in
determining the nature, timing and extent of procedures
performed in our audit of the registrant's 1996 financial
statements.
/s/ Ernst & Young LLP
Copy to Bruce Herstowski
Robert Hipple
