SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): June 17, 1999
CANDIE'S, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-10593 11-2481903
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2975 Westchester Avenue, Purchase, New York 10577
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 694-8600
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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.
(a)(1)
(i) On June 17, 1999, Candie's, Inc. (the "Company") dismissed Ernst &
Young LLP ("E&Y") as its independent auditors.
(ii) The reports of E&Y on the financial statements of the Company for the
fiscal years ended January 31, 1998 ("Fiscal 1998") and January 31, 1997 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. However, it
should be noted that, for the reasons discussed below, in a May 12, 1999 press
release the Company indicated that its financial statements for Fiscal 1998
should not be relied upon. The audit for the Company's fiscal year ended January
31, 1999 ("Fiscal 1999") has not been completed.
(iii) The decision to change auditors was approved by the Company's Board
of Directors and the Audit Committee of the Company's Board of Directors.
(iv) During the time that the audits of the Company's financial statements
for each of the two fiscal years in the period ended January 31, 1998 were
conducted, there were no disagreements with E&Y on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure which, if not resolved to the satisfaction of E&Y would have caused it
to make reference to the matter in their report.
(v) During the course of its uncompleted audit of the Company's financial
statements for Fiscal 1999 E&Y informed the Company that it had been unable to
obtain sufficient evidentiary support to determine the appropriateness of the
accounting the Company had applied to (i) certain barter transactions, (ii)
transactions with a related party and principal supplier and (iii) certain other
transactions which may have affected the Company's interim quarterly financial
results during Fiscal 1999. E&Y also requested the Company to appoint a Special
Committee to conduct an independent investigation of such transactions. E&Y also
informed the Company that, in its opinion, the resolution of such matters might
require the Company to restate its financial statements for Fiscal 1998 and each
of the first three quarters of Fiscal 1999, and could result in the Company
reporting a loss for Fiscal 1999.
In response to the issues raised by E&Y the Special Committee of the Board
of Directors has commenced an investigation. The Special Committee hopes to
complete that investigation promptly. To assist the Special Committee the
Company has retained the law firm of Squadron Ellenoff Plesent & Sheinfeld LLP
which, in turn, has retained the accounting firm PricewaterhouseCoopers LLP.
Representatives of the Company have advised representatives of
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E&Y that they believe that certain documents previously given to E&Y in support
of certain Fiscal 1998 and Fiscal 1999 transactions were not genuine. E&Y has
advised the Company that depending upon the findings of the Special Committee,
these facts may cause E&Y to be unwilling to rely on management's
representations or be associated with past or current financial statements
prepared by management.
(a)(2) On June 22, 1999 the Company engaged BDO Seidman, LLP ("BDO") as its
independent accountant to audit its financial statements with respect to Fiscal
1998 and 1999 and, if necessary, other prior fiscal years. The Company has
authorized E&Y to respond fully to any inquiries BDO may make.
The Company did not seek the advice of BDO regarding the subject matter of
the foregoing reportable events with E&Y. However, members of the Company's
Board of Directors and management did fully disclose to BDO what the Company
believed to be the subject matter of the issues raised by E&Y as part of the
process of determining whether BDO would accept the Company's engagement and, if
so, the time frame in which BDO believed it could complete the necessary audit
of the Company's financial statements.
Item 5. Other Events.
The Company has previously announced that during the past several weeks,
several class action complaints have been filed in the United States District
Court for the Southern District of New York against the Company and certain of
its current executive officers and directors and certain former officers. The
complaints, which the Company anticipates will be consolidated, allege, among
other things, that the defendants misrepresented or omitted to state material
facts concerning the Company's business and financial condition.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c). Exhibits.
16. Letter from E&Y regarding change in certifying accountant.
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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 thereunto duly authorized.
CANDIE'S, INC.
By: /s/ Neil Cole
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Neil Cole
Chief Executive Officer and
President
Date: June 23, 1999
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June 24, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
We have read Item 4 of Form 8-K dated June 23, 1999, of Candie's, Inc. and are
in agreement with the statements contained in Item 4(a)(1) sections (i), (ii),
(iv) and (v) on pages 2 and 3 therein. We have no basis to agree or disagree
with other statements of the registrant contained therein.
/s/ Ernst & Young LLP
