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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A N0.1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 26, 1997
THE EASTWIND GROUP, INC.
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(Exact name of issuer as specified in charter)
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<S> <C> <C>
Delaware 0-27638 23-2732753
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation or file Identification
Organization) number) Number)
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100 Four Falls Corporate Center
Suite 305
Conshohocken, Pennsylvania 19428
(Address of principal executive offices)
(610) 828-6860
(Registrant's telephone number, including area code)
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a) (1)
(i) On September 26, 1997, The Eastwind Group, Inc. (the
"Company") and Arthur Andersen LLP ("Andersen"), its
independent public accountants, mutually agreed to
terminate their relationship. Andersen has previously
audited the Company's financial statements for the years
ended December 31, 1996 and 1995.
(ii) The report of Andersen on the Company's consolidated
financial statements for the years ended December 31, 1996
and 1995, did not contain an adverse opinion or a
disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles.
(iii) The mutual decision of the Company and Andersen to
terminate the relationship with Andersen as the Company's
independent public accountants was approved by the Audit
Committee of the Company's Board of Directors and approved
by the Board of Directors.
(iv) (A) During the audit of the 1996 consolidated financial
statements of the Company there was a matter of
discussion and disagreement which, if not resolved to
the satisfaction of Andersen, would have caused it to
make reference to the subject matter in its report.
This matter was resolved to the satisfaction of
Andersen. There were no other disagreements with
Andersen during the fiscal years ended December 31,
1995 and December 31, 1996 and the time period from
January 1, 1997 through September 26, 1997 which, if
not resolved to the satisfaction of Andersen, would
have caused it to make reference to the subject matter
in its reports for such periods.
(B) Not applicable.
(C) The subject matter of the disagreement between the
Company and Andersen concerned the recognition of
revenue on certain transactions with entities in which
the Company made investments.
In October 1996, the Company entered into a Management
Services Agreement with Tygart Moulding Corporation
(Tygart Moulding) which provided for a $125,000 fee.
The management fee was for services to be provided to
Tygart Moulding to effect operational changes which
were necessary to its survival. Management believed
that this fee should be recognized as income in the
fourth quarter of 1996, the period in which the
services were provided.
The Management Services Agreement dated October 29,
1996 was between Ivy-Tygart Acquisition Corp.
(Management Company), a majority owned subsidiary of
the Company, and Tygart Moulding. The Management
Services Agreement stated that Tygart Moulding and
Management Company intended to enter into a certain
asset purchase agreement in which the Management
Company would acquire substantially all of the assets
of Tygart Moulding. The acquisition was completed on
December 31, 1996. The purchase agreement stipulated
that the management fee payable by Tygart Moulding
would be assumed by the Management Company.
Andersen did not believe that it would be appropriate
to recognize income with an offsetting increase to the
net assets recorded in purchase accounting given the
Company's stated intention to acquire Tygart Moulding
prior to the consummation of the Management Services
Agreement and the assumption of the management fee
payable by the Management Company as part of the
acquisition. Management believed that the Management
Services Agreement was negotiated on an arms length
basis and was not directly related to the acquisition
agreement.
The second issue related to a consulting agreement
with an entity in which the Company held a
subordinated debt interest. The consulting agreement
provided for a fee of $10,000 per month beginning in
March 1996. Management believed that specific projects
were performed for the entity and, therefore, that the
consulting fee income should be recorded. Andersen did
not believe that the facts and circumstances supported
recognition of the consulting fee income from this
related party as these amounts were not collected and
the consulting fee payable from this entity was
assumed in connection with the acquisition of this
entity in 1997.
The above management and consulting fees were not
recognized as revenue by the Company in its 1996
financial statements.
(D) Management of the Company, including the Chairman and
Chief Executive Officer and the Chief Financial
Officer, discussed this matter with Andersen.
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(E) The Company has authorized Andersen to respond fully
to the inquiries of any successor accountant
concerning the subject matter of its disagreement with
Andersen.
(a) (2) The Company is currently requesting proposals from other
independent public accountants to replace Andersen.
(a) (3) The Company has requested Arthur Andersen to furnish it a
letter addressed to the Commission stating whether it
agrees with the above statements. A copy of that letter is
filed as an Exhibit to this Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Exhibits
16.1 Letter from Arthur Andersen LLP to the Securities and
Exchange Commission dated September 26, 1997*
16.2 Letter from Arthur Andersen LLP to the Securities and
Exchange Commission dated October 17, 1997
*Previously Filed
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
Date: October 17, 1997 The Eastwind Group, Inc.
/s/ William B. Miller
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William B. Miller
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit Sequential
No. Description Page No.
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16.2 Letter from Arthur Andersen LLP to the
Securities and Exchange Commission dated
October 17, 1997
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Exhibit 16.2
October 17, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read Item 4 (a) (1) (i) (ii) and (iv) (A) (C) (D) and (E) included in
the Form 8-K/A dated September 26, 1997 of the Eastwind Group, Inc. to be filed
with the Securities and Exchange Commission on or after October 17, 1997 and are
in agreement with the statements contained therein.
Very truly yours,
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
TMM
