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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 Act of 1934
Date of Report (Date of earliest event reported) May 22, 1998
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PREMIER LASER SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
California 0-25242 33-0472684
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
3 Morgan, Irvine, California 92718
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 859-0656
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Not Applicable
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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.
On May 22, 1998, Ernst & Young LLP (the "Former Auditors"), informed the
Chairman of the Board and Chief Executive Officer of Premier Laser Systems, Inc.
(the "Company") and special counsel appointed by a special committee of the
Company's Board of Directors that they resigned as the Company's independent
auditors, and were withdrawing their report on the Company's consolidated
financial statements for the year ended March 31, 1997.
The withdrawn report on the Company's consolidated financial statements for
the year ended March 31, 1997 did not contain any adverse opinion or disclaimer
of opinion, nor was it qualified or modified as to uncertainty, audit scope, or
accounting principles.
The decision to resign was made by the Former Auditors and was neither
approved nor disapproved by the Company's Board of Directors or its Audit
Committee.
In connection with the Former Auditor's audit of the fiscal year ended
March 31, 1997 and through May 22, 1998, (i) there were no disagreements between
the Company and the Former Auditors on any matter of accounting principles or
practice, financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of the Former Auditors would
have caused them to make reference thereto in their report and (ii) there were
no reportable events as defined in paragraph 304(a)(1)(v) of Regulation S-K,
except as discussed in the following three paragraphs.
Based on information provided by the Company's Chief Financial Officer, and
reported to the Former Auditors by the Company's management and Board of
Directors, on April 6, 1998 the Audit Committee engaged the Former Auditors to:
review events involving a disputed transaction recorded as a $2.4 million sale
to a new distributor in the fiscal quarter ended December 31, 1997; determine
the appropriateness of recognizing revenue in the circumstances; and report
their findings to the Audit Committee of the Board of Directors and to
management. On April 21, 1998, the Former Auditors reported their preliminary
conclusion that such sales recognition was improper based on the evidence they
had reviewed and Company management explanations furnished through such date.
The Former Auditors indicated, however, that further investigation should be
undertaken. On April 24, 1998, the Former Auditors among other matters: reported
their preliminary findings to the Board of Directors; recommended improvements
in the Company's policies and procedures; and advised the Board of Directors to
form a special committee of independent directors, assisted by special legal
counsel, to investigate the circumstances, including possible improprieties,
surrounding the recognition of the $2.4 million of sales revenue from the new
distributor in the third quarter of fiscal 1998, and whether any improper
revenue recognition transactions existed at the end of prior quarters of fiscal
1998 or at March 31, 1997, the end of the prior fiscal year. The Former Auditors
also reported to the Board of Directors that they had identified several
specific revenue transactions recorded in the year ended March 31 1997 that they
believed should be included in the scope of the special committee's
investigation. The Former Auditors stressed that any consequent personnel
actions necessary to maintain or establish an effective internal control
environment must be taken. Special counsel was engaged by the Special Committee
following its formation on April 24, 1998 and discussed their preliminary
findings and recommendations first with the Special Committee and then with the
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Company's full Board of Directors on May 21, 1998. The Committee and the
Company's full Board of Directors unanimously adopted each of the Former
Auditor's recommendations concerning policies and procedures and authorized
legal counsel to engage the Former Auditor to review the Company's financial
statements for prior periods, including those for the year ended March 31, 1997.
On May 22, 1998, special counsel met with the Former Auditors for the
purpose of discussing the preliminary results of the Special Committee's
investigation and the possible expansion of the scope of the investigation. Due
in part to their inability to obtain timely and complete access to the Former
Auditor's work papers, special counsel indicated that their procedures to date
had been substantially limited to the $2.4 million sale recognized in December
1997. Certain limited information concerning the Special Committee's work to
date was discussed; however, the detailed results of the Special Committee's
preliminary investigation were not presented to the Former Auditor at that time
because the Former Auditor indicated that it wanted to consider the information
furnished and the Company's proposal for delivery of the detailed findings of
the special investigation. The Former Auditors, after consideration of such
information, expressed concerns with the overall direction of the preliminary
conclusions and indicated that they had serious disagreements with the limited
scope and breadth to date of the Special Committee's investigation. The Former
Auditors concluded that given the circumstances they could not be effective in
their role as auditors and further concluded it was appropriate to withdraw
their report on the Company's consolidated financial statements for the year
ended March 31, 1997.
The Company believes that the investigation was conducted in full
compliance with the Former Auditor's recommendations and the Company has
indicated its willingness in the past, and continues to be willing, to expand
its investigation beyond the disputed distributor transaction. The Company is
presently interviewing potential replacement auditors, and is discussing these
issues with such firms and other independent accounting advisors. The Company's
new auditors, when engaged, will be asked to review all of the issues raised by
the Former Auditor, including the impact of revenue recognition policies on the
Company's reported results for the 1997 fiscal year.
The Company has authorized the Former Auditors to respond fully to the
inquiries of any new independent auditors engaged by the Company concerning the
subject matter of these issues.
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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.
PREMIER LASER SYSTEMS, INC.
/s/ COLETTE COZEAN
June 1, 1998 _______________________________________
Colette Cozean, Chief Executive Officer
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