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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-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): February 16, 1999
JAYHAWK ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
TEXAS 0-26410 75-2486444
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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BRYAN TOWER
2001 BRYAN STREET
SUITE 600
DALLAS, TEXAS 75201
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (214) 754-1000
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
On February 16, 1999, Ernst & Young LLP resigned as auditors of the
Company.
The reports of Ernst & Young LLP on the Company's financial statements for
the past two fiscal years did not contain an adverse opinion or disclaimer of
opinion and were not qualified or modified as to audit scope or accounting
principles.
The reports of Ernst & Young LLP for each of the last two years were
modified as to uncertainty regarding the ability of the Company to continue as a
going concern. More specifically, Ernst & Young LLP's report relating to the
Company's financial statements for 1996 notes that "the Company experienced a
significant net loss in 1996, is currently in default on all of its debt
agreements, and in addition the Company filed a voluntary petition for
reorganization under Chapter 11 of the Federal Bankruptcy Code. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability or classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty." Similarly, Ernst & Young LLP's report relating to
the Company's financial statements for 1997 notes that "Jayhawk Acceptance
Corporation incurred significant losses in 1996 and 1997, discontinued its
purchases of Automotive Contracts, relies upon collections on its existing
Automotive Contracts in order to meet its obligations under the Plan of
Reorganization ("Plan"), projects funds available other than for meeting Plan
obligations will be limited, and expects to defer a portion of the Plan payments
originally scheduled for 1998 as allowed under the Plan. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustment that might result from
the outcome of this uncertainty."
In connection with the audits of the Company's financial statements for
each of the two fiscal years ended December 31, 1997 and 1996, and in the
subsequent interim periods, there were no disagreements with Ernst & Young LLP
on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which if not resolved to the
satisfaction of Ernst & Young LLP would have caused Ernst & Young LLP to make
reference to the matter in connection with their report. The Company has
requested Ernst & Young LLP to furnish it a letter addressed to the Commission
stating whether it agrees with the above statements. A copy of that letter,
dated March 18, 1999 is filed as Exhibit 16.1 to this Form 8-K.
At the Company's February 4, 1999 Audit Committee meeting, Ernst & Young
LLP advised the Company of the need to expand the scope of its audit of the 1998
financial statements of the Company as a result of the cooperative advertising
program the Company adopted in 1998. The Audit Committee concurred but
questioned the estimated audit fee presented by Ernst & Young LLP. Ernst & Young
LLP's resignation occurred prior to their commencement of any substantive audit
procedures with respect to the Company's 1998 year end financial statements.
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After conducting a search for a new independent public accountant, the
Company's Audit Committee appointed the firm of Grant Thornton LLP as the
Company's principal accountant. The date of such principal accountant's
engagement was March 15, 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibits
16.1 Letter re change in certifying accountant.
99.1 Letter regarding amendment to Health Care Provider Agreement, dated
January 29, 1998.
99.2 See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
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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.
JAYHAWK ACCEPTANCE CORPORATION
Date: March 18, 1999 By: /s/ Douglas Theodore
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Douglas Theodore, President
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EXHIBIT INDEX
16.1 Letter re change in certifying accountant.
99.1 Letter regarding amendment to Health Care Provider Agreement, dated
January 29, 1998.
99.2 See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
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Exhibit 16.1
March 18, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read Item 4 of Form 8-K dated February 16, 1999, of Jayhawk Acceptance
Corporation and are in agreement with the statements contained in the first five
paragraphs therein. We have no basis to agree or disagree with the sixth
paragraph contained therein.
Ernst & Young LLP
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Exhibit 99.1
JAYHAWK
MEDICAL ACCEPTANCE CORPORATION
January 29, 1998
Re: Amendment to Health Care Provider Agreement ("Agreement")
Dear Doctor:
Each month, Jayhawk Medical Acceptance Corporation makes a substantial
investment in a national advertising campaign designed to create awareness of
the availability of patient financing. In order to maximize the effectiveness of
these advertising expenditures, we will implement a change in our program,
effective February l6, 1998.
You will notice the amount calculated for payment to you on Tier I and Tier
II Contracts will be increased by 8% of the amount financed. We will then
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subtract that 8% increase and transfer that amount into an advertising fund.
- --------
All of these funds will be designated for advertising expenditures.
Although this change will increase the Purchase Price, as defined in the
Agreement, for a Contract, it will not change the net amount of the Purchase
Price Payment you are currently receiving. We will provide detail similar to the
example below on each check.
TIER I TIER II
Amount of Contract 3,000 3,000
Payment to Provider - 60% or 50% 1,800 1,500
Plus 8% of Contract + 240 + 240
Less 8% of Contract - 240 - 240
Net check to Provider 1,800 1,500
Accordingly, in accordance with Section 5.9 of the Agreement, between
Jayhawk Medical Acceptance Corporation ("JMAC") and your practice, the Agreement
is hereby
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amended, effective upon your submission to JMAC of a Contract, as defined in the
Agreement, for purchase, as follows:
1. To add a new Section 5.10 to the Agreement to read in its entirety as
follows:
5.10 Advertising Payment. With respect to each Contract accepted by
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JMAC for purchase on or after February 16, 1998, Provider
irrevocably directs that such portion of the Purchase Price for
such Contract as shall equal 8% of the amount financed by such
Contract be paid, on Provider's behalf and in lieu of to
Provider, to Jayhawk Medical Advertising Fund ("Advertiser").
Provider and JMAC acknowledge and agree that Provider shall be
deemed for all purposes of this Agreement to have received from
JMAC any amounts paid to Advertiser in accordance with the
immediately preceding sentence for and in consideration of the
related Contract purchased by JMAC and that there are no third
party beneficiaries to this Agreement
2. The Agreement, as amended hereby, shall continue in full force and
effect. The Agreement, as amended hereby, contains the complete
agreement of the parties thereto, and supersedes any and all prior
agreements, whether written or oral, and prior courses of dealings.
Please note, pursuant to Section 5.9 of the Agreement, you will be bound by
the amendment to the Agreement set forth above upon your submission to JMAC of
any retail installment sales contract for purchase.
We believe this program change will result in more effective utilization of
our advertising resources. Please direct any questions you may have in this
regard to our Provider Services Department at (214) 220-5100.
Yours very truly,
/s/Douglas B. Theodore
Douglas B. Theodore
President
