SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM 8- K/A</R<
AMENDMENT NO. 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) April 23, 1996
Model Imperial, Inc.
(Exact Name of Registrant as Specified in Charter)
Florida 0-24146 11-2401732
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification
No.)
1243 Clint Moore Road, Boca Raton, Florida 33487
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (407) 241-8244
(Former Name or Former Address; if Changed Since Last Report)
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
On April 23, 1996, KPMG Peat Marwick LLP ("KPMG") resigned as
independent auditors of Model Imperial, Inc., a Florida corporation
(the "Registrant"). Because KPMG resigned, rather than being
dismissed by the Registrant, neither the Registrant's Audit
Committee or Board of Directors recommended or approved of a change
in the Registrant's independent auditors.
KPMG's report on the Registrant's financial statements for the
fiscal years ended December 31, 1993 and December 31, 1994, did not
contain an adverse opinion or a disclaimer of opinion, nor was it
qualified or modified as to uncertainty, audit scope or accounting
principles. As of the date of KPMG's resignation, no report had
been issued by KPMG on the Registrant's financial statements for
the year ended December 31, 1995. Although KPMG had not issued a
report regarding the Registrant's financial statements for the year
ended December 31, 1995, KPMG had discussed with management and its
audit committee the possibility of indicating in its report that
circumstances related to the Registrant's losses and net capital
deficiencies and its bank loans raised substantial doubt about the
Registrant's ability to continue as a going concern and the
possibility that it would not express an opinion on the 1995
financial statements because of uncertainties related to the
foregoing.
In response to item 304(a)(1)(iv), during the second quarter
of 1995, the Registrant reported a gain of approximately $1.2
million as a result of a barter transaction. The barter
transaction included the exchange of inventory with a cost of
$300,000 for barter credits of $3 million which the
Registrant valued at $1.5 million for financial reporting
purposes. Independent of KPMG, the Registrant determined to
reverse the impact of the barter transaction in the fourth
quarter because of changes in terms and intended to report the
change in its annual financial statements. During the course of
performing its audit, KPMG indicated to the Registrant that it
believed that income recognition for this transaction in the second
quarter was inappropriate. KPMG brought this issue to the
attention of the Registrant's Audit Committee in April 1996. At
times during KPMG's engagement, KPMG and the
Registrant disagreed as to the treatment of this transaction
for financial reporting purposes. The Registrant has not made
a determination as to whether the income should have been
recognized in the second quarter. The
Registrant's Board of Directors intends to authorize the
former accountant to respond fully to the inquiries of any
successor accountant regarding the foregoing.
In response to item 304(a)(1)(v)(B) , in connection
with KPMG's 1995 audit, KPMG has advised the Registrant that
certain information had come to its attention with respect to (a)
unsubstantiated disbursements, (b) revenue recognition, and (c)
certain related party transactions, that were unresolved at the
time of its resignation. The issue regarding unsubstantiated
disbursements relates to approximately $2.1 million in payments
made by the Registrant during 1995 to a third party in connection
with purchases of inventory by the Registrant from one particular
vendor which invoiced the Registrant directly. At the time of its
resignation, KPMG advised the Registrant that the vendor's invoices
did not include commission amounts and that it had not seen the
invoices from the third party supporting these payments or a
written agreement regarding the payment arrangement between the
Registrant, the vendor from whom the inventory was purchased or the
third party intermediary to whom the payments were made. Such
payments were made pursuant to an oral agreement between the
Registrant and the third party intermediary. In addition, at the
time of its resignation, KPMG advised the Registrant that it could
not determine the business purpose or whether there was proper
authorization for these payments. Although KPMG had requested, but
at the time of its resignation had not been provided with, invoices
for such inventory purchases and commission payments, the
Registrant maintains in its records, internal documentation for the
$2.1 million in payments, including invoices for all but
approximately $273,000 of the commission payments made to the third
party intermediary. Following KPMG's resignation, the Registrant
determined that of the $2.1 million in payments, approximately
$800,000 represented payments made for inventory purchases and the
remainder represented commissions paid to the third party
intermediary related to inventory purchases.
The revenue recognition items relate to two issues. The first
is the barter transaction described in response to item
304(a)(1)(iv) above. The second issue relates to transactions in
which goods with the same SKU numbers were sold to one company and
repurchased by the Registrant shortly thereafter from a company
affiliated with the original purchaser. At the time of its
resignation, KPMG had not quantified the amount and could not
determine the business purpose for such transactions. KPMG advised
the Registrant that in analyzing such transactions, it had tested
invoices occurring in one month of the Registrant's 1995 fiscal
year.
The related party transactions relate to inventory transfers
between the Registrant and Jennico, Inc., a company wholly-owned by
the Registrant's Chairman of the Board, President, Chief Executive
Officer and principal shareholder ("Jennico"). Such inventory
transfers were evidenced by typical sales invoice forms bearing the
name of Gardenia, Inc., a wholly-owned inactive subsidiary of the
Registrant ("Gardenia"). All such inventory transfers were
recorded in the Registrant's books and records. KPMG was also
informed that the Registrant, pursuant to a separate letter
agreement, is contractually obligated to Jennico's bank to purchase
all goods purchased by Jennico.
At the time of its resignation, KPMG had advised the
Registrant that it could not determine whether Jennico's bank was
aware of Gardenia's affiliation with the Registrant, the business
purpose for invoicing the inventory transfers in the manner
described or the possible effects, if any, of such transfers on the
Registrant. Although KPMG had not advised the Registrant of the
dollar amount of the related party transactions, the Registrant has
determined that from October 31, 1995 to December 21, 1995 there
were approximately $5.7 million of such transfers between Jennico
and the Registrant, which were invoiced under Gardenia. The above
described inventory transfers were executed for the purpose of
transferring certain inventory held as collateral by Jennico's bank
to the Registrant for sale to third parties. Such inventory was
replaced with other inventory of the Registrant accepted by
Jennico's bank as substitute collateral. None of these transfers
were booked by the Registrant as revenues.
The Registrant is currently reviewing the
foregoing information. In addition, the Registrant's Audit
Committee, which has not formed any views on the foregoing, has
retained independent counsel to review each of the foregoing
matters and such other matters as the Audit
Committee deems appropriate as a result of this review. In
response to requests of the Audit Committee's independent counsel,
the
Registrant is currently collecting materials relating to
each of these matters which will be promptly provided to the Audit
Committee and its independent counsel.
None of the other reportable events listed in Item
304(a)(1)(v) of Regulation S-K occurred with respect to the
Registrant during the Registrant's two most recent fiscal years and
the subsequent interim period preceding KPMG's resignation.
The Registrant has requested that KPMG furnish the Registrant
with a letter addressed to the Securities and Exchange Commission
stating whether KPMG agrees or disagrees with the above statements.
A letter dated April 29, 1996 from KPMG to the
Registrant was attached as Exhibit 16.2 to the initial Form
8-K filed with Securities and Exchange Commission on April 30,
1996. A letter from KPMG to the Registrant regarding KPMG's
concurrence or disagreement with the statements made in this
Amendment No. 1 to Form 8-K has not yet been received. In
accordance with Item 304(a)(3) of Regulation S-K, a copy of KPMG's
letter will be filed with the Commission upon receipt by the
Registrant.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(c) Exhibits.
[CAPTION]
<TABLE>
<S> <C> <C>
Sequential
Exhibit No. Description Page Number
16.1 Letter dated April 23, 1996, *
from KPMG Peat Marwick LLP to
the Board of Directors of the
Registrant resigning from their
engagement as independent
auditors of the Registrant
16.2 Letter dated April 29, 1996, from *
KPMG Peat Marwick LLP regarding
concurrence or disagreement with
statements made in the
Registrant's Form 8-K
</TABLE>
_________________________
* Previously filed as part of the Registrant's
Current Report on Form 8-K which was filed with the
Securities and Exchange Commission on April 30,
1996.
SIGNATURE
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.
MODEL IMPERIAL, INC.
April 15 , 1996
By: /s/ Harold M. Ickovics
Harold M. Ickovics, Chairman of
the Board, President and Chief
Executive Officer
