Form 8-K
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
TELESOFT CORP.
(Exact name of small business issuer as specified in its charter)
Arizona 86-0431009
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3216 North Third Street, Phoenix, Arizona 85012
(Address of principal executive offices)
(602) 265-6311
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Item 4. Changes in Registrant's Certifying Accountants.
On October 16, 1997, Coopers & Lybrand, L.L.P informed the Registrant that
they resigned as the Registrant's independent certified public accountants.
Coopers & Lybrand, L.L.P.'s reports on the Registrant's financial statements
for the year ended November 30, 1996, did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or principles. There were no disagreements with Coopers &
Lybrand, L.L.P. on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure through Coopers &
Lybrand, L.L.P.'s issuance of their report in connection with their audit of
the Registrant's financial statements for the year ended November 30, 1996
and through the interim period ending May 31, 1997.
Coopers & Lybrand, L.L.P. (former accountant) disagreed with the Registrant
regarding the following two issues during the quarterly review of the
Registrant's financial statements for the three month period ended August 31,
1997:
Goodwill GoodNet: the former accountant informed the Registrant that in
order to evaluate the recoverability of goodwill associated with GoodNet,
the Registrant would need to prepare a detailed forecast of GoodNet's
projected income and cash flows. Based on the results of this forecast
the Company must evaluate whether the asset is expected to be recovered
through GoodNet's earnings based on guidance of SFAS 121 "Impairment of
Long Lived Assets". If the projected earnings are not sufficient to
recover the goodwill, the Registrant is required to consider whether the asset
is impaired as defined by SFAS 121. If the Registrant determines that the
asset is impaired, it is required to reduce the goodwill to its net realizable
value. The former accountant does not believe that the Registrant has
completed such an analysis, and therefore should consider a write down of a
portion of its intangible assets related to GoodNet. It is the opinion of
the Registrant's management, based upon its internal projections, that the
Registrant will be able to recover the goodwill associated with GoodNet.
Management believes that a majority of the goodwill associated with GoodNet
was derived from its dialup business, which is a profitable line of business.
The Registrant will re-evaluate the potential impairment of goodwill at the
end of the Registrant's fiscal year on November 30, 1997.
Deferred Tax Asset: The former accountant informed the Registrant that
deferred tax assets must be evaluated for recoverability in accordance with
the provisions of SFAS 109 "Accounting for Income Taxes". In the opinion of
the former accountant, the Registrant has sold 25% of the its interest in
GoodNet, and therefore the Company is unable, from the date of sale, to
include GoodNet in the consolidated tax return of the Registrant. The former
accountant believes that since GoodNet has no proven prior taxable income and
that there is no assurance of sufficient amount of future income, a $653,000
deferred tax asset relating to GoodNet should be reserved for at the end of
the quarter ended August 31, 1997. It is the opinion of the Registrant's
management that the Registrant will utilize the deferred tax asset either
through future earnings or by securing additional interest in GoodNet in
order to include them in the consolidated tax return of the Registrant. The
Registrant will re-evaluate the necessity for an allowance against its
deferred tax asset at the end of its fiscal year on November 30, 1997.
This report contains forward-looking statements within the meaning of section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Such statements involve certain risks and uncertainties that
could cause actual results to differ materially from those in the forward-
looking statements.
The Registrant has not yet selected a new independent certified public
accountant.
Item 7. Exhibits
16 Letter from Coopers and Lybrand, L.L.P regarding change in
certifying independent accountants
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.
Telesoft Corp.
/s/ Michael F. Zerbib
Date: October 23, 1997 Michael F. Zerbib
Chief Financial Officer
Exhibit 16
Coopers & Lybrand, LLP.
2901 North Central Avenue 1000
Phoenix, AZ 85012-2755
October 16, 1997
Mr. Joseph W. Zerbib
President, Principal Executive Officer and Director
Telesoft Corp
3216 N. 3rd Street
Phoenix, AZ 85012
Dear Mr. Zerbib:
This is to confirm that the client-auditor relationship between Telesoft
Corp.Commission File No. 1-13830 and Coopers & Lybrand L.L.P. has ceased.
Sincerely,
/s/ Coopers & Lybrand, L.L.P.
cc: Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 11-3
450 Fifth Street, N.W.
Washington, D.C. 20549
