UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 25, 2004
SIGHT RESOURCE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-21068 04-3181524
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
6725 Miami Avenue, Cincinnati, Ohio 45243
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 527-9770
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(Former name or former address, if changed since last report)
EXPLANATORY NOTE
This Form 8-K/A is the same as the Form 8-K filed by the Company on July 2, 2004
and reflects the status of events at that time, except for the addition of the
letter dated July 15, 2004 that KPMG LLP has furnished to the Company addressed
to the Securities and Exchange Commission about whether KPMG LLP agrees with the
statements set forth in Item 4 of the Form 8-K filed by the Company on July 2,
2004 and except that the last paragraph of Item 4 was changed to disclose the
receipt of the letter from KPMG.
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Item 4. Changes in Registrant's Certifying Accountant
On June 25, 2004, KPMG LLP informed the Company that the client auditor
relationship between the Company and KPMG had ceased. Such resignation, which
followed the filing on June 24, 2004 by the Company and its wholly-owned
subsidiaries of voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code, resulted from nonpayment by the Company of KPMG's fees.
As previously disclosed in the Company's Form 8-K filed on December 22, 2003 as
amended by the Company's Form 8-K/A filed on January 8, 2004 (collectively, the
"Prior 8-K"), on December 15, 2003, KPMG informed the Company that the client
auditor relationship between the Company and KPMG would cease upon completion of
the audit of the Company's financial statements as of and for the year ended
December 28, 2002, and the issuance of their report thereon. KPMG has now
resigned as the Company's auditor even though the completion of the Company's
financial statements as of and for the year ended December 28, 2002 and the
issuance of KPMG's report thereon have not occurred.
The Company has sought to engage a new independent accounting firm as its
principal accountant but none has yet been engaged.
In connection with the audits of the two fiscal years ended December 28, 2002
and December 29, 2001, and the subsequent interim periods through June 25, 2004,
there were no disagreements with KPMG LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures,
which disagreements if not resolved to their satisfaction would have caused them
to make reference in connection with their opinion to the subject matter of the
disagreement.
The audit reports of KPMG LLP on the consolidated financial statements of the
Company as of and for the years ended December 29, 2001 and December 30, 2000,
did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles,
except as follows:
KPMG LLP's report on the consolidated financial statements of the
Company as of and for the years ended December 29, 2001 and December
30, 2000, contained a separate paragraph stating "the Company's
recurring losses and its ability to pay its outstanding debt raise
substantial doubt about its ability to continue as a going concern.
Management's plan in regard to this matter is also described in Note 3
[of the 2001 financial statements]. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty."
The Company's 2002 year end financial statements have not been completed. In the
course of the Company's work on those statements, and in the course of work by
KPMG in their audit of those statements, it was determined that:
* The statements could not be completed, and an audit of the
statements could not be completed, until certain entries and
accounts upon which the statements are based ("accounting
entries") are substantiated, reconciled or corrected, as
applicable, and until completion of the investigation into
matters discussed below.
* The Company's internal controls over financial reporting
appear to be inadequate and should be strengthened. In
connection with KPMG's uncompleted audit of the Company's 2002
consolidated
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financial statements, KPMG informed the Company that certain
material weaknesses exist in the Company's internal controls
over financial reporting, including lack of timely performance
and supervisory review of account reconciliations; lack of
adequate documentation for various journal entries; and lack
of sufficient management knowledge of the accounting systems.
In March 2003, based on the material weaknesses reported above and concerns
raised by an employee of the Company, KPMG told management and the audit
committee of the Board of Directors that there was a question whether KPMG could
rely on representations of the Chief Financial Officer serving at that time (but
who is no longer with the Company). In October 2003, KPMG informed the Company
that it had made a determination that it could no longer rely on the
representations of this former Chief Financial Officer.
In October 2003, the Company appointed a new Chief Financial Officer, Mr. Dale
W. Fuller, who continued as Chief Financial Officer until he left the Company in
March 2004. Subsequently in March 2004, the Company appointed Mr. Donald L.
Radcliff as Chief Financial Officer of the Company, a position in which he now
serves. In June 2004, after the resignation of the President and Chief Executive
Officer of the Company, Mr. Dale W. Fuller returned to the Company and the Board
of Directors of the Company elected Mr. Fuller as the Company's new President
and Chief Executive Officer.
In March 2003, KPMG recommended that the Company conduct an investigation to
determine whether the above-referenced accounting entries were accurate or
inaccurate and, if inaccurate, the cause of the inaccuracy (that is, whether the
inaccuracy was caused by system error or deficiency, error in judgment,
negligence, intentional action or other cause). Thompson Hine LLP ("TH"), legal
counsel for the Company, retained another accounting firm, Clark, Schaefer,
Hackett & Co. ("CSH") to conduct this investigation.
Also, because of the discovery of errors and deficiencies in connection with the
preparation of the Company's 2002 year-end financial statements, the Company
initiated a review of its 2002 quarterly financial statements.
CSH presented the results of its investigation to the audit committee of the
Board of Directors in September 2003. The reports presented by CSH stated that
CSH had found no direct evidence of fraudulent entries, defalcations, or
deliberate, intentional misstatements. The reports also stated there were
significant problems with the Company's accounting system, the controls around
the accounting system and management's understanding of the reports which could
be generated by the system. The reports also presented CSH's recommendations
regarding adjustments to the quarterly financial statements.
As a result, as previously announced, the Company's previously reported
financial results for the first three quarters of fiscal 2002 will be restated.
This restatement is a result of the review and correction of certain entries and
completion of related account reconciliations. A portion of the restatement
includes the correction of the Company's revenue recognition policy, the effect
of which is to reduce revenue related to sales recorded for merchandise that has
not yet been delivered to customers.
The Company has not yet reported results of operations for the fourth quarter of
fiscal 2002, for the full fiscal year ended December 28, 2002 or for any
subsequent fiscal quarter or year. The Company currently estimates that it will
report for fiscal 2002 a net loss attributable to common shareholders in
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the range of $6.7 million to $7.5 million inclusive of asset impairment charges
estimated in the range of $2.7 million to $3.3 million. The estimated range of
the fiscal 2002 net loss is the same as previously reported by the Company in
May 2003 and repeated earlier in December 2003.
KPMG read the reports of CSH and KPMG was provided with work papers supporting
CSH's investigations. In November 2003, KPMG informed the audit committee of the
Company that they suggested that further additional procedures for the
investigation be considered. They also suggested that the audit committee engage
counsel to assist in the further investigation. In December 2003, the Board of
Directors of the Company authorized its legal counsel to proceed to determine
what further investigation was needed and to conduct and/or supervise such
further investigation.
In December 2003, it was determined that additional procedures were appropriate
to complete the investigation. TH engaged CSH to perform some of these
additional procedures.
CSH issued a report on these additional procedures in February 2004 and later in
February 2004 discussed the report with KPMG and TH. Additional procedures were
developed during this meeting, and CSH issued a draft report dated April 20,
2004 which summarized the additional procedures and results. Copies of these
reports were provided to the audit committee of the Company and to KPMG (KPMG
received the draft April 20, 2004 report in June 2004).
These reports identified potential mistimed or under-accrued accounts payable at
December 29, 2001 in a range of around $180,000 to $260,000, but did not find
any evidence of intentional profit manipulation or deceit or misappropriation of
Company funds.
In April 2004, the audit committee of the Company engaged the law firm of
Richards Spears Kibbe & Orbe LLP ("RSKO") to conduct a "second look" at
investigative work that had previously been undertaken relating to certain
accounting issues at the Company, including issues arising in connection with
the informal inquiry of the Securities and Exchange Commission ("SEC")
concerning the Company (this informal inquiry was disclosed in the Company's 8-K
filed on June 24, 2004). RSKO developed a plan with the assistance of CSH, TH
and the audit committee of the Company for additional investigative procedures.
The plan was reviewed by KPMG. The audit committee gave its approval for
conducting further investigative procedures. RSKO's involvement in the
investigation was temporarily suspended by the audit committee in May 2004 due
to the Company's financial condition.
These additional procedures have not been completed. RSKO's "second look" has
not been completed and it has been unable to confirm or disaffirm the tentative
conclusions previously reached by others. Also, the review procedures for 2001
are ongoing and the Company has not yet made a determination whether
consolidated financial statements for 2001 need restatement. This issue is still
under consideration.
During May and June 2004, CSH, RSKO and KPMG participated in several telephone
conferences with the audit committee of the Company. Generally in such
conferences CSH provided information on the status of the procedures being
conducted by them.
On June 24, 2004, the Company and its wholly-owned subsidiaries each filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. The
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investigation described above has been interrupted by the filing of the Chapter
11 petitions (and the Company's inability to make payments owing to parties
assisting in the investigation). Among other things, RSKO's investigation was
suspended in June 2004 after it was informed by the audit committee of the
pending bankruptcy filing, and, to date, the audit committee has made no
arrangements to continue RSKO's representations or have RSKO complete its
previously contemplated work plan. However, the Company presently intends to
engage counsel (which may or may not include RSKO) and accountants to assist the
audit committee in continuing the investigation. Engagement of counsel and
accountants to assist the audit committee and engagement of a new independent
accounting firm as the Company's principal accountant are subject to approval of
the Bankruptcy Court.
KPMG LLP has furnished the Company with a letter addressed to the Securities and
Exchange Commission about whether they agree with the above statements. Such
letter is attached as Exhibit 99.1.
SIGNATURES
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 thereunto duly authorized.
SIGHT RESOURCE CORPORATION
By: /s/ Dale W. Fuller
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Dale W. Fuller
President and Chief Executive Officer
Date: July 16, 2004 By: /s/ Donald L. Radcliff
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Donald L. Radcliff
Chief Financial Officer
EXHIBIT INDEX
99. Additional Exhibits
99.1 Letter from KPMG LLP dated July 15, 2004
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