-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IxqoSQ05un+H81cEpV0SZbk98jCj4NkXt2hXloXRh/9f4QX0KdGY7z/fl/kH5QJ7 30DlEH4HHxSpj0z0uIbUUw== 0000931731-03-000195.txt : 20030604 0000931731-03-000195.hdr.sgml : 20030604 20030604155656 ACCESSION NUMBER: 0000931731-03-000195 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030423 ITEM INFORMATION: Changes in registrant's certifying accountant ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INNOVATIVE SOFTWARE TECHNOLOGIES INC CENTRAL INDEX KEY: 0001084047 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 954691878 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-27465 FILM NUMBER: 03732650 BUSINESS ADDRESS: STREET 1: 5072 NORTH 300 WEST CITY: PROVO STATE: UT ZIP: 84604 BUSINESS PHONE: 801-371-0755 MAIL ADDRESS: STREET 1: 5072 NORTH 300 WEST CITY: PROVO STATE: UT ZIP: 84604 8-K/A 1 innov-8ka2.txt INNOVATIVE 8K-A (2) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A-2 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, 2003 --------------- INNOVATIVE SOFTWARE TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) California 000-1084047 95-4691878 - ---------------------------- ----------------------- ------------------- (State of other jurisdiction Commission File Number) (IRS Employer or incorporation) Identification No.) 5072 North 300 West, Provo, UT 84604 ----------------------------------------------------- (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (801) 371-0755 --------------- ------------------------------------------------------------ (Former name or former address, if changed since last report) ITEM 4. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT The Company has previously reported the engagement of Robison, Hill & Co. as the Company's new independent accountant replacing its former independent accountant, Grant Thornton LLP. We are including as exhibits additional correspondence pertaining to this matter. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) Exhibits 99.1 Correspondence from Grant Thornton LLP to SEC 99.2 Correspondence from Grant Thornton to Douglas S. Hackett, dated April 15, 2003 2 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. INNOVATIVE SOFTWARE TECHNOLOGIES, INC. By: /s/ Douglas S. Hackett ------------------------------------------------ Douglas S. Hackett, President, Chief Executive Officer and Director By: /s/ Linda W. Haslem ------------------------------------------------ Linda W. Haslem, Chief Financial Officer DATED: June 3, 2003 3 EX-99.1 3 grantthornton-sec.txt LETTER - GT TO SEC Microsoft Word 10.0.2627; Grant Thornton Accountants and Business Advisors May 7, 2003 U.S. Securities and Exchange Commission 450 Fifth Street Washington, D.C. 20549 Re: Innovative Software Technologies, Inc. (the "Company") File No. 000-1084047 Dear Sir or Madam: We have reviewed the disclosure in the Forms 8-K filed on April 14, 2003, including the attachments thereto. The following sets forth our disagreements with the statements or inferences made in those materials, as well as information we view as necessary to supplement or modify the disclosures made by the Company. The Company asserts that it had discussions with Grant Thornton about "issues concerning the consultant" to the Company. With management's knowledge and approval, the consultant provided us with essential financial information integral to the audits and reviews of the Company's financial statements. While the Company's filing is unclear about what "issues" were allegedly discussed with Grant Thornton, any inference that Grant was told by the Company of the consultant's criminal history is false. The information available now to Grant Thornton establishes that this consultant: (1) was indicted in 1987 in Federal Court for conspiring to defraud the government of tax revenues in connection with a scheme to promote fraudulent tax-sheltered investments, which scheme allegedly included backdating documents; the consultant pled guilty in 1988 and was sentenced to eighteen months in prison; and (2) the consultant was convicted in 1984 of fourth degree larceny in Connecticut State Court for diverting funds from an investment partnership to bank accounts he controlled. At no time did the Company inform Grant Thornton of these facts, nor was Grant otherwise aware of them. Similarly, contrary to the suggestion contained in the Company's April 11, 2003 letter to Grant (appended to its Form 8-K), the consultant's son never informed Grant personnel of his father's criminal convictions. We do not agree with the Company's assertion that it disclosed to us the nature of the consultant's involvement with KT Solutions, in particular, his role as CFO of KT Solution's parent corporation, Knowledge Transfer Systems, Inc. (KTSI), a public company whose stock was transferred to the Company as consideration for purported software platform sales. We were not apprised of that relationship, which may have impacted the accounting or disclosure for the purported platform sales, especially as revenue was recognized on a purported Suite 3100 Two Commerce Square 2002 Market Street Philadelphia, PA 19103-7080 T 215.561.4200 F 215.561.1066 W www.grantthornton.com Grant Thornton LLP US Member of Grant Thornton International sale to KTSI. It also may have impacted the Accounting and reporting of the value of the KTSI stock held by the Company, which was ultimately written off. We do not agree with the disclosure that impairment write-downs were made "solely at the Company's initiative." The Form 8-K, Item 5 asserts that, "the Company, on its own initiative, initiated the write-down of the securities of the software sales once management ascertained the difficult financial circumstances that the other party to the transaction had experienced." To the contrary, Grant personnel initiated many discussions with the Company, beginning during the audit of the 2001 financial statements and throughout 2002, regarding impairment of these securities held by the Company. In response, the Company asserted repeatedly that there was no permanent impairment of the securities' value. We question whether the information provided to us, by the Company and its consultant, in support of the securities' value was accurate and complete. Contrary to the Company's statement that it disclosed the transactions "in detail" with Grant, we were not apprised of all the relationships between the companies directly or indirectly involved in the transactions. We note that in the first paragraph of the 8-K filed under Item 5 that the purported third quarter 2002 software sale referred to was not made for Innovative Software securities but for securities of KTSI. The Company's Form 8-K discloses its engagement of a new accounting firm with whom it has addressed matters described in these Forms 8-K. This accounting firm has not contacted us, as required under professional standards, nor has the company asked us to respond to any inquiries by any successor accountant. The Form 8-K, Item 5 appends a letter addressed to us dated April 15, 2003, which attempts to clarify the role of Chipman and Chipman, LLC. We have never received a copy of this letter other than what was filed with EDGAR. Further, we provided the Company with a letter dated April 15, 2003, our response to the April 11, 2003 letter from the CEO of the Company. The Company chose not to include this letter in its filing, but its absence leaves a misleading impression of Grant's response to the Company's assertions. We have included a copy of that letter as an attachment to this response letter. Very truly yours, /s/ Grant Thornton LLP - ----------------------------- 2 EX-99.2 4 grantthornton-ltr041503.txt GRANT THORNTON LTR 041503 April 15, 2003 VIA FEDERAL EXPRESS Douglas S. Hackett Chief Executive Officer Innovative Software Technologies, Inc. 204 NW Platte Valley Drive Riverside, MO 64150 Douglas S. Hackett Chief Executive Officer Innovative Software Technoolgies, Inc. 5072 North 300 West Provo, UT 84604 Dear Mr. Hackett: I am writing in response to your letter of April 11, 2003. First, your assertion that Grant Thornton was informed of Mr. Chipman's criminal history, including his convictions for tax fraud, and for larceny, is incorrect. At no time were Grant Thornton's engagement partners advised of this background, by you, Chris Chipman or William Chipman. Second, contrary to the assertions in your letter, Grant Thornton's engagement partners were never informed of Mr. Chipman's involvement with Knowledge Transfer Solutions. If you have documents reflecting the disclosure of either of these facts to Grant Thornton, kindly send them to me. Third, we are unaware of any consultation by the Company with another accounting firm. We ask that you provide us with the name and contact information for the firm, and any documentation you may have regarding the issues it considered in its conclusions. Finally, the antagonistic tone of your letter and its accusation that Grant Thornton has "little regard" for the facts, are inappropriate and at odds with any good faith intention to conduct the kind of independent investigation required under the circumstances. Some of your comments suggest that you have already decided that nothing improper has teken place, and are apparently more interested in investigating our conduct than that of your Company. We are, Suite 3100 Two Commerce Square 2002 Market Street Philadelphia, PA 19103-7080 T 215.561.4200 F 215.561.1066 W www.grantthornton.com Grant Thornton LLP US Member of Grant Thornton International Douglas S. Hackett April 15, 2003 Page 2 therefore, skeptical that you will proceed in an appropriate manner and further, we are concerned that the adversarial nature of your response impairs our indepencence. We remind you that it is the Company's financial statements that are in issue, and neither are "directed" by Grant Thornton. We believe this matter must be addressed immediately. Given your statement, however, that independent board members will form a special committee to address these matters, and that the Company has consulted outside securities counsel, we will await communication from them no later than April 22, 2003, before taking the final next step required of us under Section 10A.b.2 of Securities Exchange of 1934. Please communicate directly with me regarding this matter. Thank you. Yours truly, /s/ Robert P. Scales Associate General Counsel -----END PRIVACY-ENHANCED MESSAGE-----