-----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, Q54dgng4MSf6NuftYkVX910CSuBT0LuFq4CKbHcRJxag3EZWEB9c5JvYLC3IEpb7 gfViAg9Fq0O6vRSj1FlhWw== 0001001348-97-000165.txt : 19970918 0001001348-97-000165.hdr.sgml : 19970918 ACCESSION NUMBER: 0001001348-97-000165 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970911 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19970917 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCIENTIFIC SOFTWARE INTERCOMP INC CENTRAL INDEX KEY: 0000087822 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 840581776 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-04882 FILM NUMBER: 97681753 BUSINESS ADDRESS: STREET 1: 633 17TH STREET STREET 2: SUITE 1600 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 303-292-1111 MAIL ADDRESS: STREET 1: 1801 CALIFORNIA STREET CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: SCIENTIFIC SOFTWARE CORP DATE OF NAME CHANGE: 19840813 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 11, 1997 SCIENTIFIC SOFTWARE-INTERCOMP, INC. (Exact name of registrant as specified in its charter) Colorado 0-4882 84-0581776 (State or other (Commission File Number) (IRS Employer jurisdiction Identification of incorporation) No.) 633 17th Street, Suite 1600, Denver, Colorado 80202 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 292-1111 Not Applicable (Former name, former address and former fiscal year, if changed since last report) Item 5. Other Events. On September 11, 1997, Scientific Software-Intercomp, Inc. (the "Company") resolved the investigation by the Securities and Exchange Commission ("SEC") of the Company's disclosures and financial statements for the years ended December 31, 1993, 1994 and 1995. Without admitting or denying any of the allegations of the SEC, the Company settled the matter by consenting to the entry of a permanent injunction prohibiting future violations by the Company of Section 17(a) of the Securities Act of 1933, and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder and to an order to restate the Company's financial statements for the years ended December 31, 1993, 1994 and 1995. The SEC Staff has advised the Company that, with the entry of the permanent injunction, the investigation in this matter as to the Company has been concluded. Attached as exhibits hereto are copies of the SEC's Complaint, the Company's Consent and Undertaking, and the Company's press release and SEC release related thereto. Item 7. Financial Statements and Exhibits. (a)-(b). Not Applicable. (c) Exhibits. The following exhibits are filed as part of this Current Report on Form 8-K. Exhibit 99.1 Complaint against Scientific Software- Intercomp, Inc. filed by the Securities and Exchange Commission in the U.S. District Court for the District of Columbia on September 11, 1997 Exhibit 99.2 Consent and Undertaking of Scientific Software-Intercomp, Inc. dated September 5, 1997 with annexed Final Judgment of Permanent Injunction Exhibit 99.3 Scientific Software-Intercomp, Inc. Press Release dated September 11, 1997 Exhibit 99.4 Securities and Exchange Commission Litigation Release No. 15485 and Accounting and Auditing Enforcement Release No. 956 dated September 11, 1997 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. SCIENTIFIC SOFTWARE-INTERCOMP, INC. Date: September 17, 1997 By: /S/ GEORGE STEEL George Steel, Chairman, President and Chief Executive Officer EX-99.1 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA SECURITIES AND EXCHANGE COMMISSION 450 Fifth Street, N.W. Washington, D.C. 20549, Plaintiff, v. CIVIL ACTION NO. SCIENTIFIC SOFTWARE-INTERCOMP, INC., 633 17th Street, Suite 1600 Denver, Colorado 80202, Defendant. COMPLAINT Plaintiff Securities and Exchange Commission ("Commission") alleges: SUMMARY 1. During 1993, 1994 and 1995, Scientific Software Intercomp, Inc. ("SSI") materially overstated its revenue and earnings by backdating or misdating contracts, booking revenue without contracts, overaccruing project revenues and providing confidential side letters modifying payment obligations. As a result of these practices, SSI reported false and misleading information in its Annual Reports for fiscal 1993 and 1994, its Quarterly Reports for the first three quarters of fiscal 1994 and the first quarter of fiscal 1995. In addition, SSI conducted an offering of 2 million shares of common stock from which it obtained more than $8 million on a registration statement that materially overstated revenue, net income and earnings per share for the 1993 fiscal year and the first quarter of 1994. By engaging in such conduct, SSI violated Section 17(a) of the Securities Act of 1933, and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. JURISDICTION 2. The Court has jurisdiction pursuant to Section 22 of the Securities Act of 1933 ("Securities Act") [15 U.S.C. Section 77u] and Section 21 and 27 of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. Sections 78u and 78aa]. 3. The defendant made use of the means or instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange in connection with the acts, transactions, practices and courses of business alleged herein. PARTIES 4. The Commission brings this action pursuant to Sections 20(b) and (e) of the Securities Act [15 U.S.C. Sections 77t(b) and (e)] and Sections 21(d) and (e) of the Exchange Act [15 U.S.C. Sections 78u(d) and (e)]. 5. Defendant Scientific Software-Intercomp, Inc., a Colorado corporation with its principal place of business in Denver, Colorado, develops, sells and provides software and consulting services for the oil and gas industry. SSI's common stock was registered with the Commission pursuant to Section 12(g) of the Exchange Act [15 U.S.C. Section 781(g)] and during the relevant period was listed on NASDAQ. On June 30, 1994, SSI conducted an offering of common stock pursuant to a registration statement filed with the Commission on Form S-1, and sold 2 million newly issued common shares, receiving net proceeds of $8.1 million. SSI's annual revenues during 1994 were approximately $28 million. FIRST CLAIM Violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder 6. During the relevant period, SSI's Pipeline and Facilities Division ("P&F Division"), headquartered in Houston, Texas, provided software and consulting services for oil and gas companies, principally in the areas of pipeline monitoring and simulation and leak detection. For 1994, the P&F Division contributed approximately 26% of the total revenues of the company as a whole. 7. Beginning in the early 1990's, the P&F Division began a marketing program using value added resellers ("VAR"s) to sell its software products. Under a typical VAR arrangement, SSI entered an agreement with the VAR to purchase and sell SSI's software, and the VAR would market the software. The typical agreement provided that the VAR's purchase would be unconditional. 8. The American Institute of Certified Public Accountants ("AICPA") issued Statement of Position on Software Revenue Recognition 91-1 ("SOP 91-1") on December 12, 1991, to provide guidance on applying generally accepted accounting principles ("GAAP") to software license revenue. SOP 91-1 established that revenue from sales of software generally cannot be recognized until the software is delivered, collectibility is probable and the vendor has no significant obligations remaining under the sales arrangement. It is also established the following rules: (1) for software licenses intended to be evidenced by a written contract signed by the vendor and the customer, revenue should not be recognized until persuasive evidence of the agreement exists; usually a signed contract provides such evidence; (2) revenue from cancelable licenses should not be recognized until the cancellation privileges lapse; and (3) if, after delivery, there is significant uncertainty about customer acceptance of the software, license revenues should not be recognized until the uncertainty becomes insignificant. 9. Beginning in the third quarter of 1993 through the first quarter of 1995, SSI materially overstated its revenues, which came primarily from the P&F Division, contrary to GAAP and SOP 91-1. Side Letters 10. Beginning in at least 1993, SSI began booking revenues on contracts to VARs that included confidential side- letters given by SSI either excusing payment to SSI until the VARs received a resale payment from a third-party, or rendering the contract ineffective and cancelable until a specified future event, normally the sale of SSI's software to the VAR's customers. 11. In the third and fourth quarters of 1993 and the first quarter of 1994, SSI gave several side letters to ABB, a VAR, that excused payment until ABB resold SSI's product to end users with whom contracts were pending. Despite the fact that ABB had not sold the product by year-end, and in at least one instance the contract was signed after year-end, the revenue on these contracts, amounting to more than $575,000, was booked in the second half of 1993. 12. SSI gave a side letter to Valmet Automation, another VAR, that excused payment until Valmet completed a sale of SSI's product to another party. The full amount of this contract, $200,000, was booked in the first quarter 1993 and remained on SSI's books throughout 1993 even though Valmet had not sold any of SSI's products by the end of 1993 and thus was not obligated to pay SSI under the contract. 13. In the first quarter of 1994, SSI booked $160,000 for a purported sale to Controles Texas, another VAR, despite the fact that SSI gave Controles Texas a side letter excusing payment to SSI until Controles Texas was paid by a specified end user. No payment was made to Controles Texas by the end user by the end of the quarter. Thus Controles Texas had no obligation to pay SSI under the contract. 14. In the first quarter of 1994, SSI booked $500,000 for a contract it had with Envirotech Controls, Inc., another VAR to whom SSI had given a side letter. At the time the revenue was booked, Envirotech had not made any sales of SSI's software as required by the side letter for the contract to commence, and thus Envirotech had no obligation to make payment to SSI under the contract. 15. In all, in the third and fourth quarters of 1993 and throughout 1994, SSI booked revenue of over $2 million from at least nine agreements with VARs that had been given side letters either excusing payment or rendering the contract ineffective, contrary to GAAP. Backdating or Misdating of Contracts and Shipping Documents 16. During the period from 1993 through June 1995, SSI backdated a significant percentage of its contracts by signing them "effective" as of the last day of the quarter, even though the actual contracts were signed and became binding after the quarter-end. These contracts were booked as revenue in the prior quarter contrary to GAAP. 17. In addition to the backdating of contracts, throughout the same period, SSI booked revenue from sales of software in quarters where it was shipped after the quarter-end, and often backdated shipping documentation. 18. In still other instances, revenues from sales of software were booked where the shipped software was unusable. Lack of Written Contracts 19. On numerous occasions, SSI recognized revenue before persuasive evidence of an agreement existed, and where no written contract existed, contrary to GAAP and SOP 91-1. In certain instances, the sales and accounting personnel within SSI were instructed not to bill or otherwise seek payment from the customer. 20. Specifically, in the first quarter of 1995, SSI booked $700,000 on a contract with the United States Navy for which no documentation existed except a request for pricing that had been exchanged between the SSI sales man and the agency. Despite the fact that there was no written contract at quarter-end, SSI booked $700,000 in that period. Advance Booking of Project Revenues 21. SSI also booked project revenues contrary to GAAP, which generally requires companies to recognize revenue on project agreements as the work is performed or over the life of the agreement. During the period from 1993 through June 1995, SSI booked revenues on long-term contracts in excess of the contemplated revenues of the contracts. In certain instances, SSI booked the full amount of revenue on a long-term contract where little or no work had been completed and was not anticipated in the near term. 22. By the end of 1994 and into early 1995, the various accounting improprieties within the P&F Division, including side letters, backdated contracts, nonexistent written contracts and advance booking of project revenue, resulted in revenues booked contrary to GAAP and SOP 91-1 amounting to more than $3 million, roughly 33% of the annual revenues of the entire Division. 23. On April 6, 1995, SSI issued a press release announcing that, because certain of its VAR contracts "did not meet all of the necessary requirements to be recognized as revenue" it would post a "substantial loss in the fourth quarter." Following the announcement, in which the exact loss had yet to be quantified, the price of SSI common stock dropped by approximately 25% from a high above $5 per share. Since then, the price of SSI common stock has steadily declined to its current trading range between $.50 and $.75 per share. 24. During the period from 1993 through June 1995, certain senior officers and directors of SSI knew or were reckless in not knowing of the side letters, backdating of contracts, booking of revenues without contracts, and overaccrual of project revenues, and knew or were reckless in not knowing that these practices resulted in SSI materially overstating revenues. FALSE PUBLIC FILINGS AND DISCLOSURES 25. The misstatements caused by SSI's false accounting appeared in SSI's financial statements included in each of its periodic filings with the Commission during the relevant period. On March 31, 1994, SSI filed with the Commission its Annual Report on Form 10-K for its fiscal year ended December 31, 1993. This report contained audited financial statements in which SSI materially overstated revenue, net income and earnings per share for the fiscal year. 26. On May 9, 1994, SSI filed with the Commission a registration statement on Form S-1 for the sale of 2 million shares of common stock. The registration statement contained audited and unaudited financial statements in which SSI materially overstated revenue, net income and earnings per share for the 1993 fiscal year and the first quarter of 1994. 27. On May 23, 1994, August 12, 1994, August 12, 1994, and November 21, 1994, SSI filed with the Commission its Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994, June 30, 1994, and September 30, 1994, respectively. These Quarterly Reports contained unaudited financial statements in which SSI materially misstated revenue, net income and earnings per share. 28. On June 21, 1995, SSI filed with the Commission its Quarterly Report on Form 10-Q for the quarter ended March 31, 1995. The Quarterly Report contained unaudited financial statements in which SSI materially overstated revenue, net income and earnings per share. 29. During the period from 1993 through June 1995, certain senior officers and directors of SSI knew or were reckless in not knowing that the company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q materially overstated revenue, net income and earnings per share. RESIGNATION OF SSI'S AUDITORS 30. After discovering some of the accounting improprieties occurring at SSI in April 1995, SSI's auditors expressed concern over their ability to complete the audit, and discussed with SSI management how the audit might be completed. In response, SSI appointed a special committee to conduct an internal investigation to determine the scope of the financial misstatements. On June 30, 1995, after the committee traced the improprieties in SSI's accounting to senior management outside the P&F Division, the auditors resigned. 31. On July 10, 1995, SSI filed a Current Report on Form 8-K stating that SSI's auditors had resigned and stating that there were no disagreements with the auditors. After reviewing the Form 8-K, the auditors contacted the Commission to state that they disagreed with SSI's representations in the 8-K. On August 14, 1995, SSI responded to the auditors' letter by filing another Form 8-K. In that filing, SSI noted the disagreement with its auditors, but falsely stated that the auditors had not discussed resignation with SSI prior to June 30, 1995. 32. On July 10, 1995, SSI filed with the Commission its Annual Report on Form 10-K for its fiscal year ended December 31, 1994. This report contained unaudited financial statements in which SSI materially misstated revenue, net income and earnings per share for the fiscal year. 33. During the period from 1993 through June 1994, certain senior officers and directors of SSI knew or were reckless in not knowing that the company's Current Reports on Form 8-K was false and that the company's 1994 Annual Report on Form 10-K materially overstated revenue, net income and earnings per share. 34. By reason of the foregoing, SSI violated Section 17(a) of the Securities Act [15 U.S.C. Section 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C. Section 78j(b)] and Rule 10b-5 [17 C.F.R. Section 240.10b-5] thereunder. SECOND CLAIM Violations of Sections 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder 35. Plaintiff realleges and incorporates by reference paragraphs 1 through 34 above. 36. By filing materially false and misleading Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, SSI violated Section 13(a) of the Exchange Act [15 U.S.C. Section 78m(a)] and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder [17 C.F.R. Section 240.12b-20, 13a-1, 13a-11 and 13a- 13]. THIRD CLAIM Violations of Sections 13(b)(2)(A) of the Exchange Act 37. Plaintiff realleges and incorporates by reference paragraphs 1 through 36 above. 38. By failing to make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflected the transactions and dispositions of the assets of SSI, SSI violated Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. Section 78m(b)(2)(A)]. FOURTH CLAIM Violations of Sections 13(b)(2)(B) of the Exchange Act 39. Plaintiff realleges and incorporates by reference paragraphs 1 through 38 above. 40. By failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions were recorded as necessary to permit preparation of financial statements in accordance with GAAP, SSI violated Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. Section 78m(b)(2)(B)]. PRAYER WHEREFORE, the Commission respectfully requests that the Court: I. Permanently enjoin SSI from violating, directly or indirectly, Section 17(a) of the Securities Act, and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. II. Order SSI to restate its financial statements for the years ending December 31, 1993, 1994 and 1995. III. Grant such other relief as the Court may deem just and appropriate Dated: September 11, 1997 Respectfully submitted, /S/ GREGORY S. BRUCH ________________________________ Paul V. Gerlach, D.C. Bar 366777 Gregory S. Bruch, D.C. Bar 413527 Christopher F. Robertson Attorneys for Plaintiff SECURITIES AND EXCHANGE COMMISSION 450 Fifth Street, N.W. Mail Stop 2-5 Washington, D.C. 20549 (202) 942-4548 (Bruch) (202) 942-9639 (fax) EX-99.2 3 EXHIBIT 99.2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA SECURITIES AND EXCHANGE COMMISSION 450 Fifth Street, N.W. Washington, D.C. 20549, Plaintiff, v. CIVIL ACTION NO. SCIENTIFIC SOFTWARE-INTERCOMP, INC., 633 17th Street, Suite 1600 Denver, Colorado 80202 Defendant. CONSENT AND UNDERTAKING OF SCIENTIFIC SOFTWARE-INTERCOMP, INC. 1. Defendant SCIENTIFIC SOFTWARE-INTERCOMP, INC. ("SSI") enters a general appearance, admits the jurisdiction of this Court over it and over the subject matter of this action, waives service upon it of a Summons and of the Complaint of Plaintiff SECURITIES AND EXCHANGE COMMISSION (the "COMMISSION") in this action, and the filing of an Answer. 2. Defendant SSI, without admitting or denying the allegations of the Complaint, except as to jurisdiction, which it admits, and without trial, argument or adjudication of any issue of fact or law, without findings of fact or conclusions of law which it waives, consents to the entry of the FINAL JUDGMENT OF PERMANENT INJUNCTION AS TO SCIENTIFIC SOFTWARE-INTERCOMP, INC. (the "FINAL JUDGMENT") in the form annexed hereto and incorporated by reference herein, which (i) permanently restrains and enjoins SSI from violating Section 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. Section 77q(a)] and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. Sections 78j(b), 78m(a), 78m(b)(2)(A) and 78m(b)(2)(B)], and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 [17 C.F.R. Sections 240.10b-5, 240.12b-20, 240.13a-1, 240.13a-11 and 240.13a-13] thereunder, and (ii) orders SSI to restate its financial statements for the years ending December 31, 1993, 1994 and 1995. 3. Defendant SSI waives the entry of findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure. 4. Defendant SSI waives any right it may have to appeal from the entry of the FINAL JUDGMENT. 5. Defendant SSI enters into this CONSENT AND UNDERTAKING OF SCIENTIFIC SOFTWARE-INTERCOMP, INC. (the "CONSENT") voluntarily and of its own accord and represents that no threats, offers, promises or inducements of any kind have been made by the COMMISSION or any member, officer, employee, agent or representative of the COMMISSION to induce it to enter into this CONSENT. 6. Defendant SSI agrees that this CONSENT shall be incorporated into the FINAL JUDGMENT with the same force and effect as if fully set forth therein. 7. Defendant SSI agrees that it will not oppose the enforcement of the final judgment on the ground, if any exists, that it fails to comply with Rule 65(d) of the Federal Rules of Civil Procedure, and it hereby waives any objection it may have based thereon. 8. Defendant SSI agrees that the FINAL JUDGMENT may be presented by the COMMISSION to the Court for signature and entry without further notice. 9. Defendant SSI waives service of the FINAL JUDGMENT entered herein upon it and agrees that entry of the FINAL JUDGMENT by the Court and filing with the Clerk in the United States District Court for the District of Columbia will constitute notice to it of the terms and conditions of such FINAL JUDGMENT. 10. Defendant SSI agrees and undertakes that, at the COMMISSION's request, on reasonable notice and without service of a subpoena, it will instruct its employees, agents and representatives to cooperate with the COMMISSION and its staff and to truthfully disclose all information with respect to their activities and the activities of others about which the COMMISSION or its staff may inquire with respect to the matters alleged in the Complaint; designate representatives to testify in all investigations, administrative and judicial proceedings involving the Commission as a party at which the COMMISSION or its staff makes requests for its testimony; will endeavor to make its employees, agents and representatives available on a travel cost reimbursable basis as may be required by the COMMISSION or its staff; produce any documents within its possession, custody or control, domestic or foreign, which are requested by the COMMISSION or its staff; be accompanied at any time it so desires by counsel of its choice; and give truthful and accurate information and testimony and not assert any evidentiary or other privilege, other than the attorney-client and work product privileges. 11. Consistent with the provisions of 17 C.F.R. Section 202.5(f), defendant SSI waives any claim of Double Jeopardy based upon the settlement of this proceeding, including the imposition of any remedy herein. 12. Defendant SSI has read, understands, and agrees to comply with the policy of the COMMISSION, set forth in 17 C.F.R. Section 202.5(e), not to permit a defendant to consent to a judgment or order that imposes a sanction while denying the allegations in the Complaint. Defendant SSI agrees not to take any action or make any public statement denying, directly or indirectly, the allegations of the Complaint. Defendant SSI further agrees not to take any action or make any public statement which creates, or tends to create, the impression that the Complaint underlying the FINAL JUDGMENT is without factual basis. Nothing in this paragraph affects Defendant's testimonial obligations or its right to take legal positions in other non-commission litigation or proceedings. 13. Defendant SSI agrees that this Court shall retain jurisdiction over this matter for purposes of enforcing the terms of the FINAL JUDGMENT. SCIENTIFIC SOFTWARE-INTERCOMP, INC. By: /S/ GEORGE STEEL George Steel Chairman Dated: September 5, 1997 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA SECURITIES AND EXCHANGE COMMISSION 450 Fifth Street, N.W. Washington, D.C. 20549, Plaintiff, v. CIVIL ACTION NO. SCIENTIFIC SOFTWARE-INTERCOMP, INC., 633 17th Street, Suite 1600 Denver, Colorado 80202 Defendant. FINAL JUDGMENT OF PERMANENT INJUNCTION AS TO SCIENTIFIC SOFTWARE-INTERCOMP, INC. Plaintiff SECURITIES AND EXCHANGE COMMISSION (the "COMMISSION"), having duly commenced this action by filing its Complaint, and defendant SCIENTIFIC SOFTWARE-INTERCOMP, INC. ("SSI"), having in its CONSENT AND UNDERTAKING OF SCIENTIFIC SOFTWARE-INTERCOMP, INC. (the "CONSENT") entered a general appearance herein, having admitted the jurisdiction of this Court over it and over the subject matter of this action, having waived the filing of an Answer to the Complaint and the entry of findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure, and without admitting or denying any of the allegations of the Complaint, except as to jurisdiction, which it admits, and without trial, argument or adjudication of any issue of fact or law, having consented to the entry of this FINAL JUDGMENT OF PERMANENT INJUNCTION AS TO SCIENTIFIC SOFTWARE-INTERCOMP, INC. (the "FINAL JUDGMENT"), (i) permanently restraining and enjoining SSI from violating Section 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. Section 77q(a)] and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. Sections 78j(b), 78m(a), 78m(b)(2)(A) and 78m(b)(2)(B)], and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 [17 C.F.R. Sections 240.10b-5, 240.12b-20, 240.13a-1, 240.13a-11 and 240.13a-13] thereunder, and (ii) ordering SSI to restate its financial statements for the years ending December 31, 1993, 1994 and 1995; and it further appearing that this Court has jurisdiction over SSI and the subject matter hereof, and the Court being fully advised in the premises: I. IT IS HEREBY ORDERED, ADJUDGED AND DECREED that SSI, its officers, agents, servants, employees, attorneys and those persons in active concert or participation with them who receive actual notice of the FINAL JUDGMENT, by personal service or otherwise, and each of them, is permanently restrained and enjoined from violating Section 17(a) of the Securities Act [15 U.S.C. Section 77q(a)] by, directly or indirectly, using any means or instrumentality of interstate commerce, or of the mails to: (1) employ any device, scheme or artifice to defraud; (2) obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (3) engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser, in connection with the offer or sale of any securities. II. IT IS FURTHER HEREBY ORDERED, ADJUDGED AND DECREED that SSI, its officers, agents, servants, employees, attorneys and those persons in active concert or participation with them who receive actual notice of the FINAL JUDGMENT, by personal service or otherwise, and each of them, is permanently restrained and enjoined from violating Section 10(b) of the Exchange Act [15 U.S.C. Section 77q(a)] by, directly or indirectly, using any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange to: (1) employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. III. IT IS FURTHER HEREBY ORDERED, ADJUDGED AND DECREED that SSI, its officers, agents, servants, employees, attorneys and those persons in active concert or participation with them who receive actual notice of the FINAL JUDGMENT, by personal service or otherwise, and each of them, is permanently restrained and enjoined from filing with the Commission Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K that are materially false or misleading, in violation of Section 13(a) of the Exchange Act [15 U.S.C. Sections 78m(a)], and Rules 12b-20, 13a-1, 13a-11 and 13a-13 [17 C.F.R. Sections 240.12b-20, 240.13a-1, 240.13a-11 and 240.13a-13], promulgated thereunder. IV. IT IS FURTHER HEREBY ORDERED, ADJUDGED AND DECREED that SSI, its officers, agents, servants, employees, attorneys and those persons in active concert or participation with them who receive actual notice of the FINAL JUDGMENT, by personal service or otherwise, and each of them, shall be permanently restrained and enjoined from failing to make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of SSI, in violation of Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. Section 78m(b)(2)(A). V. IT IS FURTHER HEREBY ORDERED, ADJUDGED AND DECREED that SSI, its officers, agents, servants, employees, attorneys and those persons in active concert or participation with them who receive actual notice of the FINAL JUDGMENT, by personal service or otherwise, and each of them, shall be permanently restrained and enjoined from failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that -- (1) transactions are executed in accordance with management's general or specific authorization; (2) transactions are recorded as necessary (I) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets; (3) access to assets is permitted only in accordance with management's general or specific authorization; and (4) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences, in violation of section 13(b)(2)(B) of the Exchange Act [15 U.S.C. Section 78m(b)(2)(B). VI. IT IS FURTHER HEREBY ORDERED, ADJUDGED AND DECREED that defendant SSI shall restate its financial statements for the years ending December 31, 1993, 1994 and 1995. VII. IT IS FURTHER HEREBY ORDERED, ADJUDGED AND DECREED that defendant SSI shall comply with its undertakings to: instruct its employees, agents and representatives to cooperate with the COMMISSION and its staff and truthfully disclose all information with respect to their activities and the activities of others about which the COMMISSION or its staff may inquire with respect to the matters alleged in the Complaint; designate representatives to testify in all investigations, administrative and judicial proceedings at which the COMMISSION or its staff makes requests for its testimony; endeavor to make its employees, agents and representatives available as may be required by the COMMISSION or its staff; produce any documents within its possession, custody or control, domestic or foreign, which are requested by the COMMISSION or its staff; be accompanied at any time it so desires by counsel of its choice; and give truthful and accurate information and testimony and not assert any evidentiary or other privilege, other than the attorney-client and work product privileges. In the event that compliance with this paragraph requires intercontinental or international travel by SSI employees, such employees shall be reimbursed for air travel, hotel accommodations and per them as provided by relevant Government travel regulations applicable to witnesses appearing before agencies or in Court proceedings. VIII. IT IS FURTHER HEREBY ORDERED, ADJUDGED AND DECREED that the annexed CONSENT be, and the same hereby is, incorporated herein by reference with the same force and effect as if fully set forth herein. IX. There being no just cause for delay, the Clerk of the Court is hereby directed, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, to enter this FINAL JUDGMENT forthwith. ____________________________ UNITED STATES DISTRICT JUDGE Dated: _________________________ EX-99.3 4 EXHIBIT 99.3 PRESS RELEASE CONTACT: George Steel Scientific Software-Intercomp, Inc. (303) 292-1111 Email: georges@ssii.com SSI Announces a Conclusion of SEC Investigation Denver, Colorado, 11 September 1997 . . . Scientific Software- Intercomp, Inc. (SSI) announced that the Securities and Exchange Commission (SEC) has completed its investigation into the Company's financial statements for 1993, 1994 and 1995 and that the related SEC enforcement proceedings against the Company have been simultaneously concluded. The investigation and the enforcement proceedings as they pertain to the Company have been resolved by SSI's consenting to the entry of a permanent injunction enjoining the Company from any future violations of the applicable provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. In consenting to the injunction, the Company neither admitted nor denied the allegations of the SEC. The Company is restating its financial statements for the years ending December 31, 1993, 1994 and 1995. No financial or other penalties will be levied against the Company. George Steel, President and Chairman, said "The Company and its current management are pleased that the SEC matter has been concluded without further delay, as far as it relates to SSI. With this matter behind us, we are now able to devote all of our management efforts and resources to strengthening the Company and providing to our customers the value, service and level of technology for which SSI had become known." Scientific Software-Intercomp, Inc. provides technically advanced, cost effective solutions and software to the petroleum industry worldwide. The company has offices in Beijing, Calgary, Denver, Houston, Jakarta and London. EX-99.4 5 EXHIBIT 99.4 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. September 11, 1997 LITIGATION RELEASE NO. 15485 / September 11, 1997 ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 956 / September 11, 1997 SECURITIES AND EXCHANGE COMMISSION v. SCIENTIFIC SOFTWARE- INTERCOMP, INC., Civil Action No. 97-CV-2091 (JGP) (D.D.C.) (filed September 11, 1997) On September 11, 1997, the Securities and Exchange Commission filed and simultaneously settled a financial fraud action in the United States District Court for the District of Columbia against Scientific Software-Intercomp, Inc. (SSI), a Denver, Colorado oil and gas software company whose shares formerly traded on NASDAQ, seeking a permanent injunction and other relief. The Commission's complaint alleges that during 1993, 1994 and 1995, SSI materially overstated its revenue and earnings by backdating or misdating contracts, booking revenue without contracts, overaccruing project revenues and providing confidential side letters modifying payment obligations. As a result of these practices, the complaint alleges that SSI reported false and misleading information in its Annual Reports for fiscal 1993 and 1994, its Quarterly Reports for the first three quarters of fiscal 1994 and the first quarter of fiscal 1995. In addition, SSI conducted an offering of 2 million shares of common stock from which it obtained more than $8 million on a registration statement that materially overstated revenue, net income and earnings per share for the 1993 fiscal year and the first quarter of 1994. The complaint further alleges that SSI filed false Current Reports on Form 8-K in July and August 1995 reporting the resignation of its auditors. By engaging in such conduct, the complaint alleges that SSI violated Section 17(a) of the Securities Act of 1933, and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. Specifically, the complaint alleges that, beginning in at least 1993, SSI recognized revenues on contracts to Value Added Resellers ("VARs") that included confidential side-letters either excusing payment to SSI until the VARs received payment from a third-party, or rendering the contract ineffective and cancelable until a specified future event, normally the sale of SSI's software to the VAR's customer. In addition, the complaint alleges that SSI backdated contracts and shipping documentation, booked contracts without written contracts, and overaccrued project revenues in the company's Pipeline and Facilities Division in Houston, Texas. Without admitting or denying the allegations of the complaint, SSI consented to the entry of a permanent injunction prohibiting future violations of the antifraud, reporting, internal controls and books and records provisions of the Securities Act and Exchange Act, and ordering SSI to restate its financial statements for the years ending December 31, 1993, 1994 and 1995. The Commission's investigation is continuing. -----END PRIVACY-ENHANCED MESSAGE-----