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
June 26, 2003
Date of Report (Date of earliest event reported)
IMP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-15858 94-2722142
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State or other jurisdiction Commission IRS Employer
Of incorporation File Number Identification Number
166 Baypointe in Santa Clara, CA 95054
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (408) 432-9100
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
(a)(1)(i) Effective June 26, 2003, BDO Seidman, LLP resigned as the
independent accountants for IMP, Enc. (the "Company").
(ii) The report of BDO Seidman, LLP, dated July 12, 2002, on the
Company's financial statements for the fiscal year ended March
31, 2002 contained an explanatory paragraph that stated that "the
Company continues to experience severe liquidity problems and
absorb cash in its operating activities and, as of March 31,
2002, the Company has a working capital deficiency, is in default
under the terms of certain financing agreements, is delinquent in
the payment of its federal employment taxes, and has limited
financial resources available to meet its immediate cash
requirements. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1.
The financial statements do not include any adjustments that
might result from the outcome of this uncertainty." Except as set
forth in the immediately preceding sentence, BDO Seidman's report
on the financial statements for the Company's fiscal year ended
March 31, 2002 did not contain any adverse opinion or disclaimer
of opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principles. The Company's financial
statements for the fiscal year ended March 31, 2001 were audited
by KPMG LLP ("KPMG"), and the information required to be reported
in connection with the resignation of KPMG was included in a
Current Report on Form 8-K filed on July 5, 2002. The Company's
financial statements for the fiscal year ended March 26, 2000
were audited by PriceWaterhouseCoopers LLP ("PWC"), and the
information required to be reported in connection with the
resignation of PWC was included in a Current Report on Form 8-K
filed on August 15, 2000. The audit of the Company's financial
statements for the fiscal year ended March 31, 2003 has not yet
been completed, and the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 2003 has not been filed yet. A
Notification of Late Filing on Form 12b-25 was filed on June 30,
2003.
(iii) BDO Seidman LLP resigned as the Company's independent
accountants, and therefore, the decision to change accountants
was not recommended or approved by the Company's Board of
Directors or Audit Committee.
(iv) During the Company's most recent fiscal year and the subsequent
period through June 26, 2003, there were no disagreements with
BDO Seidman, LLP on any matter of accounting procedures, or
practices, financial statement disclosure, or auditing scope or
procedures, which disagreement, if not resolved to the
satisfaction of the former accountant, would have caused it to
make reference to the subject matter of the disagreement in
connection with its report. As noted above, the information
required to be reported in connection with the dismissal of KPMG
on June 12, 2002 was included in a Current Report on Form 8-K
filed on July 5, 2002. The resignation of PWC on August 8, 2000
was included in a Current Report on Form 8-K filed on August 15,
2000. The audit of the Company's financial statements for the
fiscal year ended March 31, 2003 has not yet been completed, and
the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2003 has not been filed yet. A Notification of
Late Filing on Form 12b-25 was filed on June 30, 2003.
(v) BDO Seidman, LLP advised the Company and its Audit Committee by
letter dated July 12, 2002, of certain matters that it considered
to be material weaknesses in the Company's internal control and
its operation, including inadequate cut-off procedures over sales
and shipping; inadequate control procedures over the receipt and
application of payments received from customers; lack of timely
analysis and reconciliation of sub-ledger accounts to the general
ledger; and lack of readily available documentation to support
all Company transactions. The Company has authorized BDO Seidman,
LLP to discuss the subject matter of each material weakness
identified (as discussed further below) with any successor
auditor subsequently engaged as the principal accountant to audit
the Company's financial statements.
Sales and Shipping Cut-Off Procedures.
BDO Seidman, LLP noted that as of March 31, 2002, the Company had
recorded a significant amount of sales for which title to the
product had not been transferred to the customer as of March 31,
2002. Specifically, in certain instances, product for which
revenue had beeen recognized in March 2002 had not been delivered
to the appropriate common carrier until after the fiscal year
end. BDO Seidman, LLP recommended that the Company strengthen its
control over sales and shipping cut-off by establishing
procedures that, among other criteria, require that product be
shipped and title to product be transferred to the customer in
advance of recognizing revenue. The Company has subsequently
revised its method of recognizing revenue. Since March 31, 2002,
no sales have been recognized as revenue until the products have
been picked up by the common carrier for delivery to the
customer.
Application of Cash Receipts to Accounts Receivable.
After testing the aged accounts receivable listing as of March
31, 2002, BDO Seidman, LLP noted that the Company frequently did
not apply cash receipts against specific individual invoices, but
rather, cash receipts were frequently applied against a
customer's oldest outstanding invoices. BDO Seidman, LLP
recommended that the Company strengthen its procedures over the
application of cash receipts to accounts receivable by
communicating more closely with its customers to determine the
invoices that are being paid by the customer in order to ensure
that cash is applied against the appropriate outstanding
invoices. The Company has attempted to minimize this problem in
subsequent periods by requesting that its customers indicate the
specific invoices to which their payments should be applied;
however, to the extent customer cooperation is necessary, the
Company has not been 100% effective. Since April 24, 2003, the
Company's operations have been temporarily shut down and as a
result, receivables have decreased to relatively low levels. The
Company's reason for shutting down operations is to move
manufacturing equipment to facilities in China. Before operations
resume in full force, the Company will implement procedures to
account for the receivables based on invoice numbers. The overall
impact of the accounting issues with respect to the receivables
on reported numbers in previous quarters is minimal and not
material.
Reconciliation of Sub-ledger Accounts
BDO Seidman, LLP also noted that the Company does not
consistently reconcile certain of its sub-ledger accounts to the
general ledger on a regular basis. Further, certain of the
Company's key general ledger accounts are not adequately
controlled and monitored on a consistent basis. BDO Seidman, LLP
recommended that the Company reconcile sub-ledger accounts to the
general ledger on a monthly basis, and that reconciling items
should be thoroughly investigated and adjusted. BDO Seidman, LLP
further recommended that a responsible employee with the
appropriate level of authority should approve adjustments to the
general ledger and sub-ledger accounts. Due to a lack of
accounting resources, the Company was formerly unable to
reconcile sub-ledgers on a monthly basis. As indicated above, the
Company has temporarily suspended its operations. When operations
resume, the Company will reconcile its sub-ledgers on a regular
basis. This control weakness had no effect on the Company's
published financials.
Record Retention and Documentation of Transactions
BDO Seidman, LLP noted that the Company does not consistently
maintain documentation in support of transactions. The Company
had difficulties or was unable to locate documents to support
transactions involving vendors, customers, and affiliates, in
particular, transactions that occurred in prior periods, which
had continuing accounting consequences. BDO Seidman, LLP
recommended that the Company strengthen its controls to ensure
that all
transactions are fully documented and supported in the accounting
records. All agreements with vendors, customers and affiliates
should be evidenced in writing and should be maintained in the
appropriate files and available for inspection. Further, the
Company should establish, communicate and enforce a well-defined
records retention policy. The reliability and consistency of the
Company's record keeping systems has suffered due to management
changes in 2001, an accounting system failure in that same year
and reductions in personnel. The Company has subsequently
implemented a new accounting system and is paying special
attention to documentation. This control weakness had no impact
on the Company's published financials.
The Company's management team is in the process of strengthening
each of these weaknesses in its internal controls. Due to the
downturn in the general economy and the technology industry in
particular over the prior two years, the Company has been forced
to reduce personnel and other resources throughout its
organization, including accounting. Therefore, the Company has
not been able to invest sufficient resources to permit it to
completely address the weaknesses noted above. Internal control
weaknesses identified by KPMG are described in the Current report
on Form 8-K filed on July 5, 2002. Internal control weaknesses
identified by PWC are described in the Current Report on Form 8-K
filed on August 15, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired: N/A
(b) Pro forma financial information: N/A
(c) Exhibits. The following Exhibits are attached hereto and incorporated herein
by reference:
Exhibit Number Description of Exhibit
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16.1 Letter of BDO Seidman, LLP
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.
Date: October 10, 2003
IMP INC.
By /s/ Tarsaim Batra
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Tarsaim Batra, CFO