UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange At of 1934
Date of report (Date of earliest event reported):
August 11, 2005
NORTH ATLANTIC HOLDING COMPANY, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
333-115587 20-0709285
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(Commission File Number) (IRS Employer Identification No.)
257 Park Avenue South
New York, New York 10010-7304
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(Address of Principal Executive Offices) (Zip Code)
(212) 253-8185
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange
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|_| Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
ITEM 4.02 NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED
AUDIT REPORT OR COMPLETED INTERIM REVIEW.
(a)
On August 11, 2005, North Atlantic Holding Company, Inc. (the
"Company") concluded that its previously issued consolidated financial
statements as of and for the year ended December 31, 2004 and as of and for the
three months ended March 31, 2005 should be restated to correct the computation
of valuation allowance for deferred tax assets for these periods.
During the fourth quarter of 2004, the Company and its subsidiaries
provided a full valuation allowance against its net deferred tax assets.
Following a review of the Company's deferred tax assets and deferred tax
liabilities, the Company determined that in calculating the valuation allowance,
deferred tax liabilities relating to inventories and tax-deductible goodwill had
been inappropriately netted against certain deferred tax assets relating to
purchased intangibles. It cannot be determined that the temporary differences
related to inventories and goodwill will reverse during the time period in which
the Company's temporary differences related to its deferred tax assets are
expected to reverse or expire. Therefore, these deferred tax liabilities should
not have been utilized to reduce the amount of the valuation allowance against
deferred tax assets. This resulted in an understatement of the valuation
allowance in the amount of these deferred tax liabilities of $9.8 million and
$10.0 million as of December 31, 2004 and March 31, 2005, respectively, and an
understatement of income tax expense of $9.8 million and $0.2 million for the
year ended December 31, 2004 and for the three months ended March 31, 2005,
respectively. The correction of this understatement has the effect of increasing
deferred tax liabilities, increasing accumulated deficit and decreasing net
income, with no effect on net cash flows, as of and for the year ended December
31, 2004 and as of and for the three months ended March 31, 2005. The Company
evaluated the materiality of this correction on its consolidated financial
statements using the guidelines of Staff Accounting Bulletin No. 99,
"Materiality," and concluded that the effects of the corrections were material
to its consolidated financial statements relating to these periods. As a result,
the Company concluded that it will restate such previously issued consolidated
financial statements to recognize the impact of the correction.
Accordingly, on August 11, 2005, the Audit Committee concluded that
the Company's consolidated financial statements as of and for the year ended
December 31, 2004 and as of and for the three months ended March 31, 2005 should
no longer be relied upon as a result of the Company's determination to restate
its consolidated financial results, as discussed above. These financial
statements will be restated and filed with the Securities and Exchange
Commission via a 10-K/A as of and for the year ended December 31, 2004 and a
10-Q/A as of and for the three months ended March 31, 2005.
On August 11, 2005, the Audit Committee of the Board of Directors
discussed the matters relating to this restatement with the Company's
independent registered public accounting firm, PricewaterhouseCoopers LLP.
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The Company has determined that, as of December 31, 2004, it had a
deficiency in internal controls over the valuation of deferred income tax
assets. Specifically, the Company did not have adequate controls over the
accounting for and the review and approval of income tax related financial
statement accounts requiring a significant degree of technical knowledge related
to deferred tax assets and liabilities. As a result of the ineffective review,
an error in the deferred tax valuation allowance was not detected prior to the
issuance of the 2004 consolidated financial statements. This control deficiency
resulted in the restatement of the Company's 2004 annual and first quarter 2005
consolidated financial statements. In addition, unless effectively remediated,
this control deficiency could result in a misstatement to deferred tax valuation
allowance that could result in a material misstatement to the annual or interim
financial statements. Accordingly, management determined that this control
deficiency constitutes a material weakness. A material weakness is a control
deficiency, or combination of control deficiencies, that results in a more than
remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected.
The Company is in the process of determining the remedial steps
necessary to eliminate the material weakness relating to financial disclosure
controls that resulted in the restatement and intends to engage the services of
consultants with appropriate levels of income tax accounting knowledge to assist
in the review of complex tax matters.
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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.
NORTH ATLANTIC HOLDING COMPANY, INC.
By: /s/ Douglas P. Rosefsky
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Name: Douglas P. Rosefsky
Title: President
Date: August 15, 2005
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