SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): June 27, 2003
Upgrade International Corporation.
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(Exact name of registrant as specified in its charter)
Washington 000-27649 58-2441311
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) No.)
P.O. Box 2770
Blaine, Washington 98231
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(Address of principal executive offices, including zip code)
(206) 652-3530
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(Registrant's telephone number)
Item 4. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.
(a) On June 16, 2003, Upgrade International Corp. (the "Company") received a
letter from Grant Thornton LLP ("Grant Thornton"), the independent auditors for
the Company, confirming "that Grant Thornton resigned as the Company's
independent auditor effective immediately. A copy of such letter, dated June 16,
2003, is filed as Exhibit 16.1 to this Current Report on Form 8-K. The audit
committee of the Company's board of directors has not yet engaged successor
independent auditors.
The audit reports of Grant Thornton on the Company's financial statements for
the years ended September 30, 2001 and 2000 did not contain any adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles, except that the opinion issued with the
Company's financial statements for the year ended September 30, 2001 included a
reference to substantial doubt that existed regarding the Company's ability to
continue as a going concern. The Company has not filed financial statements for
its fiscal year ended September 30, 2002, as of the date of this report.
In connection with the audits for the years ended September 30, 2001 and 2000
and for the subsequent interim period through June 16, 2003, the date of Grant
Thornton's resignation, there were no disagreements with Grant Thornton on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of Grant Thornton, would have caused them to make reference thereto
in their reports on the financial statements for such years.
In a letter to the Company dated January 7, 2002 relating to Grant Thornton's
audit of the Company's financial statements for the fiscal year ending September
30, 2001, Grant Thornton informed the Company of the following matters relating
to significant deficiencies in the design or operation of the Company's internal
controls that, in Grant Thornton's judgment, could adversely affect the
Company's ability to record, process, summarize and report financial data
consistent with assertions of the Company's management in the financial
statements. Grant Thornton has discussed the subject matter of each of the
events described below with the Company's board of directors. The Company has
authorized Grant Thornton to respond fully to the inquiries of the Company's
successor accountant concerning the subject matter of each of the events
described below.
Grant Thornton informed the Company that it does not require its subsidiaries to
provide detailed budgets prior to making cash loans to its subsidiaries. For
more effective monitoring of subsidiaries activities as well as more effective
use of the corporate funds, Grant Thornton recommend that the Company request
and approve annual budgets prepared by each of its subsidiaries and, then on a
monthly basis, obtain and review budget to actual comparison by expense
categories.
During its audit, Grant Thornton noted that in some cases, the Company did not
have proper support for transactions with related parties.
In another instance, Grant Thornton noted that the Company did not timely obtain
an extension agreement from a third party in connection with the acquisition of
an interest in one of such
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party's subsidiaries. The Company continued to make payments under the defaulted
agreement, which may result in the Company's inability to recover either the
shares acquired or the funds remitted.
During its audit of the Company's financial statements for the fiscal year
ending September 30, 2001, Grant Thornton noted that the Company incurred
material penalties satisfied by the issuance of the Company's common stock and
common stock warrants, as a result of late deliverance of shares requested by
holders of some of its notes payable. Under the terms of the underlying notes
payable, the Company was to incur penalties for any delays in excess of seven
business days past the day such request was submitted to the Company. The delay
was partially due to the Company not timely paying its transfer agent.
Grant Thornton informed the Company that it does not monitor on a consistent
basis stockholdings by controlling groups, as well as potential dilution of the
Company's stock that could result from exercises of currently outstanding
options and warrants. The Company tracks the issuances of warrants and options
sporadically, generally when requested by the auditors.
Grant Thornton noted that several press releases issued by the Company and its
subsidiaries during the year ended September 30, 2001, were published prior to
their approval by the Company's Board of Directors.
Grant Thornton noted that the Company and some of its subsidiaries, did not file
federal and state corporate income tax returns for the year ended September 30,
2000.
The Company requested that Grant Thornton furnish it with a letter addressed to
the Securities and Exchange Commission stating whether they agree with the
statements made in this Item 4, and if not, stating the respects in which they
do not agree. A copy of such letter, dated June 18, 2003, has been furnished by
Grant Thornton and is filed as Exhibit 16.2 to this Current Report on Form 8-K.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(c) Exhibits.
16.1 Letter dated June 16, 2003 from Grant Thornton LLP to the
Registrant.
16.2 Letter dated June 19, 2003 from Grant Thornton LLP to the
Securities and Exchange Commission.
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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.
Dated: June 27, 2003
Upgrade International Corp.
By: /s/ Daniel S. Bland
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Daniel S. Bland
President and Chief Executive Officer
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