UNITED STATES
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
Date of Report (Date of earliest event reported)
October 7, 2005 (September 15, 2005)
THINKPATH INC.
(Exact name of registrant as specified in its charter)
ONTARIO 001-14813 52-209027
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
201 WESTCREEK BOULEVARD, BRAMPTON, ONTARIO, CANADA L6T 5S6
(Address of principal executive offices, including zip code)
(905) 460-3040
(Registrant's telephone number, including area code)
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 communication pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] 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))
FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
This Current Report contains forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements that are
other than statements of historical facts. These statements are subject to
uncertainties and risks including, but not limited to, demand and acceptance of
services, changes in governmental policies and regulations, economic conditions,
the impact of competition and pricing, and other risks defined in this document
and in statements filed from time to time with the Securities and Exchange
Commission by Thinkpath Inc. (the "COMPANY"). All readers are encouraged to
carefully review this Current Report. All such forward-looking statements,
whether written or oral, and whether made by or on behalf of the Company, are
expressly qualified by the cautionary statements and any other cautionary
statements which may accompany the forward-looking statements. In addition, the
Company disclaims any obligation to update any forward-looking statements to
reflect events or circumstances after the date hereof.
ITEM 4.02 NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED
AUDIT REPORT OR COMPLETED INTERIM REVIEW.
(a) RESTATEMENT AND NON-RELIANCE
On September 15, 2005, in a response letter to the staff of the Securities and
Exchange Commission, the management of the Company made an internal
determination and stated that it planned to restate the Company's financial
statements and other financial information for the fiscal year ended December
31, 2004 and the quarters ended March 31, 2005 and June 30, 2005. The
restatement primarily relates to the Company's accounting for its long-term
investments and the debt discount and additional paid-in capital attributable to
the beneficial conversion feature of the 12% Senior Secured Convertible
Debentures. Because of the restatement, the Company's previously issued
financial statements which are included in its Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2004 and Quarterly Reports on Form 10-QSB for
the quarters ended March 31, 2005 and June 30, 2005 should no longer be relied
upon.
BACKGROUND
During its normal review of the Company's filings, the SEC staff initiated
discussions with the Company about the Company's accounting for its long-term
investments and the amortization and valuation of the beneficial conversion
feature of the 12% Senior Secured Convertible Debentures.
At December 31, 2004, the Company wrote off its investment in non-related
companies of $45,669 but failed to record previous adjustments to market value,
through comprehensive income, in the amount of $385,649, as losses. The Company
will amend its 2004 Form 10-KSB to include the prior market adjustments in its
statement of operations for the year ended December 31, 2004. The effect of this
restatement will be to increase the Company's net loss by $385,649. This
restatement will not alter the Company's EPS or shareholder's equity.
During the period December 2002 until November 2004, the Company issued 12%
Senior Secured Convertible Debentures in the aggregate principal amount of
$5,025,000, which debentures were subsequently converted or repaid by June 27,
2005. The value assigned to the beneficial conversion feature on the debentures
was credited to paid in capital and charged to earnings as interest expense on
the date of issuance. The Company has determined, in accordance with Issue 6 of
Emerging Task Force No. 00-27 "Application of Issue No. 98-5 to Certain
Convertible Instruments" ("EITF 00-27"), that the value of the beneficial
conversion feature should be accreted to interest expense from the date of
issuance to the stated redemption date.
The Company recorded the value of the beneficial conversion feature in excess of
the amount of proceeds allocated to the convertible instruments. The Company has
determined, in accordance with Paragraph 6 of Emerging Task Force No. 98-5
"Accounting for Convertible Securities with Beneficial conversion Features or
Contingently Adjustable Conversion Ratios" ("EITF 98-5"), that the amount
allocated to the value of the beneficial conversion feature should be limited to
the amount of proceeds allocated to the convertible instrument.
The Company will amend its 2004 Form 10-KSB and Form 10-QSB's for the quarter
ended March 31, 2005 and June 30, 2005 to amortize the beneficial conversion
feature from the date of issuance to the stated redemption date and to limit the
value of the beneficial conversion feature to the amount of proceeds allocated
to the convertible instrument.
The effect of this restatement will be to decrease the Company's net loss by
$4,656,125 in 2003 and by $2,412,548 in 2004. The effect on the balance sheet
will be to decrease the 12% Convertible Debenture Balance by $79,484 in 2003 and
$61,695 in 2004. This restatement concerns a non-cash item. There will be no
change to the Company's reported EPS as a result of the above adjustments.
The decision to restate the financial statements was made by the Board, upon the
recommendation of the Company's management, the Audit Committee and with the
concurrence of the Company's independent auditors, Schwartz Levitsky Feldman,
LLP. In addition, the Board, upon the recommendation of management and the Audit
Committee, made an internal determination that the previously issued financial
statements and other financial information contained in the Company's Form
10-KSB for the fiscal year ended December 31, 2004 and Form 10-QSB's for the
quarters ended March 31, 2005 and June 30, 2005 should not be relied upon and
should be amended accordingly.
On September 28, 2005, the Board discussed the matters disclosed in this Item
4.02(a) with management, the Audit Committee and with the Company's independent
auditors. The Company's auditors informed the Board that they concur with the
conclusions described above.
The Company intends to file Forms 10-QSB/A and a Form 10-KSB/A amending the
Forms 10-QSB's and 10-KSB, respectively, to include the respective restated
financial statements as soon as possible after the completion of its discussions
with the SEC staff.
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.
(d) APPOINTMENT OF DIRECTOR
On September 28, 2005, Mr. David Barnes was appointed as a director of the
Company. Mr. Barnes was also appointed as chairman and financial expert of the
audit committee. Prior to this appointment, there was no relationship between
Mr. Barnes and the Company or any of its officers, directors or shareholders
owning five percent (5%) or more of the Company's shares of common stock. Mr.
Barnes will serve as director until the Company's next annual meeting of
stockholders or until his successors shall have been duly elected. Mr. Barnes is
assisting management of the Company in connection with the amendment and
restatements of the financial statements referenced above.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: October 7, 2005
THINKPATH INC.
By: /s/ Kelly Hankinson
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Name: Kelly Hankinson
Title: Chief Financial Officer