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) AUGUST 7, 1996
COATES INTERNATIONAL LTD.
[Exact name of registrant as specified in its charter]
DELAWARE
[State or other jurisdiction of incorporation]
33-94884 22-2925432
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(Commission File Number) (IRS Employer Identifica-
tion Number)
Highway 34 & Ridgewood Road
WALL TOWNSHIP, NEW JERSEY 07719
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(Address of principal executive (Zip Code)
office)
Registrant's telephone number, including area code 908-449-7717
COATES INTERNATIONAL LTD.
ITEM 4. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a)(1)(i) On August 7, 1996, Coates International Ltd. (the
"Registrant") dismissed the firm of Warner, Berman & Lott, Certified Public
Accountants, P.A. ("WB&L") which firm was its principal independent accounting
firm previously engaged to audit the Registrant's financial statements.
(ii) WB&L's report with respect to the Registrant's financial
statements for the years ended December 31, 1994 and 1995 did not contain an
adverse opinion or a disclaimer of opinion. However, such report did include a
modification of the auditors' standard report, stating that "...the company has
suffered recurring losses from operations since inception and has a net capital
deficiency that raise substantial doubt about its ability to continue as a going
concern....The financial statements do not include any adjustments that might
result from the outcome of this uncertainty."
(iii) The decision to dismiss WB&L and to retain a new principal
independent accounting firm was approved by the Registrant's board of directors.
(iv) During the two most recent fiscal years ended December 31,
1995, there were no disagreements between the Registrant and WB&L on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of WB&L, would have caused it to make a reference to the subject
matter of the disagreement in connection with its report.
However during the interim period subsequent to December 31, 1995, a
disagreement arose between WB&L and the Registrant concerning the fiscal 1995
financial statements. The issue is whether a bank account known as the "CIL
Transfer Account" maintained at NatWest Bank in Wall, New Jersey was an asset of
the Registrant's at December 31, 1995. The balance in said account at December
29, 1995 was $508,428.44. The Registrant's balance sheet at December 31, 1995
with respect to which WB&L issued its report, includes this account as an asset
of the Registrant. In July 1996, the Registrant's management and its attorneys,
with the approval of its board of directors, discussed this issue with WB&L and
advised WB&L that as such account was not an asset of the Registrant's at
December 31, 1995, that the Registrant's financial statements for the year ended
December 31, 1995 were in error and should be revised and reissued with a new
auditor's report. WB&L refused to accede to management's request to issue a new
report with respect to financial statements revised in such manner. WB&L has
stated in part;
1
"...When we issued our opinion we were attesting to the presentation of
the company's financial position as represented to us by management and
based on the evidence collected during the course of our audit. If
management now determines that this account does not belong to the
company we cannot present our opinion that the financial statements
present fairly IN ALL MATERIAL respects, the financial position of the
company. Accordingly, we would have no choice but to withdraw our
opinion concerning these financial statements."
As a result of this disagreement, the Registrant's board of directors decided to
dismiss WB&L as the Registrant's principal independent accountants.
(v) With the exception of the disagreement referred to above,
the Registrant is unaware of the occurrence of any of the kinds of events
described in subparagraphs (A) through (D) of Item 304(a)(1)(v) of Regulation
S-K as promulgated by the Securities and Exchange Commission (the "Commission").
(2) On August 7, 1996, the Registrant engaged the certified public
accounting firm of Moore Stephens, P.C. ("MSPC") to serve as its principal
independent accounting firm and to reaudit its financial statements for the year
ended December 31, 1995 and, if necessary, 1994. Prior to the engagement, the
Registrant's management and its attorneys consulted with a principal of MSPC and
apprised him of the facts underlying the above described disagreement with WB&L.
The MSPC principal stated that he could not advise as to the type of report his
firm would issue until it had completed an independent review of the facts and
had completed its audit of the year (or years) in question. WB&L's views with
respect to this issue are stated above.
MSPC has been furnished with a copy of this report by the Registrant
and has been requested to review the disclosure contained herein and to furnish
the Registrant with a letter addressed to the Commission containing any new
information, clarification of the Registrant's expression of its views or the
respects in which it does not agree with the statements made by the Registrant
in response to Item 304(a) of Regulation S-K. MSPC has advised the Registrant
that after review of this report, it does not believe that such a letter is
needed.
(3) WB&L has been furnished with a copy of this report by the
Registrant and has been requested to furnish the Registrant with a letter
addressed to the Commission stating whether it agrees with the statements made
by the Registrant in response to Item 304(a) of Regulation S-K and, if not,
stating the respects in which it does not agree. A copy of WB&L's letter dated
August 8, 1996 is filed as an exhibit to this report.
2
CIL's management has reviewed the WB&L letter and it is CIL
management's position that the letter misrepresents what WB&L was told by CIL
management about the "Coates Transfer Account." It is CIL management's position
that it advised WB&L that the account was a transfer account for people buying
and selling stock from each other, that the account was not an asset of CIL and
that the sole funds in the account were from sales by stockholders of CIL stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits - Letter dated August 8, 1996 from Warner, Berman &
Lott, Certified Public Accountants addressed to the Securities and Exchange
Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COATES INTERNATIONAL LTD.
---------------------------
(Registrant)
Dated: AUGUST 13, 1996
By /S/GEORGE J. COATES
----------------------------------
George J. Coates, President
3
WARNER, BERMAN & LOTT
CERTIFIED PUBLIC ACCOUNTANTS, P.A.
OLD MILL PLAZA
SUITE D
2100 HWY, 34
SEA GIRT, NEW JERSEY 08750
IRA D. WARNER, C.P.A.
BERNARD I. BERMAN, C.P.A.
MARK V. LOTT, C.P.A.
JAMES R. RYAN, C.P.A.
DOUGLAS M. DURITZA, C.P.A.
SEA GIRT, 908-449-0400
LAKEWOOD 908-367-2500
FAX 908-449-5028
YVONNE LOWE, C.P.A.
DORCELLE K. HERR, C.P.A., M.S.T.
SHAUN MC DONNELL, C.P.A.
ANITA M. MC CUE
August 8, 1996
Securities and Exchange Commission
Washington, D.C. 20549
RE: Coates International, Ltd. (CIL)
------------------------------------
FEI #22-2925432
Gentlemen:
We have been requested by Coates International, Ltd. (CIL) to respond to CIL's
dismissal of our firm as the principal independent auditor as a result of a
disagreement concerning an accounting issue in CIL's, fiscal 1995 financial
statements. On March 11, 1996 we issued our audited report for the 1995 fiscal
year. We did not disclaiam or give an adverse opinion concerning the 1995
financial statements. However, due to recurring losses and a net capital
deficiency we modified our report to include a going concern paragraph.
As part of our pre-audit planning phase, which was conducted late last fall, we
became aware of a certain bank account called Coates International, Ltd., Inc.
Transfer Account maintained at NatWest Bank in Wall, New Jersey. The account
maintained a sizable balance of well over $500,000. When we questioned
management (specifically George J. Coates) as to the reasons for the account we
were informed that this account was being used as a clearing account for private
sales of the company's stock. I was informed by Mr. Coates that the court
appointed trustee advised him to establish the account in this manner. I
expressed our belief that this account was an asset of the Company and asked Mr.
Coates to provide an analysis of the transactions in this account so as to
provide evidence for an audit trail. We also learned that the account bore the
Federal identification number of the company. Further, the bank's response to
our standard bank confirmation also confirmed the existence of the account as of
December 31, 1995 with a balance of $508,428.44. This information was also
discussed with other members of management, corporate counsel and the court
appointed trustees.
Page 2
Securities and Exchange Commission
RE: Coates International, Ltd. (CIL)
FEI #22-2925432
Management offered no evidence to the contrary to indicate that said account was
NOT a corporate asset. There were no corporate minutes indicating ANY kind of
special arrangements or the reason why the account was created.
Since management is responsible for the fair presentation of the company's
financial statements we can only render our opinion as to whether or not the
financial statements are free of material misstatement and presented in
accordance with generally accepted accounting principles.
The aforementioned financial statements and our accountants' report were
discussed with management prior to the final issuance of our report. Copies of
financial statement drafts were made available to counsel for CIL as well as the
court appointed trustee.
Not a single member of management, counsel or the court appointed trustee
disagreed with the company's presentation of its financial condition as of
December 31, 1995, at the time we issued our report.
Only recently, after the judge for the United States District Court Southern
District of New York issued her opinion on July 10, 1996 and for other reasons
not clear to this firm, has management expressed an interest in correcting an
"error" in the 1995 fiscal report. Specifically, on July 23, 1996 our firm
received a letter from the court appointed trustee questioning the inclusion of
the account balance in the 1995 fiscal financial statements, copy attached. Our
response to the trustee's concerns are also enclosed. We also received numerous
calls from Mr. Coates and corporate counsel requesting us to correct this
"error." The aforementioned correspondence sets forth our position on this
matter quite clearly.
Respectfully submitted,
/s/ Mark V. Lott
MARK V. LOTT
For the Firm
MVL/m
Encls.