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
JANUARY 31, 2003
Date of Report (Date of earliest event reported)
ARABIAN AMERICAN DEVELOPMENT COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 0-6247 75-1256622
(State or Other Jurisdiction (Commission File (I.R.S. Employer Identification No.)
of Incorporation) Number)
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10830 N. CENTRAL EXPRESSWAY
SUITE 175 75231
DALLAS, TEXAS (Zip Code)
(Address of principal executive offices)
(214) 692-7872
Registrant's telephone number, including area code
Item 4. Changes in Registrant's Certifying Accountant
(a) Previous independent accountants
(i) On January 31, 2003, Grant Thornton LLP ("Grant Thornton") resigned
as the independent accountants of Arabian American Development Company.
(ii) The reports of Grant Thornton on the financial statements for the
past two fiscal years contained no adverse opinion or disclaimer of opinion and
were not qualified as to audit scope or accounting principle. The reports for
the past two years were modified as to uncertainty concerning substantial doubt
about the Company's ability to continue as a going concern since the Company was
not in compliance with certain covenants in its loan agreements and, if
resolution with the lender was not achieved, and the Company does not generate
positive cash flow adequate for its operations and loan obligations, the Company
will have to raise debt or equity capital. There is no assurance that capital
would be available. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. As disclosed in the Company's
Current Report on Form 8-K filed on December 23, 2002, Grant Thornton has since
withdrawn its reports on the consolidated financial statements of the Company
and its subsidiaries as of December 31, 2000 and 2001 and for the years then
ended.
(iii) The Company's Audit Committee did not participate in or approve
the decision to change independent accountants as the change was due to the
resignation of Grant Thornton.
(iv) In connection with its audits for the two most recent fiscal years
and through January 31, 2003, there have been no disagreements with Grant
Thornton on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Grant Thornton would have caused them to make
reference thereto in their report on the financial statements for such years.
(v) (A) By letter dated January 31, 2003 to the Company's Board of
Directors, Grant Thornton issued a formal report pursuant to Section 10A of the
Securities Exchange Act of 1934 (the "Act"). In the formal report, Grant
Thornton states that, in their view, the omission of certain developments
concerning the Company's mining lease for the Al Masane area in Saudi Arabia may
have resulted in the filing of materially misleading financial statements
contained in the Company's Forms 10-K for the years ended December 31, 2000 and
2001 and Forms 10-Q for the quarters during 2000, 2001 and 2002 and may be
deemed an illegal act or acts within the meaning of Section 10A of the
Securities Exchange Act of 1934. The omitted developments involved the receipt
of letters during 2000, 2001 and 2002 by the Company's President and Chief
Executive Officer from the Saudi Arabian Ministry of Petroleum and Mineral
Resources (the "Ministry") informing the Company that it must proceed with
positive steps for implementation of the Al Masane project and that failure to
do so would result in termination by the Ministry of the Company's Al Masane
mining lease. The Grant Thornton formal report concludes that the illegal acts
that may have occurred had a material effect on the
Company's financial statements and that the Company failed to take timely and
appropriate remedial actions with respect to those illegal acts. Specifically,
Grant Thornton contends that the Company failed to conduct an investigation to
determine all the relevant facts. As a consequence, Grant Thornton resigned as
the Company's independent auditor.
The Company strongly disagrees with Grant Thornton's conclusion that
the Company did not take prompt remedial action. In connection with the
preparation of a report to the Company's shareholders, the President of the
Company voluntarily informed the Company, Grant Thornton, outside United States
securities counsel and the other directors and officers of the Company of the
matter referred to in the Grant Thornton report and made them aware of the facts
and circumstances surrounding the developments respecting the Al Masane project.
Upon such disclosure, the Company initiated an active internal investigation.
This investigation, which continues, included questioning each director and
executive officer regarding his knowledge of the matter and obtaining and
translating all written correspondence during the relevant period from the
Ministry to the Company regarding the Al Masane project. The President also
provided an extensive written compilation and summary of all written
correspondence between the Company and the Ministry regarding the Al Masane
project during the relevant period.
Based upon the preliminary findings of this investigation, the Company
filed a Current Report on Form 8-K dated December 23, 2002 concerning the matter
and the Board of Directors caused the Company to take other action the Board
deemed most appropriate and in the best interests of the Company and its
shareholders under the circumstances, including reprimanding the President and
strengthening the Company's disclosure controls and procedures to ensure that
all material facts and developments relating to the Company's business and
operations are timely and accurately disclosed. The Board may take further steps
if the Company discovers facts concerning recent developments with respect to
the Al Masane project that are inconsistent with the preliminary findings of its
investigation.
The Company did not believe it advisable or practical at this time to
make direct inquiries to the Ministry regarding the status of the Al Masane
mining lease, in light of the Ministry's threats to terminate the lease and the
Company's efforts to obtain assistance through diplomatic channels in resolving
its dispute with the Ministry.
(v) (B) The Company's Audit Committee, as such, has not discussed the
subject matter of the reportable event with Grant Thornton, although the
Company's chief accounting officer had several conversations with Grant Thornton
concerning the matter and reported to the Company's Board regarding those
discussions.
(v) (C) The Company intends to authorize Grant Thornton to respond
fully to the inquiries of the successor accountant, when appointed, concerning
the subject matter of the reportable event.
(vi) The Company has requested that Grant Thornton furnish it with a
letter addressed to the Securities and Exchange Commission stating whether or
not it agrees with the above statements. A copy of such letter will be filed by
amendment to this report within two business days of receipt.
(b) New independent accountants
(i) The Company has not yet engaged successor independent
accountants.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(16) Letter re Change in Certifying Accountant (A copy of such
letter will be filed by amendment to this report within two
business days of receipt.)
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.
ARABIAN AMERICAN DEVELOPMENT COMPANY
By: /s/ Drew Wilson, Jr.
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Drew Wilson, Jr.
Secretary/Treasurer
Date: February 7, 2003