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 ACT OF 1934
Date of report
April 24, 2006
(Date of earliest event reported)
EPIXTAR CORP.
(Exact Name of Registrant as Specified in Its Charter)
Florida
(State or Other Jurisdiction of Incorporation)
001-15489 65-0722193
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(Commission File Number) (IRS Employer Identification No.)
11900 Biscayne Boulevard Suite 700
Miami, Florida 33181
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(Address of Principal Executive Offices) (Zip Code)
(305) 503-8600
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(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 communications 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))
Item 4.01. Changes in Company's Certifying Accountant.
On April 11, 2006, the Company's auditors, McClain & Company, L.C. ("McClain"),
filed a motion (the "Motion") with the United States Bankruptcy Court for the
Southern District of Florida (the "Court"), to withdraw from its engagement with
the Company on the basis that McClain believed it no longer had confidence in
the Company's management and was no longer independent. The Company contested
the Motion.
The Court held an emergency hearing on April 13, 2006. McClain, through its
counsel, confirmed that it had no knowledge, as a result of the work performed
on the audit of the Company's financial statements for the year ended December
31, 2005, of any financial wrongdoing. Moreover, counsel confirmed that there
were no allegations of fraud or misconduct other than McClain's allegations
relating to Bradley Yeater and the Company's Form 12b-25 filing described in the
last sentence of the fourth paragraph of this Item. At the hearing, the Company
maintained that McClain's claims were without merit. At the conclusion of the
hearing, the Court directed the Company and McClain to participate in mediation
and scheduled a continued hearing for April 24, 2006.
Based, in part, on the mediation conducted on April 19, 2006, McClain's position
that it would not issue a report on the Company's financial statements based on
its proclaimed lack of independence, even if the Court did not authorize McClain
to withdraw from the engagement, as well as the Company's desire to avoid any
further loss of time, the Company believed that it had no choice other than to
allow McClain to resign and engage new auditors. Consequently, the Company and
McClain agreed that:
(a) McClain would withdraw the emergency motion;
(b) McClain would resign effective upon an entry of an Order by the Court
and would fully cooperate in the Company's transition to new auditors;
and
(c) the Company and McClain reserved all claims and causes of action
against each other.
An Order reflecting the foregoing terms was entered by the Court on April 24,
2006.
During the period of McClain's engagement (January 9, 2006 - April 24, 2006),
there were no disagreements with McClain on any matter of accounting principles
or practices, financial statement disclosure, or, except with respect to the
issue of McClain's independence, auditing scope or procedure. By letter dated
April 21, 2006 to the Company's Audit Committee, McClain advised the Company
that it believed there were certain weaknesses in internal controls and
questions regarding management's judgment arising from (a) the failure of
management to timely learn of pending felony charges and a subsequent guilty
plea by Bradley Yeater, the Company's Chief Operating Officer, (b) the decision
by the Company to retain this executive officer, (c) management's decision on
the method of publicly disclosing this matter, and (d) the filing of a Form
12-b25 which McClain believed was inaccurate, incomplete and materially
misleading and which was not submitted to McClain for review prior to filing.
The felony charge and subsequent guilty plea related to a charge of sexual
battery by Mr. Yeater. Mr. Yeater was sentenced to a period of probation with
the ability to travel internationally. The Company engages in the practice of
conducting criminal background checks on all its executives. Said procedure was
in effect at the time of Mr. Yeater's employment and failed to disclose any
criminal convictions as it was performed prior to the guilty plea being entered.
Upon McClain's notification to the Company of the charges, which occurred one
month after McClain learned of the matter, the Company undertook a vigorous
investigation of the facts and circumstances related to the matter and
determined that, although it does not in any way condone Mr. Yeater's behavior,
he has been able to execute his responsibilities at a high level and can be
expected to do so in the future. Based upon such investigation and analysis,
including the facts that the conviction did not interfere with Mr. Yeater's
performance of his duties and the crime was non-economic in nature, management
elected to retain Mr. Yeater's services and while arguably not required to do
so, disclose the conviction in the Company's Annual Report on Form 10-K, which
management then anticipated would be filed within several days.
With regard to the erroneous Form 12b-25, when the Company was apprised of its
error by McClain, the Company acknowledged that it erred and offered to
immediately correct the filing.
The Company is in the process of interviewing potential auditors and, therefore,
is not in a position to predict as to when an audit of the financial statements
for the year ended December 31, 2005 will be completed and when the Company will
be able to file its Annual Report on Form 10-K for the same period.
McClain has been provided with a copy of the disclosures contained in this Form
8-K with a request that it furnish to the Company a letter addressed to the
Commission stating whether it agrees with the statements made by the Company in
response to Item 304(a) of the Regulation S-K and, if not, stating the respects
in which it does not agree. Upon receipt of the letter, the Company will file
the letter by amendment.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
16.05 - Letter re: change in certifying accountants (to be filed by amendment).
SIGNATURE
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.
EPIXTAR CORP.
(Registrant)
Date: April 26, 2006 By /s/ IRVING GREENMAN
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Irving Greenman
President and Chief Financial Officer