Swisher International Inc – ‘8-K’ for 2/18/98

As of:  Friday, 2/27/98   ·   For:  2/18/98   ·   Accession #:  1026777-98-7   ·   File #:  0-21282

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Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                         6     23K 
 2: EX-16.1     Letter From Auditor                                    9     35K 

8-K   —   Current Report
Document Table of Contents

8-K
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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): February 18, 1998             

 SWISHER INTERNATIONAL, INC.
--------------- 

(Exact name of registrant as specified in its charter)                          

Nevada                    0-21282                 56-1541396  
------------------------------------------------------------------------------  
(State or other jurisdiction     (Commission             (I.R.S. Employer       
of incorporation)              File Number)            Identification No.)

6849 Fairview Road, Charlotte, North Carolina                   28210           
------------------------------------------------------------------------------  
(Address of principal executive office)                        (Zip code)       

Registrant's telephone number including area code: (704) 364-7707               
                                     -------------

-------------------------------------------------------------                   
(Former name or former address, if changed since last report)                   

Exhibit Index on Page 5     

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ITEM 4.     CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.                       

WITHDRAWAL OF REPORT; RESIGNATION OF AUDITOR.  On Friday, February 20,
1998, Swisher International, Inc. (the "Company"), received a letter from its   
former auditor, McGladrey & Pullen, LLP (the "Former Auditor"), resigning       
"effective immediately" as auditor of the Company and withdrawing their report  
dated January 30, 1997, on the Company's financial statements for the year      
ended October 31, 1996.  The Former Auditor's letter stated that the decision   
to resign and withdraw "is the result of (i) our conclusion that we are no      
longer able to rely on management's representations, and (ii) the existence of  
significant unresolved accounting matters relating to the Company's financial   
statements as of and for the years ended October 31, 1997 and 1996." The        
extended date for the filing the Company's form 10-KSB with the SEC was         
February 13, 1998.  Not until February 17, 1998, was the Company asked,         
through a member of its Board of Directors, to meet with the Former Auditor.    
The purpose of the meeting was not stated until the meeting began.  The Board   
Member promised to address each concern forthwith and respond to the Former     
Auditor the following morning.  On February 18 and 19, 1998, the Former         
Auditor, without waiting for additional information that the Company was        
prepared to provide, indicated that it intended to resign and that it was       
withdrawing its opinion for fiscal year 1996 as stated above.                   

The February 20, 1998, letter identifies seven areas of concern to the Former   
Auditor, which are briefly identified below.  The Company believes that         
significant information affecting these issues has not been reviewed by the     
Former Auditor.  The Company has determined that, in addition to retaining new  
auditors and authorizing the Former Auditor to respond fully to inquiries of    
the successor accountant concerning each disagreement and event, the Company    
will:                                                                           

  --     appoint a three-member special committee comprised of individuals
    not involved in the issues of concern to the Former Auditor,
   which special committee will direct an independent internal
investigation as described below;                       

   --     retain the law firm of Swidler & Berlin, Chartered, to conduct the
     independent internal investigation under the direction of the
independent special committee;                          

   --     obtain at the earliest possible time the report of the independent
     special committee along with its recommendations, if any, for
   steps to be taken in response to the internal investigative
report; and                                             

--     publicly announce the actions recommended and adopted by the   
Board.                                                  

Based upon the Company's adoption of the foregoing plan, the Former Auditor     
has agreed, with respect to its opinion on the Company's financial statements   
for fiscal year ended October 31, 1996, to consider the Company's comments and  
any evidence that amplifies or supplements the evidence as currently known and  
will delay taking further action until such time as it receives the Company's   
written responses to the enumerated matters.  The Former Auditor also has       

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requested the results of the independent investigation by March 9, 1998.  The   
Company has taken that request under advisement .                               

The seven areas of concern identified by the Former Auditor (and the Company's  
comments thereon, contained in the parentheticals at the end of individual      
paragraphs) are:                                                                

1.     management's representations concerning the timing of the Company's      
consummation of the sale of a franchise in Ireland (the question  
     presented for the financial statements being whether the sale should be
   recognized under applicable accounting principles in fiscal      year
1996 or fiscal year 1997);                                        

2.     the Company's failure to disclose certain option and warrant agreements  
executed by management during 1996, and the resulting failure to  
account for them in the Company's financial statement (the Former 
    Auditor acknowledged that it knew in April 1997 that the agreements in
question had not been approved by the Swisher Board of Directors  
which subsequently determined the agreements were unenforceable   
because they were unauthorized and caused the Company and other   
involved parties to agree that the agreements were not legally    
enforceable; thus, the agreements were never effected);           

3.     management's representations concerning the sale of a Houston franchise  
 by the Company in third quarter 1996, resulting in recordation of a
gain of $284,017, specifically the failure to disclose the related
party nature of this transaction and the existence of a management
agreement which the Former Auditor believes indicates the Company 
   retained control of the franchise in a way that prevented recognition
of the sale in third quarter 1996;                                

4.     pendency of a question concerning the proper audit treatment of a        
    transaction similar to that described in Item 3, above, regarding sale
by the Company of a franchise in Charlotte in third quarter 1997, 
recorded as a $381,000 gain in the Company's 1997 third quarter   
 Form 10-Q but not therein identified as a related party transaction
(because they did not complete the audit of the Company's 1997    
 financial statements, the Former Auditor formed no conclusion as to
when the sale should be recorded);                                

5.     failure of certain management employees to pay the Company, during       
fiscal year 1997, $138,000 in personal expenses recorded by the   
   Company as receivables in 1996 and represented by management as to be
   repaid in 1997 but not so repaid (these amounts have now been repaid)
   and certain concerns about intervening explanations by the Company of
     the need for and nature of the repayment which would or should be made;

6.     a question as to whether Swisher management misrepresented that no       
other side agreements existed concerning its receivable from      
    Professional Carpet Systems, Inc. (PCS) which would affect recognition
of that receivable at October 31, 1996, given that there is now   
  litigation between the Company and PCS which involves a PCS claim to
  entitlement to $80,000 in consulting fees under a February 10, 1997,

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  agreement with a principal in PCS which, if valid, could mean that
 Swisher potentially overstated its receivable (that litigation is
ongoing, the issue has not been resolved therein, and           
 the Former Auditor acknowledges that the foregoing facts "raise a
 question as to whether Swisher management misrepresented the fact
that no other side agreements existed" but does not resolve that
question); and                                                  

7.      representations by Swisher management regarding a note receivable and   
     repurchased franchise assets being held for resale in connection with
      the Mobile franchise and the Scottsdale franchise, respectively, as to
which the representations made in connection with the 1996 audit
     proved to be in error during 1997, resulting in writing off a $45,000
      note as uncollectible and a reduction in carrying value of a franchise
by $53,000.                                                     

Finally, in addition to these seven areas of concern, discussions were ongoing  
regarding concerns of the Former Auditor regarding ". . . timing of revenue     
recognition and the need for additional accounting reserves to adequately       
address the realization of accounts receivable, notes receivable relating to    
previously recorded franchise sale revenues, and the value of assets held for   
resale."  The audit work in these matters had not been completed at the time    
of the Former Auditor's resignation; however, they believed it likely they      
would have issued a modified opinion if such matters were not ultimately        
resolved to their satisfaction.                                                 

ITEM 5.     OTHER EVENTS.                                                       

The Company reported the following additional events:                 

1.     The Company has undertaken to appoint a three-member special   
committee to oversee an independent internal investigation of these and any     
related issues, which will include company General Counsel James A. Marshall    
and two outside individuals with appropriate backgrounds and experience.        

2.     The Company has retained the law firm of Swidler & Berlin,     
Chartered, to conduct the investigation under the direction of, and reporting   
to, the special committee.                                                      

3.     The special committee will recommend appropriate responses,    
including any corporate governance and/or structural changes, which may be      
advisable in light of the issues raised by the Former Auditor.                  

ITEM 7.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.    

c)  Exhibits                                                                    

16.1     Letter from McGladrey & Pullen, LLP, to the Company dated    
February 20, 1998.                                  

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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 thereunto duly authorized.                                          

                               SWISHER INTERNATIONAL, INC.

Date: February 27, 1998                By:  /s/ Patrick L. Swisher              
                                  ----------------------------
                                 Patrick L. Swisher,
                               President and CEO

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INDEX TO EXHIBITS       

FORM 8-K      

Exhibit                                                          Page           
-------                                                          ----           

16.1    Letter from McGladrey & Pullen, LLP, to the Company                     
dated February 20, 1998.                                        

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘8-K’ Filing		Date		First		Last			Other Filings
		3/9/98		3
Filed on:		2/27/98		5
		2/20/98		2		6
For Period End:		2/18/98		1
		2/17/98		2
		2/13/98		2
		10/31/97		2					10KSB,  10KSB/A,  NT 10-K
		2/10/97		3
		1/30/97		2
		10/31/96		2		3			10-K,  10-K/A,  10-K405/A,  NT 10-K
									List all Filings