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Aremissoft Corp/DE – ‘8-K’ for 6/30/01

On:  Tuesday, 12/4/01   ·   For:  6/30/01   ·   Accession #:  912057-1-541820   ·   File #:  0-25713

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

12/04/01  Aremissoft Corp/DE                8-K:5,7     6/30/01    2:62K                                    Merrill Corp/FA

Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                      HTML     35K 
 2: EX-99.1     Miscellaneous Exhibit                               HTML     55K 

8-K   —   Current Report
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Washington, D.C. 20549

Form 8-K

Current Report Pursuant to Section 13 or 15 (d) of
The Securities Act of 1934

Date of Report (Date of earliest event reported): June 30, 2001

(Exact name of registrant as specified in its charter)

Delaware 0-25713 68-0413939
(State or other jurisdiction of
incorporation or organization)
Commission File No. (I.R.S. Employer
Identification No.)

Two Meridian Crossings
Minneapolis, MN
(Address of principal executive offices)


(Zip Code)

(612) 851-1900
(Registrant's telephone number, including area code)

Sentry Office Plaza
216 Haddon Avenue, Suite 607
Westmont, New Jersey 08108
(Former name or former address if changed since last report)


SEC Investigation and Proceeding

    On July 31, 2001, AremisSoft Corporation (the "Company") announced that it was cooperating with a Securities and Exchange Commission ("SEC") investigation into, among other things, the Company's contracts with the National Health Insurance Fund of Bulgaria ("NHIF"). After commencement of the SEC investigation, AremisSoft engaged outside accountants to review cash receipts from the Bulgarian contracts. Based upon this review, AremisSoft was able to confirm receipt of only $1.7 million from the NHIF, while it had recognized a total of $7.1 million of revenue on these contracts during 2000. AremisSoft also asked outside counsel to review the contracts with the NHIF to further determine the size and scope of the contracts. Based upon this review, AremisSoft believes that it was awarded the first two phases of the contracts, worth approximately $3.9 million in revenue (based on exchange rates in existence on the date of signing), but that the other phases of the contracts are contingent on a number of events.

    In part because of the SEC investigation, because of irregularities that became apparent during the review of the NHIF contracts, and because of the officer and director changes referenced below, in August 2001 AremisSoft engaged Deloitte & Touche to conduct forensics work relating to its Cyprus-based Emerging Markets Group ("EMG"), an operating group managed by executives who have since left its employ. The Company's Board of Directors also created a Special Litigation Committee, comprised of its three outside directors, to work with the Company's counsel and Deloitte & Touche.

    In September 2001 the Company announced that, based on available information, it had concluded that, in addition to the previously reported issues relating to the Bulgarian contracts, there are financial and accounting irregularities relating to revenue recognition in the EMG. The Company is unable to substantiate the approximately $90 million of consolidated revenue reported by the EMG in 2000 or the expenses associated with the EMG or its Cyprus operations. Additionally, the Company concluded that its acquisitions of, E-ChaRM India Pvt Ltd and Denon International Ltd, companies identified and evaluated by executives in the EMG, were recorded at values not substantiated by information developed in the investigation. The Company's counsel is continuing to investigate who is responsible for these financial and accounting irregularities and whether any funds were misappropriated from the Company in connection with the three acquisitions. It is anticipated that the Company's investigation will near completion by year end. The Company expects that previously released prior period financial statements would require substantial adjustments because of the facts derived from this investigation and that those adjustments could result in losses in prior periods.

    On October 4, 2001, the SEC filed suit in the Southern District of New York against the Company, and against Roys Poyiadjis and Lycourgos Kyprianou, former Co-Chief Executive Officers of the Company, alleging that the defendants overstated the value of the Company's contracts, revenues and recent acquisitions, and that the two former officers engaged in insider trading. On October 19, 2001, the Company, without admitting or denying any of the allegations in the suit, consented to the entry of a preliminary injunction enjoining it from violating certain securities laws pending the outcome of the litigation. On the same date the court entered an order preliminarily enjoining Mr. Poyiadjis and Dr. Kyprianou from further violations of securities laws, freezing their assets derived from the sale of AremisSoft stock, and requiring them to account for and repatriate such assets to the United States. The order does not freeze the assets of the Company or otherwise affect its business operations. The Company continues to cooperate with the SEC in connection with its investigation and lawsuit.

    The Company is also aware that the Office of the United States Attorney for the Southern District of New York has commenced an investigation relating to the irregularities cited in the SEC proceedings, including the insider trading allegations. The Company is cooperating with such investigation and lawsuit.

Civil Suits

    (1)  Delaware Derivative Action.  On June 8 and June 11, 2001, Plaintiffs Thomas Malagisi and Jeffrey Munic respectively brought shareholders' derivative suits in Chancery Court for the State of Delaware, alleging that several of AremisSoft's Directors and former Directors (including Lycourgos K. Kyprianou, Roys Poyiadjis, Dann V. Angeloff, H. Tate Holt, George Papadopoulos, John Malamas, Noel Voice, George H. Ellis, and Theodore S. Fessas—AremisSoft Corporation was a Nominal Defendant) had breached their fiduciary duties to the Corporation. The claims were consolidated on July 12, 2001 as In Re AremisSoft Corporation Derivative Litigation (Consolidated Civil Action No. 18954), and dismissed by the Plaintiffs on October 25, 2001.

    (2)  New Jersey Derivative Action.  David Weir, a common stock holder, brought a shareholders' derivative suit against several of AremisSoft's Directors and former Directors, including its Audit Committee members, (including Kyprianou, Poyiadjis, Michael Tymvios, Dann V. Angeloff, H. Tate Holt, Stan J. Patey, George Papadopoulos, John Mamalas, and Paul I. Bloom), in the United States District Court for New Jersey on August 10, 2001 (Civil Action No. 01-CV-3819). The complaint alleges that all Director Defendants are liable for intentional or reckless beach of fiduciary duty, and gross mismanagement, and further that the Audit Committee breached a distinct fiduciary duty in failing to perform its "crucial watchdog functions." To the Company's knowledge, the Company is the only Defendant that has been served with the complaint in this action. Plaintiff has requested a jury trial, and seeks the removal and replacement of Defendants as Directors of the Company and the appointment of a receiver to manage the Company until new Directors are elected; a declaration that Defendants have breached their fiduciary duties; compensatory and punitive damages with interest; and costs.

    (3)  New Jersey Securities Class Action.  Gunner Torderlund brought a Class Action Complaint against AremisSoft, Lycourgos Kyprianou and Roys Poyiadjis in Federal District Court for the District of New Jersey, on May 24, 2001. Six similar Class Action Complaints followed. The class asserted in each Complaint includes all persons who purchased AremisSoft common stock (or, for Plaintiffs Keystone Trading Partners and Ben Burgoyne, AremisSoft securities) between December 17, 1999 and May 17, 2001. Plaintiffs allege that the Defendants violated § 10(b) of and Rule 10b-5 under the Exchange Act and additionally that the individual Defendants are liable as controlling persons under § 20(a) of that Act. The various plaintiffs stipulated among themselves as to the appointment of lead plaintiffs (now George D. Bjurman and Associates, Ralph DeLuca, Keystone Trading Partners, and Andy Win) and lead counsel, and successfully moved to consolidate the actions on August 27, 2001. The action is now styled In Re AremisSoft Corporation Corp. Securities Litigation (Civil Action No. 01-CV-2486). There have been no further proceedings.


    On October 16, 2001, the Company incorporated SoftBrands, Inc. as a wholly owned subsidiary. The Company intends to consolidate its vertical software and development activities under SoftBrands in part to segregate those operations from the current legal and financial reporting issues that face AremisSoft.

Changes in Executive Officers and Directors

Departing Officers and Directors:

The Company believes that important financial information relating to its Emerging Markets Group may be missing or in the possession of Dr. Kyprianou, Mr. Tymvious or Mr. Matthews. The Company has not been able to obtain from these individuals the financial information needed to complete or verify the EMG financial statements.

New Directors and Officers

As a result of these changes the current directors of the Company consist of:


  Director Since

H. Tate Holt   April 1999
Stan J. Patey   February 2001
Dann V. Angleoff   April 1999
George Ellis   October 2001

The current Executive Officers of the Company consist of:



George Ellis   Chief Executive Officer
David Latzke   Executive Vice President and Chief Financial Officer

Quarterly Reports on Form 10-Q and Financial Information

    The Company has not filed its quarterly reports on Form 10-Q for the quarters ended June 30, 2001 and September 30, 2001 because the financial information relating to the Emerging Markets Group and Cyprus corporate subsidiary necessary to complete the financial statements that form the basis of such reports is unknown and unavailable to the Company. The Company hopes to be in a better position to provide more financial information by the end of the current calendar year and intends to work with the SEC to the extent certain financial information remains unavailable.

Nasdaq Delisting

    Because it failed to timely file its quarterly report on form 10-Q for the quarter ended June 30, 2001, the Company was delisted from the Nasdaq Stock Market effective August 30, 2001.

Recapitalization Plan

    The Company has terminated the proposal relating to a recapitalization plan announced on July 6, 2001, and has withdrawn filings made with the SEC (including a Schedule 13E-3) relating to such recapitalization plan.

Shareholder Rights Plan

    On October 16, 2001, the Board of Directors of the Company authorized and declared a dividend of one preferred stock purchase right (each, a "Right") for each share of common stock, $0.001 par value per share of the Company (the "Common Shares"). The dividend was payable on October 30, 2001 (the "Record Date") to the holders of record of Common Shares as of the close of business on such date. The rights are described in detail in the Company's Rights Agreement dated October 16, 2001 and in the Company's registration on Form 8-A filed with the SEC on October 23, 2001, the summary description of which is incorporated herein by reference.


    (c) Exhibits

Exhibit Number

99.1   Press Releases, dated July 31, August 14, September 28, October 1, 2001 and October 16, 2001.


    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.


Date: November 29, 2001


David G. Latzke,
Chief Financial Officer



Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘8-K’ Filing    Date    Other Filings
Filed on:12/4/01
7/31/013,  4
7/6/01DEFA14A,  PRE 14A,  SC 13E3
For Period End:6/30/014
 List all Filings 
Filing Submission 0000912057-01-541820   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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