FORWARD-LOOKING
STATEMENTS:
Certain
statements in this filing contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect
to
our financial condition, results of operation and business. These statements
relate to analyses and other information, which are based on forecasts
of future
results and estimates of amounts not yet determinable. These statements
also
relate to our future prospects, developments and business strategies. These
forward-looking statements are identified by their use of terms and phrases
such
as ‘‘anticipate,’’ ‘‘believe,’’ ‘‘could,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘intend,’’
‘‘may,’’ ‘‘plan,’’ ‘‘predict,’’ ‘‘project,’’ ‘‘will’’ and similar terms and
phrases, including references to assumptions. These forward-looking statements
involve risks and uncertainties, including current trend information,
projections for deliveries, backlog and other trend estimates that may
cause our
actual future activities and results of operations to be materially different
from those suggested or described in this financial discussion and analysis
by
management. These risks include: our ability to finance and successfully
operate
our retail businesses; our ability to accurately predict demand for our
products; our ability to receive timely deliveries from vendors; our ability
to
raise cash to meet seasonal demands; our dependence on the retail and aerospace
industries; our ability to maintain customer satisfaction and deliver products
of quality; our ability to properly assess our competition; our ability
to
improve our operations to profitability status; our ability to liquidate
non-core assets to meet cash needs; our ability to attract and retain highly
qualified executive management; our ability to achieve and execute internal
business plans; weather conditions in Europe during peak business season
and on
weekends; labor disputes; competition; worldwide political instability
and
economic growth; military conflicts, including terrorist activities; infectious
diseases; and the impact of any economic downturns and inflation.
If
one or more of these and other risks or uncertainties materializes, or
if
underlying assumptions prove incorrect, our actual results may vary materially
from those expected, estimated or projected. Given these uncertainties,
users of
the information included in this report, including investors and prospective
investors are cautioned not to place undue reliance on such forward-looking
statements. We do not intend to update the forward-looking statements included
in this filing, even if new information, future events or other circumstances
have made them incorrect or misleading.
ITEM
4.01 CHANGES IN REGISTRANT’S CERTIFYING
ACCOUNTANT.
On
September 10, 2007, The Fairchild Corporation (the “Registrant” or the
“Company”) dismissed KPMG LLP (“KPMG”) as the Registrant’s principal accountants
effective immediately. The decision to dismiss KPMG was approved by the
Registrant’s Board of Directors and Audit Committee of the Board of
Directors.
The
audit reports of KPMG on the Registrant’s consolidated financial statements as
of and for the years ended September 30, 2006 and 2005 did not contain an
adverse opinion or a disclaimer of opinion and nor were they qualified
or
modified as to uncertainty, audit scope, or accounting principles, except
as
follows:
KPMG’s
report on the Registrant’s consolidated financial statements as of and for the
years ended September 30, 2006 and 2005 contained a separate paragraph
stating that: “As discussed in Note 2 to the consolidated financial
statements, the Company has restated its consolidated financial statements
as of
September 30, 2005 and for each of the years ended September 30, 2005 and
2004.”
During
the two fiscal years ended September 30, 2006, and the subsequent interim
period
through September 10, 2007, there were no disagreements between the Registrant
and KPMG 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 KPMG, would have caused KPMG to make reference
in connection with their opinion to the subject matter of the
disagreement.
During
the two fiscal years ended September 30, 2006, and the subsequent interim
period
through September 10, 2007, there were no “reportable events”, as that term is
defined in Item 304(a)(1)(v) of Regulation S-K, except that KPMG advised
the
Company of the following material weaknesses:
In
its Annual Report on Form 10-K as of and for the fiscal year ended September
30,
2005, the Registrant reported it had material weaknesses in the following
areas
of the Registrant's internal control over financial reporting: (1) the
Company
did not have adequate resources in financial statement matters related
to the
accounting for complex and non-routine transactions in accordance with
U.S.
generally accepted accounting principles; and (2) the Company did not have
effective policies and procedures in place to review and approve the propriety
of certain journal entries prepared at two of our subsidiaries.
In
its Annual Report on Form 10-K as of and for the fiscal year ended September
30,
2006, the Registrant reported it had material weaknesses in the following
areas
of the Registrant's internal control over financial reporting: (1) the
Company
did not have adequate resources in financial statement matters related
to the
accounting for complex and non-routine transactions in accordance with
U.S.
generally accepted accounting principles; and (2) the Company did not possess
the appropriate number of tax personnel necessary to adequately review
related
tax accounts.
The
audit report of KPMG on management’s assessment of the effectiveness of internal
control over financial reporting and the effectiveness of internal control
over
financial reporting as of September 30, 2005 did not contain an adverse
opinion
or a disclaimer of opinion nor was it qualified or modified as to uncertainty,
audit scope, or accounting principles, except as follows:
KPMG's
report on management’s assessment of the effectiveness of internal control over
financial reporting and the effectiveness of internal control over financial
reporting as of September 30, 2005 indicates that the Company did not maintain
effective internal control over financial reporting as of September 30,
2005
because of the effect of material weaknesses in the achievement of the
objectives of the control criteria and contains an explanatory paragraph
that
states: (1) the Company did not have adequate resources in financial
statement matters related to the accounting for complex and non-routine
transactions in accordance with U.S. generally accepted accounting principles;
and (2) the Company did not have effective policies and procedures in place
to
review and approve the propriety of certain journal entries prepared at
two of
our subsidiaries.
The
Registrant provided KPMG with a copy of the disclosures it is making in
this
Current Report on Form 8-K (“Report”) prior to the time the Report was filed
with the Securities and Exchange Commission (“SEC”). The Registrant
requested that KPMG furnish a letter addressed to the SEC stating whether
or not
it agrees with the statements made herein. A copy of KPMG’s letter dated
September 13, 2007 is attached as Exhibit 16.1 hereto.
On
September 10, 2007, the Registrant engaged BDO Seidman, LLP (“BDO”) as its new
principal accountants for the fiscal year ending September 30, 2007. The
decision to engage BDO Seidman, LLP was approved by the Registrant’s Board of
Directors and Audit Committee of the Board of Directors.
In
deciding to engage BDO, the Registrant’s Audit Committee reviewed auditor
independence issues and existing commercial relationships with BDO and
concluded
that BDO has no commercial relationship with the Registrant that would
impair
its independence. During the years ended September 30, 2006 and 2005, and
in the subsequent interim period through September 10, 2007, neither the
Registrant nor anyone acting on its behalf has consulted with BDO on any
of the
matters or events set forth in Item 304(a)(2) of Regulation S-K.