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): November 2,
2007
ETHOS
ENVIRONMENTAL, INC.
(Exact
name of registrant as specified in its charter)
Nevada
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000-30237
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88-0467241
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(State
or other jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
Incorporation)
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Identification
Number)
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6800
Gateway Park Drive
San
Diego, CA 92154
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(Address
of principal executive offices)
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619-575-6800
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(Registrant’s
Telephone Number)
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(Former
name or former address, if changed since last report)
Copy
of
all Communications to:
Luis
Carrillo
SteadyLaw
Group, LLP
501
W. Broadway, Suite 800
San
Diego, CA 92101
main
phone: 619.399.3090
fax:
619.330.1888
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:
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))
FORM
8-K
CURRENT
REPORT
ITEM
4.01. CHANGES
IN REGISTRANT’S CERTIFYING ACCOUNT.
On
November 5, 2007, Ethos Environmental, Inc. (the “Company”) appointed the firm
of JH COHN LLP ("New Auditor") as the Company's independent
auditor.
The
Company has not consulted with the New Auditor regarding the application
of
accounting principles to a specified transaction or the type of audit opinion
that might be rendered on the Company's financial statements during the two
most
recent fiscal years through the present.
The
appointment of the New Auditor as the Company's independent auditor was approved
by the Board of Directors of the Company on November 5, 2007.
ITEM
4.02.
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NONRELIANCE
ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED AUDIT REPORT
OR
COMPLETED INTERIM REVIEW
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On
November 2, 2007, the chief executive officer and chief financial officer
of the
Company, under authority granted to them by, and with the approval of, the
board
of directors, concluded that our previously reported consolidated financial
statements included in our annual report and quarterly reports for the periods
listed below should no longer be relied upon:
·
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Our
annual report for the year ended December 31, 2006 filed with the
Securities & Exchange Commission (“SEC”) on April 17,
2007;
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·
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Our
quarterly report for the period ended March 31, 2007 filed with
the SEC on
May 21, 2007; and
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·
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Our
quarterly report for the period ended June 30, 2007 filed with
the SEC on
August 22, 2007.
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During
the third quarter of 2007, we received a comment letter (the “Comment Letter”)
from the SEC's Division of Corporation Finance (the “Staff”) relating to a
review of our Form SB-2 filed on June 13, 2007, with such Comment Letter
also
including comments on our Form 10-KSB referenced above and our Form 10-QSB
for
the period ended March 31, 2007. Though the Company withdrew its Form SB-2
on
November 6, 2007, in the course of responding to the Staff’s comments on the
aforementioned filings, we reviewed the accounting treatment for various
transactions. As a result of this review, on November 2, 2007, after discussion
with our Board of Directors, we concluded that we should restate our
consolidated financial statements for the periods set forth above. The effects
of the restatements are as follows:
December
31, 2006:
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The
net loss decreased by $66,690 for the year ended December 31, 2006,
due to
the deletion of amortization expense from the financials. The
accounting for the reverse acquisition was changed to reflect a
recapitalization. Since the Company, as the accounting
acquirer, is deemed to be a shell company, there should be no goodwill
or
other intangible assets recognized in conjunction with this
transaction. Accordingly, we removed the goodwill of $2,411,103
and the customer list of $2,000,726, and the corresponding amortization
of
$66,690, which is the only number affecting the previously reported
net
loss. These changes also resulted in a decrease to additional
paid in capital of $4,400,669, and an increase in earnings per
share.
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·
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We
reclassified depreciation expense from general and administrative
expense
to cost of sales per SAB11.B. The majority of the deprecation
was due to the purchase of a building in
2006.
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·
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Other
adjustments, reclassifications and timing adjustments which will
change
the amounts previously reported in the financial statements will
be
identified in an amended Form
10-KSB.
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March
31,
2007
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The
net loss decreased by $1,943,067 resulting in a restated net loss
of
$924,407 for the quarter due to the
following:
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§
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Amortization
of customer list was removed as previously stated above,
($100,036).
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§
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Stock
compensation increased by $2,121,460 due to the issuance of stock
which
had been valued incorrectly; the revalued stock compensation is
based upon
the fair market value at date of issuance resulting in a
reduction to income.
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§
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The
Company entered into a sale and leaseback transaction during this
quarter
for which revisions were made, the net effect of which resulted
in an
increase to income by $78,357 with changes to depreciation, lease
expense
and gain on sale of assets. This transaction has been accounted
for as an
operating lease per SFAS 13 and 28. The contract has no bargain
element and does not meet the other tests for classifying as a
capital
lease.
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·
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Other
adjustments, reclassifications and timing adjustments which will
change
the amounts previously reported in the financial statements will
be
identified in an amended Form
10-QSB.
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June
30,
2007
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The
loss increased by $452,402 resulting in a restated net loss of
$7,243,577
for the quarter due to the
following:
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§
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Amortization
of customer list was removed as previously stated above, in the
amount of
$100,036.
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§
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Stock
compensation increased by $646,000 due to the issuance of stock
which had
been valued incorrectly; the revalued stock compensation is based
upon the
fair market value at date of issuance resulting in an increase
to the
loss.
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§
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The
sale and leaseback transaction which was finalized during this
quarter
reflects changes, the net effect of which resulted in a decrease
to the
loss of $93,562, with changes to depreciation, interest expense,
and gain
on sale of assets.
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·
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Other
adjustments, reclassifications and timing adjustments which will
change
the amounts previously reported in the financial statements will
be
identified in an amended Form
10-QSB.
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Our
chief
executive officer and chief financial officer, under authority granted to
them
by the board of directors, discussed all of the foregoing and reviewed it
with
Peterson Sullivan PLLC, our independent registered public accounting firm
for
the periods mentioned above.
The
Company anticipates filing corrected financial information for the year ended
December 31, 2006 and the subsequent periods ended March 31, 2007 and June
30,
2007 in a timely manner, but in any event prior to November 19, 2007. However,
the time required to complete the restatement cannot be stated with certainty
at
this time and will depend, in part, upon completion of Peterson Sullivan’s audit
of the restatement.
Upon
filing the restatements for the periods indicated above, we believe that
we will
have fully addressed all the comments in the Comment Letter. However, the
Staff
will review the restatements prior to finalizing the comment letter process.
In
addition, all of our current and future filings remain subject to scrutiny
by
the Staff.
Until
we
have reissued the restated results for the applicable periods discussed above,
investors and other users of our filings with the SEC are cautioned not to
rely
on our financial statements in question, to the extent that they are
affected
by the accounting issues described above.
Certain
statements included in Item 4.02 of this Current Report on Form 8-K, which
are
not historical facts, are forward-looking statements such as statements about
the resolution of SEC comments and the filing of amended periodic reports
to
reflect the restatement. Such forward-looking statements are made pursuant
to
the safe harbor provisions of the Private Securities Litigation Reform Act
of
1995 and speak only as of the date of this Current Report. These forward-looking
statements represent our expectations or beliefs and involve certain risks
and
uncertainties, including those described in our public filings with the SEC;
also including, but not limited to, the outcome of the SEC's review process,
higher than expected charges after completing the restatement process, and
delays in filing amended periodic reports for the affected periods due to
our
efforts to complete the restatement and respond to SEC comments, any or all
of
which could cause actual results to differ from those in the forward-looking
statements. The forward-looking statements by their nature involve substantial
risks and uncertainties, certain of which are beyond our control, and actual
results may differ materially depending on a variety of important
factors.
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.
Date: November
8, 2007 |
Ethos
Environmental, Inc. |
By:
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/s/
Enrique de Vilmorin
Enrique
de Vilmorin,
President
& CEO
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