Home Theater Products International Inc., reeling from claims that it overstated its annual profit and sales by $9 million, has been hit with the resignation of a second outside auditor and has asked that its stock be delisted from the Nasdaq Stock Market.
Trading in the shares of the financially beleaguered company has been halted since Sept. 25. The delisting action removes HTP from Nasdaq altogether, leaving the company in so-called pink sheets, where it is more expensive for investors to trade shares.
The company sought the delisting because it knew that Nasdaq would soon remove the company itself, Shannon Squyres, a spokesman for the company, said Thursday. HTP simply wanted to "expedite" the process and avoid the cost of a hearing, he said.
The company's listing became untenable after its auditor, Jaak (Jack) Olesk of Beverly Hills, resigned in early September and later withdrew his audits for the previous three years because he no longer trusted the numbers. That left the company without audited figures since 1991.
A second accountant, Oscar Sendowski of La Habra, said Thursday that he quit last week because the absence of audits for the prior three years made the task of auditing fiscal 1995 results "impossible" for his small operation. "I couldn't afford to take the time that was needed," Sendowski said.
HTP has hired a forensic accounting firm to reconstruct three years of financial numbers to come up with audited figures and establish a base for the audit of fiscal 1995, which ended June 30.
Olesk told HTP in his letter of resignation that he had concerns about "significant weaknesses" in the company's internal controls and about "management integrity." When executives challenged his reasons in a filing with securities regulators, Olesk spelled out the problems.
He said he uncovered $9.3 million in non-existent sales that had helped to give the company what appeared to be a $4-million profit for its 1995 fiscal year. But the company actually lost $5 million for the year, he said. Management, he said, acted "nonchalant" when informed about the discrepancies.
After Olesk's resignation became public, the company launched an internal investigation and quickly asked operators of Nasdaq to halt trading in its stock. With no valid audits for fiscal years 1992, 1993 and 1994, the company also knew that it no longer met the qualifications to be listed on Nasdaq.
To rejoin the exchange, it will have to apply as if it were a new company and pay the initial $42,000 fee.
Last week, the Securities and Exchange Commission began a preliminary investigation of HTP.
HTP makes, assembles and sells audio and video systems in cabinets and home furniture. The majority of its sales come form its Paramount Pictures line, which the company sells under a license with the studio's parent company, Viacom.