FRAMINGHAM (07/21/2000) - With its former accountanting firm alleging illegal acts and calling for possible further income restatements, wireless-equipment maker Vari-L Co. faces an indefinite suspension of its stock trading by Nasdaq Stock Market Inc.
Nasdaq halted trading of Denver-based Vari-L [Nasdaq: VARLE] indefinitely July 7 after the resignation of the company's independent accounting firm, Englewood, Colo.-based Haugen, Springer & Co. The firm made allegations of illegal acts, stating it was "uncertain" about management's representations and lacked cooperation from Vari-L's former controller, Sarah Hume, in investigations into revenue discrepancies. Haugen Springer officials say revenue statements from 1997 through last year could be inaccurate.
Vari-L has retained New York-based KPMG International as its new accounting firm.
Vari-L's troubles didn't begin when Haugen Springer quit. After hitting a 52-week high of $39.25 per share Dec. 23, Vari-L's stock price stumbled in an overall market correction on technology issues. Yet analysts labeled the stock a Buy after Vari-L posted first-quarter income of 16 cents per share on sales of $7.87 million, up 48% from the same quarter last year.
But in mid-May, Vari-L restated its 1997 revenue by $1.3 million, which adjusted income down from 45 cents per share to 41 cents. Hume resigned in late May, and Vari-L's chief financial officer stepped down one week later. The company was also hit with a bevy of shareholder lawsuits stemming from the earnings restatement.
Steve Wing, an analyst at American Fronteer Financial Corp. in Denver, says he was bullish about the company and its future earnings potential until Nasdaq halted trading of the stock.
"So far, what we've seen is restatements that are immaterial - just a few cents from 1997," he says. "We can only analyze so much, and we rely on auditors to a certain degree. [The accountants] are there to do a job, and now one has to ask what they were doing."
Trading won't resume until Nasdaq completes an investigation, says Nasdaq spokesman Wayne Lee.
Officials from Vari-L and Haugen Springer didn't respond to requests for comment.