Power Solutions International (PSIX) appointed the accounting firm of Frazier & Deeter to re-audit the past three fiscal years’ worth of financial reporting after uncovering revenue reporting errors by its previous consultant.
The alternative-fuel engine manufacturer’s stock price has plummeted by more than 100 percent over the past week to close at $3.07 a share Friday, following the launch of an internal investigation and the subsequent resignations of RSM US, LLC and Michael Lewis, PSI’s chief financial officer.
PSI stock posted a 52-week high of $20.97 last summer. It fell to about $7.52 a share late last month before the bottom dropped out over the past week.
Nasdaq threatened to de-list PSI when the company was unable to meet the deadline for filing its latest quarterly financial updates due to the reporting errors. But PSI said it is now in negotiations with Nasdaq to obtain a further extension.
Nasdaq suspended PSI trading for two hours on Feb. 3, a customary response to the PSI's mid-day filing of Form 8-K with the SEC explaining to investors RSM’s revenue reporting errors and an admission that previously reported company revenues for the past three fiscal years were no longer reliable.
A week earlier, RSM notified PSI’s Audit Committee of the Board of Directors that there were “material weaknesses in internal controls over revenue recognition and overall control environment" that resulted in PSI launching an ongoing independent investigation over the accounting firm's financial reporting.
PSI’s SEC report states that RSM gave no prior indications of reporting errors for fiscal years 2014 and 2015 and for the current reporting period through Jan. 27. PSI also said there were no previous disagreements with RSM "on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure."
Lewis announced on Feb. 1 he was taking a leave of absence and would resign, effective March 4. PSI retained Timothy Cunningham of Randstand Professionals to serve as the company’s interim CFO. He will oversee Frazier & Deeter’s re-auditing of “certain restated financial statements and review financial statements to be included in delinquent filings,” according to a PSI statement released on Friday.
Gary Winemaster, chairman and CEO of PSI, said the company now has the “key resources” in Cunningham and Frazier & Deeter “to move forward expeditiously.”
“As we near the completion of the Audit Committee's independent internal review, we are developing a strategy to move quickly and efficiently to work through the financial restatement and become current in our filings,” he added. “In addition, we've also retained Donohoe Advisory, a firm offering expert advice to companies on U.S. stock exchange listing and compliance matters, to guide us through the process of maintaining our listing on Nasdaq."
Meanwhile, PSI’s engine manufacturing and R&D operations remain unaffected. The company provides gasoline and propane engines to Navistar for the IC Bus brand and owns the Powertrain Integration PIthon engine that powers Thomas Built Buses.