Hitsgalore's Auditor Quits, Citing Founder's Past
Rancho Cucamonga, California, July 28 (Bloomberg) --
Hitsgalore.com Inc.'s outside auditor quit less than five months
after it was hired because the Internet advertising company
didn't meet the firm's ''client acceptance criteria.''
Moore Stephens Lovelace P.A., of Orlando, Florida, hired on
March 4, resigned in a letter dated July 19, said a filing by
Hitsgalore with the Securities and Exchange Commission.
The move followed the refusal on May 27 by the previous
auditor, Ernst & Young LLP, to allow Hitsgalore to use its 1996
audit. It had cited the company's disclosure that Dorian Reed,
chairman, chief technology officer and main shareholder, spent 10
months in federal prison for a 1992 wire fraud conviction.
''Among the things considered was what we learned about Mr.
Reed's background,'' said Farlen Halikman, who was in charge of
auditing Hitsgalore for Moore Stephens.
He said the firm was also influenced by a May 11 news report
that a U.S. judge, in a Federal Trade Commission suit, had
ordered Reed and his wife Audrey to pay $613,110 to 100 customers
they defrauded at another Internet company two years ago.
Hitsgalore on June 4 asked the SEC for permission to
withdraw its 1997 and 1998 reports because of Ernst & Young's
refusal to allow the use of its 1996 audit. Moore Stephens
Lovelace was asked to do a substitute 1996 audit.
Ernst & Young had resigned on Feb. 20, 1998, as the auditor
of Systems Communications Inc., a shell company with which
Hitsgalore merged in July to become a public company.
A Hitsgalore spokesman, Danny Gavin, declined to comment on
Moore Stephens' departure.
Online Business
Hitsgalore operates an online search engine, gives away
advertising and sells sponsorships of banner ads on the Internet.
The company's shares fell 7/16 to 4 9/32. They're down 79
percent from a 1999 closing high of 20 1/8 on May 10, the day
before Reed's involvement with the FTC suit was first reported.
On July 23, Hitsgalore said revenue for the second quarter
was about $1.2 million, triple the $391,000 reported for the
first quarter. It didn't say how much came from the Life
Foundation Trust, which committed to spending $10 million to buy
up to 200 Web sites from Hitsgalore.
0- (STR) Jul/28/1999 13:08
EOS (STR) Jul/28/1999 13:08 197
Jul/28/1999 16:34
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