Financial Shenanigans: Stocks Looking for a Fall Message Board

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Microcap & Penny Stocks : Financial Shenanigans: Stocks Looking for a Fall

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To: Pam Wooten who wrote (35)	5/14/1998 6:48:00 PM
From: BelowTheCrowd	Read Replies (2) of 108

The 10-K Informix issued this year (for fiscal year 1997) is not the problem. The problem is that much of the trouble which was included in this year's 10-K SHOULD have been revealed earlier, hence the need for a restatement. Many of the things that forced the restatement are the kinds of financial shennanigans with which this thread is concerned, but as you noted they are in the past. Since those problems were discovered, the earnings were completely restated going back two years. They failed to report earnings on time due to the need for restatement, and hence were put on notice for delisting from the NASDAQ, but that issue was solved as soon as the earnings were reported, several months ago. The old management team was essentially kicked out and replaced by people with a generally good reputation who appear to have corrected the gross mismanagement practices. Finally, they have started making money again. All this collectively explains why the stock is off it's lows. The 1997 10-K is two quarters out of date and needs to be supplemented with significant new information, some of which is available in the 10-Q's. An interesting exercise would probably be to look at the 1996 10-K and attempt to find "flags" that should have warned investors about the IFMX situation BEFORE the stock crashed. And just to be fair with IFMX today, they are ahead of most of the software industry in their adoption of new accounting rules about revenue recognition on multi-year contracts. Obviously, they can't even afford the perception that they're not 100% in their accounting. My expectation is that Oracle and others will take a nice hit when they finally implement the same rules. mg

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