To thread (DISK story from street.com):
To tell the truth: On Monday, Image Entertainment (DISK:Nasdaq) filed amended 10-Q SEC filings for the quarters ended in June and September, as well as an amended 10-K for last year and an amended registration statement related to a proposed stock offering. Turns out the company, a large distributor and licensee of laser disks and DVDs, wasn't quite on the up-and-up in earlier filings regarding compliance with its bank loans. Or let's just say it wasn't liberal with the facts.
For example, in the June 10-Q the company said it was in compliance with its bank loan agreement. In the September 10-Q, the wording changed ever so slightly to say that it "was in compliance with the financial and operating covenants or has received waivers of noncompliance from Union Bank."
Hmmm, one of those subtleties that raises eyebrows, especially for a company that is trying to raise cash from the public.
Enter the amended Qs, K and registration statement, which included this new line: "In recent quarters the company has experienced losses, which have caused noncompliance with certain financial covenants under certain of its debt agreements such as minimum tangible net worth, maximum total debt to tangible net worth ratio and minimum average quarterly profitability covenants. As a result, the company has requested and received waivers for its noncompliance from its lenders."
So, why didn't the company disclose its noncompliance in the first place? CFO Jeff Framer was unavailable when I phoned, and he never returned my call.
Meanwhile, investors apparently haven't caught wind of the company's latest financial mystery. The stock has been on a tear lately, rising 7/8, or 16%, yesterday to 6 1/4; a little more than a month ago it was under 4, but earlier this year it got as high as 10.
Controversy is nothing new to Image Entertainment. A 1990 profile in the Los Angeles Business Journal described CEO Martin Greenwald as the former owner of "a pornographic distribution company." The story went on to say that the company's No. 3 officer at the time "torched his own car -- a 1985 Audi -- outside the company headquarters in 1988 in a botched bid to collect insurance. The official, who has used an alias, pled guilty to arson charges brought by the Los Angeles District Attorney's office.
"But the auto bonfire then was surely no hotter than Image Entertainment stock today."
True then. True today. |
