It grows increasingly difficult to figure out what to make of embattled Georgia jeweler Friedman's (NYSE:FRM). The company's shares fell in morning trading on news related to an ongoing controversy that involves the SEC, the Justice Department, a raft of shareholder lawsuits, Whitehall Jewellers (NYSE:JWL) and more.

First off, the company said it will delay the filing of its 10-K -- essentially, it's annual report -- for the fiscal year ended Sept. 27. The filing is now expected by the end of February, though Friedman's says it will work to provide updated, restated financial information before that date. (Last year's 10-K was filed in late December.) It's longer than investors would like to wait to understand how severely past earnings will be restated, though investors have already made the company pay heavily in advance.

Just as important, however, is the news that Friedman's has defaulted on some of the provisions of its credit pact. While its lenders haven't taken any action, they could terminate their support at any time. Why exactly Friedman's is in default isn't immediately obvious, though the company's current problems are surely responsible. The credit pact was discussed in detail in its last 10-Q filing, at which time Friedman's wasn't in default.

The company has lately been using its borrowings for growth -- store openings and the construction of a new headquarters and distribution facility -- rather than operations. That's not a worst-case scenario, but it does mean the company is now under further pressure -- and provides some early insight into some of the challenges lurking around the corner.

It's no wonder investors are eyeing this company closely. Trading volume continues to be high even as this gem gets cloudier and cloudier.

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Dave Marino-Nachison can be reached at