You'll have to excuse Merge Technologies
Merge Technologies primarily pursues two businesses: selling software that allows hospitals and clinics to digitize, archive, and better utilize radiographic information (like X-rays and ultrasounds), and selling software to large imaging-equipment manufacturers like General Electric
In this case, it's increasingly clear that Merge Technologies has been improperly recognizing revenue from customers. Now, "improper" does not necessarily mean "fraudulent." It's entirely possible that the company has simply made oafish mistakes and hasn't been trying to deliberately mislead investors or misrepresent itself. By the same token, until there is, pardon the pun, a full accounting of just what has gone on (and why), I certainly can't say that it's just a collection of innocent mistakes.
In the meantime, this mess has already cost several jobs. The company's CEO resigned back in May; now the interim CEO, CFO, and senior vice president of business development are all on the way out, too. It certainly seems fair to me that the CFO, who is supposed to be responsible for the company's books, would be made to walk the plank over this . though again, it does not prove intent or malfeasance.
There are a few bright spots here. Merge commands a decent market share of its core businesses, serves some fast-growing markets, and has cash on its balance sheet -- all suggesting that it's not a complete house of cards. If you're more bearish, though, you can point to ample competition, high customer concentration, and the fact that we really don't know anymore just how profitable this business is (or isn't).
Investing in Merge today takes real intestinal fortitude -- particularly since the stock might still be delisted, and nobody really knows what the financials look like. It's worth remembering that stocks like this can be decent ideas for a hedge fund (which may have many, many other positions to offset a drastic loss), but not necessarily great risk-reward trade-offs for individual investors like you.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).