Shares in U.S.-based Merge Technologies Inc. plummeted yesterday after the departures of a number of senior executives amid a widening internal accounting investigation.
Merge shares dropped $6.25 or almost 50 per cent to close at $6.60 on the Toronto Stock Exchange, with more than 6,000 shares trading in the wake of Monday's disclosure of the executive departures.
The Milwaukee-based health care technology company revealed that its board has accepted the resignation of William Mortimore as interim chief executive officer and a director, along with the resignations of chief financial officer Scott Veech and senior vice-president David Noshay.
Mr. Mortimore, the company's founder and chief executive officer from 1987 to 2000, before becoming chairman, had been named interim CEO in May. His appointment followed the resignation of Richard Linden as the company's financial reporting issues became apparent.
The new chairman, Michael Dunham, has been appointed interim principal executive officer.
Merge, which acquired Cedara Software Corp. of Toronto last year and does business as Merge Healthcare, also disclosed Monday that its previously issued financial statements for all reporting periods from 2002 through 2005 "should no longer be relied upon."
Merge had previously said it was restating the quarters ended June 30, 2005, and Sept. 30, 2005 "due to certain material errors."
The company anticipates its restatements will primarily relate to revenue, but it "cannot provide a precise estimate of the impact of these non-cash adjustments."
The audit committee's investigation and remedial actions "have caused and will likely continue to cause uncertainty and disruption of the company's business and operations," Merge said in a release.
But Mr. Dunham said the company continues to deliver industry-leading products in the medical imaging and health care information technology markets, and with $60-million in cash and equivalents in hand, management "is confident that it has sufficient liquidity for the foreseeable future."
The company also said it cannot meet the July 7 deadline set by the listing qualifications panel of the Nasdaq Stock Market to issue its annual report for 2005 and its quarterly report for the period ended March 31. Merge said it will not be able to meet the deadline, and is requesting that the panel move the date to Sept. 30 so the company can avoid pink-sheet trading.
The review of finances came after a shareholder lawsuit alleging that Merge and some of its executives violated U.S. securities laws by selling $29-million worth of shares between last August and March, "with the company's stock trading at artificially inflated prices."
