Cancer disease management and information technology firm Impath has opened an internal investigation into "possible accounting irregularities" due to the likely overstatement of accounts receivable and has disavowed its financial results from 2002 and the first quarter of 2003, the New York-based company says.
Impath also announced today that Vice President of Finance Robert Campbell-chairman of the Robert Wood Johnson Foundation-and the firm's corporate controller have resigned and that the company will retain an unspecified restructuring group to help solve a cash crunch.
The news prompted the Nasdaq stock market to halt Impath trading just nine minutes after the market opened this morning. Nasdaq officials later decided that the stock would be frozen until the company provides Wall Street with more information about its financial condition.
"I wouldn't be surprised if this were the status for days or weeks," stock analyst Andreas Dirnagl of Harris Nesbitt Gerard says. "Given the language in the press release (issued this morning), it's likely that any additional information will be negative and material."
Dirnagl halved his target price to $5 from $10 based on today's announcement and other recent Impath news and writes in a research report that a formal investigation from the Securities and Exchange Commission "is likely in the future."
Impath shares were at $18.09 when the Nasdaq suspended trading. However, Dirnagl says it really is a "shot in the dark" to make forecasts, given the current "paucity of information" coming from management.
"I am significantly worried about the language about liquidity," Dirnagl says. He says that he has had concerns about Impath cash availability for the last two quarters.
Still, Dirnagl gives Impath credit for instigating the probe on its own. "The new management team obviously has to be given credit because this is an internal investigation."
In its press release, Impath says, "In light of the company's limited available cash, a key objective will be to ensure sufficient liquidity to meet the company's obligations for the foreseeable future." A company spokesperson did not respond to a request for comment.
Impath also warns that its report for the 2003 second quarter will be delayed pending the review of finances and that the company will incur a net loss for 2003
The company has faced a great deal of turmoil at the executive level in the last 10 months.
Carter Eckert became chairman and CEO in March after predecessor Anu Saad resigned amid questions about her expense reports.
Richard Adelson resigned as president and chief operating officer in May to "pursue other opportunities," according to a company press release.
Senior Vice President and CFO James Agnello joined Impath last October, following the resignation of David Cammarata, who also left to "pursue other opportunities," another press release says.
The company earlier this year asked the SEC for a 15-day extension for filing its 10-K annual report for 2002 after it changed its policy for reporting revenue from noncontracted payers.