On Friday, Merge Technologies Inc. (NASDAQ: MRGE), doing business as Merge Healthcare, announced horrible financial results and a formal SEC investigation into the company's financial statement troubles.

The stock has been on a freefall since December 2005, when it hit a high of around $30 per share. It has now fallen to under $1.50 per share, with the price wavering between $1.04 and $1.46 in the last few weeks.

In 2005 and into early 2006, the company was flying high following a takeover of Cedara Software, purchased for $325 million in an all-stock transaction. But Merge has been struggling to file restated financial statements for 2004, 2005, and 2006. Improper revenue recognition related to software and maintenance contracts, as well as improper booking of goodwill and net deferred tax liabilities related to the Cedara purchase have caused Merge to file the restatements.

Now the company is fighting for its life. Revenue for Merge's second quarter was $14 million, down 55% compared to the second quarter of the prior year. The net loss for the quarter was almost $11 million, or 32 cents per share. This is an improvement over last year, which saw a $211 million loss, or $6.27 per share.

It's still bad news though, as revenue for the six months ended June 30 is down 37% over the prior year. The third quarter will be dismal as well. The company has no lines of credit and is depending on cash flow to fund operations. Cash has been dwindling over the past year and is now down to $22 million as of September 30. And all (or substantially all) of the goodwill on the books will be written off, about a $124 million hit that will really hurt .

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.