Yesterday, Manhattan Bridge Capital (NASDAQ:LOAN), previously discussed because of the massive discount at which it trades to its equity, came out with its 10-K. You may recall that this is the company that issued 1 million shares (when it only had 3.3 million outstanding) to its CEO and controlling shareholder. It would appear that the company's shareholder-unfriendly activities may be continuing.
Management reports in its 10-K that "[w]e anticipate that our current cash balances together with our cash flows from operations will be sufficient to fund the operations for the next 12 months." Furthermore, subsequent to the end of the quarter, the company announced that it repaid a loan of $200,000 on which there was an interest rate of 10%.
But then, again subsequent to the end of the quarter, the CEO and controlling shareholder saw fit to lend $230,000 of his own money to Manhattan Bridge at an interest rate of 12%.
So first the company says its cash from operations are adequate to fund operations for the next year, then it repays a loan with interest of 10% using a loan of 12% that came from the guy who controls the company! Whether or not the reasoning behind this sequence of activities was sound, the optics from the point of view of the public shareholder are poor.
And optics matter. Because of the optics of the company's shenanigans with the trading of stock options for restricted stock last year, the company's board is being sued by shareholder Alan Kahn. The apparent self-dealing of the company's CEO may continue to cause problems; stay tuned for more developments!
Disclosure: No position