New Image, Officials Agree to Settlement

New Image Industries Inc. and four of its top executives have agreed to pay $2 million in cash and issue $1 million of New Image common stock to settle class-action litigation stemming from certain stock transactions in 1989 and 1990.

The Canoga Park company said it reserved $1.4 million against its earnings in its fiscal fourth quarter that ended June 30, to cover the costs of issuing the stock and other expenses. The reserve led, in part, to New Image’s $1.01-million loss in fiscal 1992, on $16.4 million in revenue.

New Image said the cash portion of the settlement will be fully covered by its insurance, and it does not expect that it will need to set aside additional reserves due to the suit.

The complaint was filed in U. S. District Court in Los Angeles in 1990 by a New Image shareholder who contended that the company executives had issued misleading statements to jack up New Image’s stock price, and sold some shares of the stock knowing that the company was having financial problems. New Image said the settlement did not represent an admission of fault.

The company said it would also have to pay up to $125,000 in legal fees and other costs. The settlement is subject to court approval, New Image said, and its fairness will be considered at a hearing later this year.

New Image makes computer imaging devices used by dentists and other professionals to show “before” and “after” images.