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I can't let this one go. The thought that companies can pick and choose whatever accounting techniques they want is nonsense. Accountants have to follow conventions and only have a little wiggle room to change these. Also the idea that there is revenue out there they've not disclosed; or that it's shown as accounts receivable; or that it's hiding in negative accounts receivable shows a complete lack of understanding of accounting principles and standards. If revenue has been earned it will show in the revenue line on the Income Statement. To the extent that it hasn't been received, it will show in accounts receivable. It's as simple as that really. To infer that there's somehow $8 million of income "off balance sheet" is wishful thinking at best.
Nobody
I'm still lurking here, but don't really post as there's not been much to say recently. I've been sitting on my hands regarding trading in GERS as I don't see any point in buying while dilution is still continuing. I'm not convinced that YAGI's best interests are served by taking over and selling the IP though. They still need someone willing and able to execute a business plan that will generate revenue and GERS are as well placed as anyone to do that. If they stick with GERS until settlement their shares would be worth a lot of money, with potentially much more to come if they sign up more customers and develop other IP.
Nobody
I'm no lawyer, but I don't believe that YAGI would become the beneficiary of a settlement just because they take over the patents. The legal process is in the name of Greenshift (or previous iterations thereof) and will, I believe refer to damage done up to the point that GERS is no longer patent owner.
Perhaps a lurking lawyer can opine here?
Any publicly quoted organisation that aspires to be professional and taken seriously has little excuse for late filings imo. What is the point of a CFO if he can't meet important deadlines?
I've seen stranger things happen so I wouldn't completely rule out your scenario. On the other hand you will know as well as I do that business is very much every man for himself and when you compare the dubious worth of an escrow of limited amount against the first mover advantage of potentially beneficial settlement I think someone would see the latter as much more enticing. Especially when you consider the size of some of the supposed infringers - large entities won't be swayed by ICM's carrot.
Nobody
Not sure if yours was aimed at me as I've said a few times that I won't be buying any more until I see the prospect of an end to dilution, and there's no sign of that now. I was just pointing out that settlement is not solely within the gift of "DVG".
Nobody,
There is more than "DVG" involved here and not all infringers will have the same determination to hold out. Once one falls the house of cards will start to fall.
Nobody,
By way of reminder, DVG/ICM is not the only infringer, there are many others. Where a SJ is decided against the others, then any "insurance" from DVG/ICM does not mean that the latter becomes responsible to GERS for payment. Hence, any intransigence on DVG's part will not necessarily hinder settlement by all the other infringers and will therefore probably have limited impact.
..and why should we be happy about this again?
I'm not really saying that.
Whether GERS will be able to recover any settlement monies due will depend on the strength of the Balance Sheets of the direct infringers, not ICM (except to the extent that ICM have direct liability to GERS for infringing).
Let me repeat - the parties that will owe GERS directly will be the infringers, one of which may be ICM. Just because the latter has given a (worthless) indemnification to other infringers does not clear those other infringers from any settlement liability. They will have direct legal liability in the event the court case is decided against them. Whether they are able to collect or not from the ICM "insurance" is entirely their problem.
Yes, but they would owe it to the infringers not GERS. Any infringers themselves are still directly liable to GERS.
I believe it was Gerry that lives in Ireland. I'm mid-Atlantic now, originally English - nearly the same as Irish
Firstly, I think we need to draw a distinction between inventors' royalties (paid by GERS to Cantrell, Winsness etc) and GERS licence fees earned from users of their technology. The latter is revenue, the former cost of sales.
I agree that Ethanol production does not necessarily indicate what GERS revenue should be. Sales, however, does and the most straight forward calculation of GPRE sales revenue should directly influence GERS revenue, assuming our understanding of GERS licence terms is correct (20%). This relationship has broken down. I don't believe any amount of assumptions about payment terms, inventors royalties can change this inexorable logic.
I've not read the Zero Point report yet - what's in it that you think is noteworthy?
Dhole,
Let me try this one more time. Inventors' royalties are a cost of sales and are not netted out of revenue. This is not relevant to the declaration of revenue. It is a sales expense and will be accrued according to the terms of agreemet with inventors. Again the actual date of cash/value transfer is not the determinant of when these are accounted for in the Income Statement.
Received is not the same as shipped. Shipped means the point at which the delivery leaves the point of embarkation. You're arguing against yourself. BTW I am Neil you refer to, and I've seen no explanation that properly deals with revenue shortfall, except that GERS licence fees are not 20% as previously understood. This nonsense about timing of payments shows the lack of understanding some commentators have of reading financial statements.
Dhole,
Nice rant, but not sure what most of it has to do with the matter at hand. Are you preaching over my head to the sheep that follow you that because some people don't make correct future economics estimates that my informed accounting opinion can be ignored? Isn't that what's called a "straw man" argument?
I'll say it again, the terms of the agreement with regard to payment timing do not determine financial statement presentation - this is quite tightly defined. Reveunue declaration will almost certainly depend on when the product is shipped, not when money changed hands. Pleease accept this.
Dhole,
I'm still not getting it. From an accounting perspective revenue is booked when it is contracted. In GERS case this is when the corn oil is sold and delivered I believe. When the cash changes hands (driven by payment terms) is irrelevant from a revenue booking perspective. Also if there are expenses related to the revenue, such as inventor's royalty, then that should be itemised as a cost of sales item, not netted from revenue.
Perhaps I'm still misunderstanding?
I'm trying to understand your point. Are you suggesting that the lower than anticipated revenue in the last 3 qtrs is due to royalty payments?
If the answer is there, please explain it to me as I can't see it. Thanks
Whatever the reason for the difference in OS this is not it. Fluctuation in market prices would not explain the pattern Nobody refers to.
Nobody,
I have no real insights and don't have the attention span to trawl through the long narrative on convertibility rights of the various loans outstanding. The answer lies somewhere there, but I don't know exactly. Around 6 years ago back in the "Veridium" days GERS appeared to me to be a shell game with a labrynthine group ownership structure that was almost impossible to understand. Around that time I sold out on the basis that anything designed to be that complicated must be built to hide something and I value transparency. They tidied that up around 4 years and simplified the share structure (and I bought back in), but now, increasingly, the multitudinous separate loan agreements, each with their own conversion terms is having the same effect imo. It's not necessarily that I think it's designed to obfuscate as I realise that KK has had to do a lot of this to survive in very difficult circumstances, however the end result is the same. If/when new financing is found all of this needs to be tidied up and simplified so that we can get back some transparency on this. Ultimately this lack of transparency holds the share price down as potential investors have no idea what the contingent liabilities really are, nor do they know how much of a share overhang there is. Until this is cleared up I won't be investing again.
Dhole
Buffet's long term returns speak for themselves, in up and down periods, but he's not infallible. My point is that, even in his wind power investments, he won't have been blind to the challenges and he will have been putting a lot of intellectual rigour into answering the difficult questions, even if they challenged his rationale for investing in the first place. I'm confident that that is what Nobody is doing here, and as such he adds a lot to the discussion. Much more than just "Go GERS..."
I'd go further than that Nobody. There is a core element that has invaded this Board and Skunk's that view GERS investing as a religion, not to be challenged. With that sort of attitude they'd be better leaving their money in the collection plate.
Can you imagine really successful investors like Buffet et al investing without considering pros AND cons? thought not.
Unfortunately, based on last qtrs GERS results, this means little with regard to GERS 2nd quarter revenue. Until the reason for this established, visibility with regard to GERS results has vanished IMO.
Nobody,
Don't forget that as the price falls the dilution automatically increases for the same amount of cash. A halfing of the price will double the shares needed to dilute.
Nobody,
As I've explained before, any attempt to change accounting treatment because cash is diverted from point a to point b will fail accounting rules. If the contract states that royalties are due, then that should be revenue regardless of whether the debt is paid now or in 1 years time. Now, the parties can, of course, structure a new revenue agreement at any time, however, I should have a thought a restructured agreement with the largest client would constitute a significant event that should be publicised.
Gerry,
I remember Best - a great, maverick, talent.
Are you in the north or the south of the Emerald Isle?
Small,
I believe that litigation expenses would form part of SG&A. Remember, the income statement is not a cash flow statement. Just because items are non-cash doesn't mean they won't show up on the income statement. In fact, so long as the expense has occurred (regardless of whether it is paid) it absolutely should be in the income statement.
Correct, any money that comes in that is revenue related has to be accounted for as such. What happens to the actual cash is a balance sheet matter and is separate from booking the revenue.
Gerry,
Excellent post - concise and realistic. I wish there more like it.
If money's been made so what? All it means is that somewhat made the right call that the stock was going to fall rather than rise. That's what the stock market is all about. You keep confusing cause and effect.
You fundementally misunderstand the dynamic of the market. Ignoring naked shorting (which is illegal and abusive), short selling reflects the state of the company, rather than causing the problems. Whatever short sales are taking palce(I'm sceptical because short selling records are notoriously difficult to value) are telling us that the this company has a cash flow problem, a revenue problem and a big corporate governance issue. You should try listening for a change.
Jim,
It's not entirely clear, but I read this as they have an agreement to satisfy legal expenses by issuance of stock as well as cash. The daily dilution may be legal expenses as well as interest.
All this brings us full circle to asking why we don't have the revenue/cash that we should have (and that we had in Q3 2011)?
Nobody
I don't think thta theory works. If they had taken corn oil instead of cash you would see an inventory item valuing the corn oil at market rate. I don't see that anywhere. Regardless of the location of the corn oil the substance of the transaction would be payment of royalty with goods, rather than cash. IMO they would still need to account for this as revenue.
Your tortured justification for low revenues ignores the GPRE/GERS equation. The calculation is very straight forward and doesn't add up. If GERS revenues are not always 20% of licencees then we should have been informed. Many previous public circulars from GERS incorporate the 20% number. To criticise particpants on this and other boards for poor due diligence due to the fact we haven't been able to dig this out is disingenuous at best.
Then you say "Greenshift may be owed 10's of millions for all we know". Your lack of understanding of basic accounting lets you down again. If it is owed to GERS, we will almost certainly know about it as the revenue must be contracted for and recognised as revenue before it is owed. If 10's of millions are owed then there would be a receivable item in the balance sheet for that amount.
Face it your as stumped and concerned as the rest of us as to what's going on here.
Petal,
They've mentioned it for comparison purposes as both the brought forward (Q$) and the carried forward (Q1) affect the net change in revenue in the period.
Accountant here again. Deferred revenue has hardly changed between Q4 and Q1 (is slightly down) therefore that has no impact whatsoever on Q1 revenue shortfall.
Accountant here, and you're right I don't lie.
The "simple truth" of time lag seems to be very questionable. Any time lag causing lower than anticipated revenue in Q4 11 should have reversed in Q1 12. This does not appear to have happened. I find it highly unlikely (though not impossible) that the reason for the reporting time lag stretches up to 6 months, which would be necessary if Q4 time lag was not reversed in Q1. To be that dismissive about the revenue shortfall really raises questions about judgement and motive. As Nobody has pointed out, "Inventors Royalties" and legal fees are expenses, not revenue and cannot explain a revenue shortfall.
Nobody has suggested that some of the royaties may be going to another KK shell company. If this is the case KK would leave himself open to potential fraud charges, and so I think this is unlikely.
Until we have greater clarity with the revenue picture the SP is headed for the toilet.
...sounds like I'd be better going straight to your wife to discuss this!