Decision Diagnostics Corp (DECN)

[EDMGUY]

Loan:
I knew I could count on you for great well informed response.
Thx for that.
Since I am more of a hands on shop floor guy my thinking is more of a "just get this tool done right and start making stuff" view.
I would agree that any CapEx of that size should certainly be amortized/depreciated over many years. What I'm less clear on is if after buying the equipment and running production what happens if it goes south.

I'll run through a quick scenario that happens to us more often than you would think and let you respond from a accounting view.

1.We are given a part by a customer they would like us to design and build a production tool (currently I am in plastic injection molding but stamping wouldn't change anything). The customer can be very demanding on price and timely delivery of product.

2.We build them a tool and send them samples for approval/buyoff before starting full production.

3.We get two enthusiastic thumbs-up from customer. Start up the press/ATM machine!

4. After weeks of production and millions of parts are sent to the customer we get a panic call that some aspect of the design was overlooked and the tool needs to be modified to an updated design before making any more useless parts.

5.We get the design changes from the customer approved and done in record time (picture Scotty saying Capn' we just canna do it that fast and Kirk saying you have to our life depends on it).

6. Production resumes but with a totally different cost basis than originally planned.

So my question is how fuzzy could the accounting of that fairly expensive scenario get. If the customer had already received and inventoried a significant amount of product (believed to be good but wasn't) what kind of shifting costs can be used?

P.S. My comment about the $750k wasn't directed to you. I included it because some of the chatter (Scoop or johhny maybe?) was questioning how DECN could have sent all that money to Korea and have nothing to show for it.If they bought a cheap tool and are having trouble getting good parts well (see item 4/5 above)...