"They feel they will not hit any milestones."
For sure that's what they said, but I should have included the context in case the REASON they said it is significant. :
"Fiscal 2018 compared to Fiscal 2017 - Other expense, net increased during fiscal 2018 primarily related to the increase in other expense of $2,218,000. The commitment fee allocated to the future milestone funding of $2.2 million was fully expensed under Other Expenses, because it is unlikely that the Company will achieve any of the three milestones by September 30, 2018. (see Note 13 to the accompanying financial statements)."
I posted about the commitment fee issue previously. We don't know exactly when the light bulb went off that the milestones wouldn't likely be met, but by acknowledging that none of the milestones was likely to be met it became the obligation of the Company to write off the full amount of the commitment fee as soon as they became aware of it otherwise it (or the piece of it pertaining to whatever milestone WAS expected to be met) would have been carried forward as an asset and written off upon the achievement of the relevant milestone(s). That's the proper accounting treatment when an asset isn't expected to have any future value and one can't find fault with it from an accounting standpoint. Just because the fee was agreed to and paid on June 28th and it boggles the mind to think that it was already determined to be worthless as of June 30th, that doesn't mean that it wasn't accounted for properly.
My problem was with how the the $2.2 million VALUE assigned to the fee was calculated, which was absent from the filing except in the vaguest of terms and I had hoped that someone could explain it. No one could, or at least no one did.
I suspect that the method of calculating the fee was flawed. Even if that wasn't the case, if the Company had carried that $2.2 million forward as an asset its size alone would have been a red flag...or at least a "WTF?"... to any objective reader of the 6/30 balance sheet. I believe that that was the true motivation for the decision.
But can it core A apple?
Yes Ralph, of course it can core A apple.
