The sight of the financial statements really concerns me. First of all, the $3M adjustment to prior period revenues scares the heck out of me. They were recognizing revenue on "future orders" shows a blatent disrgard for Generally Accepted Accounting Principals (GAAP). At sales of $600k per year, it will take some time before the negative effect of the adjustment (It should almost be considered fraud) will be overcome.
Also, the Balance Sheet shows an extremely weak company. The statement shows a Negative Net Working Capital amount of about $709k. What this means is, they owe debtors $705k more than they currently have on hand to pay (current assets minus current liabilites). How are they going to meet those obligations? Bringing more O/S shares to the market is my guess.
On top of that, the biggest part of their assets is capitalized development costs of $1M. There are strict rules on capitalizing software costs (costs only after Technological Feasibility has been established, can be capitalized), which may not make it through an audit. If that's the case, the amount which is disallowed would be reclassified to development expense which would put the P&L in the crapper. Capitalizing development costs was an easy way of software development companies to move expenses off of P&L and onto the Balance Sheet. As I mentioned before, this is highly regulated now and is extremely hard to pass an audit.
One other peeve of mine (I'm a CPA) is that the balance sheet does not balance. Any respecable bean-coounter would make sure that the balance sheet balanced. Also the cash flow statement does not tie. I know it's off a penny, but if you're a bean counter, you'd know what I mean.
My 2 cents.
BTW I own 1,230,000 shs of HISC.
All posts are my opinion. I may be wrong, but I doubt it.
Numbers don't lie...people do!
