I'm not trying to defend the company here, but there are many big name reputable firms that restate prior earnings all the time. It is not because of fraud, but because of different interpretations of accounting standards. In the filings that the company has made, they have not admitted to fraud or even been accussed of fraud, but in improperly recognizing revenue or in layman's terms recognizing revenue to soon.
Debt and Liabilities are two very different things and shouldn't be used synonymously. In their case, their liabilities are made up of deferred revenue, money accrued to pay taxes, and bills payable. None of these are debt as is in money borrowed in a loan.
My understanding of deferred revenue is money that has been billed to the customer, but not recognized as revenue yet. If it is money already collected as you say, then that is more money collected than the $2.9 million that you have claimed.
While I do agree that the collectability of the contract amounts is definitely the big issue with this company, and is the reason for their low p/e, I find that your facts are not accurate either. It does come down to credibility of the expected revenue. In the last filing the following statement was made
"Factors for Government or Quasi-Government Agency Customers
Most of our current customers are government or quasi-government agencies and are considered a low collection risk and irrevocable due to the budgetary nature of governments. However, due to the “slow pay” nature of these entities, payments could take as long as 12 months to be brought current, although management expects to reduce that time to no more than 9 months. As more fully discussed in SOP 97-2, the fees are determined to be fixed and determinable because;
· our software is not subject to obsolescence, any more than is typical for comparable software and we have not made concessions to effect collections,
· our software is integral to the fundamental mission of our master and their satellite license customers,
· our contracts are long term, greater then 12 months, and collections on invoices are expected to be less than 12 months,
· our contracts provide for normal collection terms which are substantially less than the term of our agreements and further permit the assessment of late fees and interest on delinquent balances,
· our contracts are with government entities, and by law, these entities are precluded from not disbursing funds that have been approved and allocated for the license agreement,
· our contracts do not include any Fiscal Funding Clauses,
· our contracts do not include any Rights of Return or Cancellation Clauses, and
· payment is not dependant on the number of SME’s engaged."
If you believe these statements, then the company is tremendously undervalued. If you don't, then it could be worthless.
AI
