Excellent post from a CPA on another board:(sorry if it's been posted already)::::::
I have never done the accounting for a mining company and I have been
away from this level of accounting for quite a few years, so my
accounting info from here on may not be totally correct and up-to-
date. I'll give some insight anyway. The reason I don't think the
valuation is the reason for the SEC halt is that assets are generally
recorded on the books of companies at cost for accounting purposes.
That means whatever was paid for them. If they weren't, then the
company would most likely have a gain (income), and most likely a tax
consequence (tax accounting is somewhat different than GAAP
accounting). For example, if UCAD paid 10 million for CMKX claims and
the claims were valued at $1 billion on the balance sheet, then UCAD
would have a gain of $990 million. UCAD might have to pay taxes on
$990 million in gains and would not have received any money to pay
these taxes. Also, why would CMKX sell UCAD $1 billion worth of
claims for $10 million? So I find it unlikely they are recorded other
than cost. Since the claims are recorded at cost, all the
auditors/SEC have to do is find the purchase contract and see that
they were purchased for $10 million (a check or note payable to
support the payment/liability). This is not a good enough reason to
halt trading in my opinion. There are other ways to record gains as
unrealized, so this could be how mining companies do their
accounting, and this is why I qualify my opinion in this area. Maybe
an accountant more familiar with mining could provide some expertise.
Also, the SEC could have a question about where the financing came
from, but I don't think this would be enough reason to halt the stock
because UCAD only needs to provide a loan agreement.
In my opinion, the more likely scenario is that the SEC received
complaints from shorty that the price has increased more than tenfold
based upon nothing. Shorty is whining because he has to pay so much
for UCAD/UCSA shares and there are none available (exactly RG's
plan). Shorty complains the PRs issued by UCAD/UCSA should not have
caused such an increase. Shorty is cornered and wounded and pulling
out all the stops to hold off the inevitable - covering CMKX and the
dividends. If if weren't for the potentially endless stream of
dividends CMKX could be shorted until doomsday. The dividends have
started shorty's bleeding and it will only get worse when RG releases
his plan for CIM.
I think RG has been speaking with the SEC all along about CMKX. I
think RG told the SEC about his plan concerning the dividends because
he didn't want to surprise them with a huge problem after the fact.
It is much smarter to work with the SEC than to try and embarass
them. I think the SEC told him to take it slow and give shorty time
to cover and many did but some didn't making the short position even
worse, overall. I think the stock was halted to prevent any other
announcements that would make shorty's position even worse. The SEC
doesn't want this problem to get worse, it is already a disaster. I
agree that if the SEC has not come up with some sort of way to
correct this whole situation by November 10th, they might continue to
halt trading or put CMKX/UCAD etc. on some sort of hold until they
do.
I believe RG's plan is brilliant and he has done everything he can to
give people time to correct things. He now has both shorty and the
SEC under the gun and has the evidence to bring both down if they
don't correct the situation in a way that is satisfactory to the
shareholders.
We need to just sit tight and hold our shares and wait for the great
news.
This is only my opinion.
John
EXOBOX tsunami on the way!
