IMO Dicon is the "dirty little secret" that Mosky is hiding from the shareholders. It started in late April, intensified in May and ended on July 9th. At a cost of $12-15 Million. All because of the SPNG/Dicon "handshake agreement". Just an opinion.
Under GAAP the Dicon Balance Sheet, as of July 9th, must be included in the consolidated May 31st, 2009 balance sheet of SPNG. It's the number one issue concerning the audit, and is the reason why 4 major accounting firms were interviewed shortly after R&H was retained. Pretty unusual to hire R&H and then start interviewing weeks later. Mosky just wanted a 2nd opinion.
The "smoking gun" in the Dicon purchase was the need for a $250,000 LC. As of Feb 28th, the Spng/Dicon inventory advance was $2.9 million, and based on the revenue/sales projects for the next six months, SPNG could have advanced $10 -20 million more to Dicon by July 9th. Thus why the need for a 250K LC? Because the Dicon parent drained the bank accounts before the purchase and could have been on the verge of bankruptcy. A little strange how fast this deal went down. And the banks reaction (Buffets favorite bank, owner of Wachoiva) was strange too. (Wells Fargo, I think)
In addition, observation of year-end inventory (WIP and FG) was impossible. Thus making for a auditing nightmare for R&H. This scope limitation will be clearly stated in the R&H audit opinion.
I think Taidone (or whatever) is one of limited partners bossing Pike around.
AI
