tkc, agreed, when compared to say goodwill then yes it is more real, in the event Wave sells SFND software, isra.gov gets a cut. I don't think defrevs or goodwill gets a cut of future sales of the SFND properties.
It may have something to do with the continued distinct branding of SFND products (the continued branding a demonstration of ineptness according to blue as measured by his commentary on Gartner's remarks on branding) ... but it may be that distinct branding make sfor an easier placement of a firewall around SFND revs in order to reconcile royalty payments to isra.gov and not have such installment seek to leverage, e.g., ERAS should the product lines become blurrd or blended.
SFND sales in the preceding(acquisition) 12 months were some 6m, 3.5% of that being something like 200k. Should e.g SFND revs double (FY13 vs FY12 e.g) then were SFND revs to reach 10-12m, isra.gov should presumably be entitiled to 350-400k. LIBOR it seems likely in this application is in the 1% range, such that 4m in liability (grants received unpaid against balance) is in the area of 40k. Given the thin scratch SFND was surviving on, it may well be that isra.gov is willing to fold earned royalties back into principle, and they may continue to be willing to do that given that bk leaves them dry.
I do not think sales increase the liabiity. I think (BICBW) that the liability is the dollar amount of the grants received and not paid back. Those grants received earn interest (amount goes up) and get paid against at 3.5% of SFND sales (amount goes down). [but see also earned royalty fold back into principle if such things can or are occurring, it this is happening then Wave is taking a 1% loan against royalty payment obligations] As all sales went down dramtically (SFND, ERAS, catfood, doughnuts ... as sales of everything except decals .. they actually didn't sell decals, they *paid* for decals), I could see that the royalty payments were not enough to offset the interest the grants earned.
Should the SFND property never perform, then that line would grow (and become realized if and only if, when and only when SFND sales gained traction). Otherwise, at some point, upon the extinction fo the SFND proerty and the associated products, isra.gov rights the thing off ala Solyndra.
My expectation is that SFND sales fell along wih all other Wave sales, that if such sales recover (Wave and SFND) to appreciable levels (b.e. eg for SFND roughly 10m/yr or so, then that number would drop by something like 300k/yr until such a point that 100-120m in sales had been achieved.
this is what I go tfro an explanation of a person familiar with similar thingys in biotech takeovers where a sales based royalty liability was part of the deal (as so many biotech thingy have rather convoluted royalty agreements often including developmental costs grants). The notion that such a royalty arrangement is some sort of missed gotcha moment (ala blue) is considered to be ure rubbish by my source on this ... in the 'you are kidding me, right?' fashion.
The above content is my opinion.
AI
