When you pay the board in shares at par .02 and the trading value is over .50, this is misleading. If there was 2,000,000 shares paid to each board member, each expense was $1,000,000 and not $40,000 as they claimed. That changes the dramatic increase in the bottom line that they claimed.
Yes, there do seem to be accounting problems that resulted in significant misrepresentations.
Yet in its comment letter from 23 December, the SEC failed to address those problems. And that letter was written by the Accounting Branch Chief in the Corp Fin department. The letter seems odd to me. It contains quite a lot of objections to and criticisms of the company's disclosure in its 2012 10-K and a subsequent 8-K.
Why didn't it ask the company to amend, rather than say it should fix things in its next K? And it seems to have taken them much longer than usual to get round to the review.
Perhaps the examiners went on to later 10-Qs, found more, and more serious, problems, and decided to refer the matter to Enforcement rather than send more letters.
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