Thanks for your diligence in following the price of JSB. Even US$2.75 is still more than the value on the SPYG financial statement, which by law must show the lower of either market price or cost.
The accrual accounting used for recording amounts received for service contracts is an additional factor that must go into any valuation of the stock. The company can announce it has received a contract, say, in the millions of dollars, but it cannot record any of this money until at least some work has been performed. When it has reached certain benchmarks in the contract, the fees will then be reported, but all the costs leading up to the contract or the costs incurred thereafter are taken as they occur. The result is that initially there is a drain on profits, or even an operating loss. Then, once a portion of the service has been delivered, the company may report an appropriate portion of the contract fees, even if they haven't been received. This is different from the method of accounting that would be used for software shipments, where the price paid by the customer is reported when the item is shipped.
The end result in the case of Spyglass is that previously announced contracts with Microsoft and several Japanese firms should now begin showing up on the books when the next financial statement is released in April. The earlier sale of one-third of its JSB shares will also show up, and the price they got for that should add nicely to the bottom line.
Art |
