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Gold/Mining/Energy : Nuvo Research Inc -- Ignore unavailable to you. Want to Upgrade?

To: PlayTheKing who wrote (12219)	3/9/2003 10:51:27 PM
From: Tom Drolet	Read Replies (1) \| Respond to of 14101

PTK, Rondo, Wolf et al: My opinion, as always, not worth an "educated" (medical, accounting) plug nickel: That said--on the subject of Management credibility and business sales prospects--and, for that matter Board credibility as it pertains to Biz support--beg to differ... Answer Zero out of Ten Tom D.

To: PlayTheKing who wrote (12219)	3/10/2003 11:28:25 PM
From: PlayTheKing	Read Replies (2) \| Respond to of 14101

DMX to do's and my comments: move its non-cash obligations in respect of the unpaid balance of the OXO Chemie AG acquisition purchase price from the liability portion of the balance sheet to the equity portion The installment payments to OXO explicitly indicated that 2 cash payments were to be made, each for USD$500K. The $4.0M due in 2002, $4.24M in 2003, and $9.24 in each of 2004, 2005 and 2006 may be a combination of cash or shares. DMX paid the $4.0M in shares last November 2002. Based on this, I believe the OSC has taken the position that DMX will more likely than not pay the future obligations in shares, and not in cash. The following would support this stance: 1) Current revenue streams would not make it possible to pay the obligations in cash; 2) There is no reasonable assurance that DMX will raise that level of cash in the next fiscal year; and, 3) The most recent payment was made in shares. Therefore, a precedent has been established. As a result, these future transactions are better classified as "equity", and not in the Long-term liability section, as there is no reasonable assurance that these obligations will be paid in cash or cash equivalents. Most companies would have argued that their obligations should be treated in the equity portion, and not in the liability section, since debt-to-equity ratios may be breached. In DMX’s case, I just think this issue was missed by their auditors. This is an issue that REK would not have even contemplated. Strike 1 against the auditors. apply a net present value discount factor (currently undetermined) to the equity, since the payment obligations are to be satisfied over the next five years; This is consistent with any other public company’s treatment of long-term obligations. Since the obligations are payable over 5 years, to 2006, if the amount had to be paid out today, the obligation would be lower due to the time value of money. The Balance Sheet is intended to reflect the Company’s current position at a specific point in time. Have a look at all the major financial institutions and how they account for long-term commitments, everything is fair valued. This is the norm. Strike 2 against Schwartz. The discount rate to be used needs to be reasonably supported. This is not too difficult as DMX has many benchmarks to use: i.e. Acqua discount used, Caledonia discount used, current interest rates DMX would have to pay to obtain a loan, etc. make a corresponding adjustment to the value of the OXO patents on the Company's balance sheet (this adjustment will also reduce amortization charges in future periods); and As a result of the changes in the valuation of the equity, the offset would be against the patents. clarify its note disclosure regarding foreign currency translation. Big deal. No one reads this anyway. The Company is also working with Ontario Securities Commission staff to determine whether: a portion of its classification of the OXO patents should be treated as acquired research and development; and This is mainly for tax purposes. Patents are treated one way (eligible capital property), while research and development costs are treated another way (R&D filings and itc’s need to be calculated). Since DMX is a manufacturing company, I have always wondered why they have not disclosed their ITC available. These amounts may be used to offset future taxable earnings. I am not well versed in the tax rules with respect to R&D tax credits and ITCs to discuss at length. I used to be at one stage but the rules change so much. separate disclosure of offsetting future tax assets and future tax liabilities is required. This has to do with deferred income tax disclosure. Generally, if there is reasonable assurance that DMX will be profitable then they may elect to record a deferred tax asset on their balance sheet so long as offsetting future tax assets exceed their future tax liabilities. This disclosure would be interesting as DMX needs to prove that it is reasonably assured that it will be able to generate sufficient income in the future to realize the tax losses available. Contrary to popular belief, deferred income tax does not mean that a company has “avoided” to pay its share of taxes. The accounting disclosure rules tries to anticipate what the future tax liabilities/assets would be based on historical, current and future income tax rates.