Frank, good information.

In spite of our frustration concerning the settlement amount, your subsequent meeting with RP has provided us a meaningful insight into the process employed by DM.

In retrospect, the game plan employed by DM and the variables they consider are well beyond our thought process and we do have to rely on their expertise even though some of the results may have been cloudy at the time.

As to the financial analysis, it is difficult to ascertain the exact settlement from examining the Income Statement and Balance Sheet.

My first assumption is that the entire revenue would be associated with edig and not split in accordance with the agreement with DM.

As a result the 1.6 million would be shown on the Income Statement.

The first deduction would represent the expenses incurred. This amount would be included as Selling, Administrative, or Other Expense and also would show up on the Balance Sheet as a Payable in some fashion or another.

The 40% owed to DM could be reflected under several items. I suspect they choose to show it as a Patent Expense in the Cost of Revenue section. I would prefer to see it as an Identified Expense under Other Expenses. This would also show up under Accounts Payable until the actual check was written to DM.

If the Patent Expense of 561k represented 40% of X, then the total Revenue split after Expenses would calculate to 1.402 million, 561/.4=1.402. Edigs share would amount to 1.402 x 60%, or 841k.

If these values are reasonable, then the Expense to DM would have been 1.6 million less 1.402 or 198k. I don't find this specific amount in the Income Statement, but there are substantial increases in the Selling and Other Expense Items and Accounts Payable on the Balance Sheet.

Frank, it's a guess that the total was 1.6 million and the resulting numbers shown above, but if it was our share, then a separate check would have been made out to DM, thus showing their hand in the equation. I doubt they would like to see that info divulged.

Unless I missed the information, I didn't see any specifics in the 10Q identifying the split or Expense to DM as a line item contained in the Financials.

It would be great if you could confirm the process I used or get RP to identify where the specifics are in their financials.

I may be correct or I may be off 180 degrees, would be nice to know and why they choose the Patent Expense as a Cost of Revenue.