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-----Original Message-----
From: Dennis Holverstott <dennis@xxxxxxxxxx>
To: Omega List <omega-list@xxxxxxxxxx>
Date: Friday, April 16, 1999 12:01 AM
Subject: Re: Extending trial period to 60 days (success)
>> I suppose it helps Cruz's cash flow
>
>They are a public company now with quarterly reporting. As I recall,
>this same tactic was one of the things the disgruntled shareholders sued
>omega over after the IPO. It's a semi-legal way to cook the books. As
>long as they can keep the customers from returning the product, it shows
>up as a sale on their books. If they can put off the returns until the
>next quarter, it buys them 3 months of accounting time. Time to short
>the stock?
Not exactly - suppose it's Omega's historical experience that 75% of the dollar
amount of original orders became non-returnable sales. Then Omega would
include 75% of the dollar amount of orders within the last 30 days of the
quarter as revenue in that quarter. The estimate will be corrected to the
exact figure after the 30-day period has ended for all orders in the prior
quarter.
With TS 4, it might be that historically a fairly high percentage of orders
became paid revenue. However suppose with TS 2000 only about 50% of orders
become non-refundable sales. Omega has a choice of using the historical figure
based on TS 4 experience, or making an estimate based on Omega's limited
experience with TS 2000 returns. If Omega uses the historical percentage,
primarily based on TS 4, it seems possible Omega's revenue will be slightly
over-stated for the 1st quarter.
Omega will also likely make an adjustment to revenue for the historical
percentage of customers who will go past the refund period but then not pay in
full for the product.
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