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Post by travis1953 on Jan 2, 2019 9:31:23 GMT -5
"As of September 30, 2018 and December 31, 2017, the remaining milestone rights liability balance was $8.8 million. The Company currently estimates that it will reach the next milestone in the first quarter of 2019. Accordingly, $1.6 million in value related to the next milestone payment was recorded in accrued expenses and other current liabilities as of September 30, 2018 and December 31, 2017, resulting in $7.2 million being recorded in milestone rights liability, which is non-current, in the accompanying condensed consolidated balance sheets as of September 30, 2018 and December 31, 2017, respectively."
Sorry but I don't have any accounting background. What is that? |
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Post by mytakeonit on Jan 2, 2019 13:42:59 GMT -5
Ahhh ... $1.6M + $7.2M = $8.8M
And for that, I got all A's in college.
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Post by xanet on Jan 2, 2019 14:07:48 GMT -5
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Post by cretin11 on Jan 2, 2019 17:08:32 GMT -5
Do we know what the "13 specific Milestone Events" are?
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Post by agedhippie on Jan 2, 2019 17:27:49 GMT -5
Do we know what the "13 specific Milestone Events" are? Each time one of these events occurs Mannkind pays Deerfield. On the revenue side Mannkind pays 10% of net sales revenue for Afrezza for the first $500M and a smaller percentage after that. The first two milestones are paid, and the third milestone should be paid Q1 or Q2. MILESTONE TRIGGERING EVENT MILESTONE PAYMENT AMOUNT Product Partner Event $ 5,000,000 Product Launch $ 10,000,000 $50,000,000 Cumulative Net Sales $ 5,000,000 $100,000,000 Cumulative Net Sales $ 5,000,000 $150,000,000 Cumulative Net Sales $ 5,000,000 $200,000,000 Cumulative Net Sales $ 5,000,000 $250,000,000 Cumulative Net Sales $ 5,000,000 $300,000,000 Cumulative Net Sales $ 5,000,000 $400,000,000 Cumulative Net Sales $ 5,000,000 $500,000,000 Cumulative Net Sales $ 5,000,000 $750,000,000 Cumulative Net Sales $ 10,000,000 $1,000,000,000 Cumulative Net Sales $ 10,000,000 $1,500,000,000 Cumulative Net Sales $ 15,000,000 |
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Post by travis1953 on Jan 2, 2019 17:31:42 GMT -5
Clear as mud. Why does it exist? What is it supposed to be measuring? Why is there a liability now for something anticipated to occur in the future? |
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Post by cretin11 on Jan 2, 2019 17:32:34 GMT -5
Thanks aged, but how do those amounts square with the statement that the remaining liability is only $8.8 mil?
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Post by mnkdfann on Jan 2, 2019 17:37:33 GMT -5
Thanks aged, but how do those amounts square with the statement that the remaining liability is only $8.8 mil? As I read it, the Milestone Rights liability is an estimated fair value of future milestone obligations / payments. That suggests to me that the 10s of millions of milestone payments are considered to be unlikely to ever be paid, or will be paid so far in the future that they are being massively discounted. I'll go with the latter unless someone has a better explanation. |
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Post by babaoriley on Jan 2, 2019 19:02:52 GMT -5
So the current estimate of what they owe is $8.8 million per their 2013 contract, but they have already booked $1.2 million of expense on accrual given the "accounting certainty" of having to pay such a sum in first quarter of 2019 (it is sufficiently certain that the company can and must take the expense when such certainty is achieved). Thus, this leaves a balance of $7.2 million on MNKD's books, but for cash purposes MNKD still must deliver the cash to DF in first quarter assuming the "certainty" does in fact obtain, at which point the book balance of $7.2 million will match up with the "actual" balance under the contract of $7.2 million. I say "actual" cuz that amount is still subject to changed depending on what milestones are reached and when. For example, if another milestone, let's call it "Matt Turns into a MNKD Bull," is seen during the first quarter of 2019 to have accounting certainty, then the then estimated value under the contract of that Milestone (which may be different from the originally estimated value of that Milestone), will be expensed in the first quarter. So if the value of that Milestone is determined at the time of accounting certainty to be $1,000,000, then $1,000,000 gets expensed in the first quarter (an accrued expense, no money changes hands), and the $1,000,000 gets paid down the line when the Milestone is actually achieved. And at the time of the accrual of the liability of $1,000,000, the balance of the milestone rights would go from $7.2 million to $6.2 million.
Caveat, I'm not an accountant, but I like the above explanation nonetheless.
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Post by mytakeonit on Jan 3, 2019 1:07:10 GMT -5
Sounds like a lawyer to me ...
For what it's worth ... I think that the current offering is a way to make the pps drop and give the shorts a chance to excape, management to purchase shares, possibly a partnership, and a chance for kite to figure out what the heck he's doing here.
I love the fact that the CC is on Friday. In the mean time, these 12 cent jumps makes me want to yell ... KA CHING !!!
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Post by matt on Jan 3, 2019 8:58:42 GMT -5
Clear as mud. Why does it exist? What is it supposed to be measuring? Why is there a liability now for something anticipated to occur in the future? Some lenders, including Deerfield, offer lower interest rates or a cash infusion in exchange for a piece of the action later on. That is what created the liability in the first place; MNKD took their money and will have to repay it in the form of milestones if the specific triggers are reached. The company is expected to have a $5 million payment this quarter related to the $50 million in cumulative sales trigger. Generally accepted accounting principles require every entity to carry a liability on the books for any future payments that may come due. The underlying principle is that you have to match the costs of producing revenue with period in which revenue is realized. This is the same reason you do not expense a factory when built but instead it is depreciated over the life of the production line as product is made. Matching of revenues and expenses, whenever incurred, is the basic difference between accrual basis accounting and cash accounting, and all large business are required to follow accrual basis principles. Think of it this way. A bank offers you a mortgage with two payment plans: 1. You pay 5% per year in interest as with a conventional mortgage. 2. You pay 3% per year in interest, but when you sell the house the bank gets to keep 20% of any profit. That is essentially what lenders like Deerfield do; they give a lower cost form of financing that reduces the cash bite in the early years, but eventually the company has to pay the piper. In the hypothetical example above, if you take option 2 then you don't really own 100% of the house but rather 100% less 20% of any profit. That 20% is a liability that has to be paid to the bank eventually, and it would show up on your personal balance sheet. It is the same here; the shareholders do not own 100% of the future of Afrezza; they own 100% less any milestone payments that are likely to come due. If the company did not accrue and adjust the milestone liability, the balance sheet would be misleading. |
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Post by agedhippie on Jan 3, 2019 9:36:49 GMT -5
... Generally accepted accounting principles require every entity to carry a liability on the books for any future payments that may come due. The underlying principle is that you have to match the costs of producing revenue with period in which revenue is realized. This is the same reason you do not expense a factory when built but instead it is depreciated over the life of the production line as product is made. Matching of revenues and expenses, whenever incurred, is the basic difference between accrual basis accounting and cash accounting, and all large business are required to follow accrual basis principles. ... That makes sense if I have it right. To use a simple example; if the milestones were $4M paid at $10M, 20M, 40M. Then after $5M in sales were made the accruals would be 2M against the first milestone ((5/10)*4), 1M against the second milestone ((5/20)*4), and 0.5M against the last milestone ((5/40)*4) for a total of 3.5M. Is that correct? |
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Post by xanet on Jan 3, 2019 10:59:18 GMT -5
I think matt gets the prize for breaking this down into simple terms. Thanks! As for baba... I think I need to read that post again. Or... maybe hire an attorney to explain it to me.   |
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