KGIC Inc LGLTF

HOUSTON! We have a problem.

[sirbarfalot]

In the June 10th news release, the trend analysis chart (recognized + deferred tuition fees) reveals consistent revenues (all of 2014 and Q1, 2015) with a slight dip in Q4 and full recovery during Q1, 2015. Moreover Klerer states in the Aug 26th news release, "we have recently experienced year over year improvements in student numbers". Yet during Q2, 2015 (March-June) there is a very sharp, precipitous decline in tuition revenues to 11 million. This total would include recognition of 7.1 million in deferred revenues from Q4 (2014) and Q1 (12.5 Mill x 58% as indicated in June 10th news release). No mention is made in the Q2 notes (Aug 26th) to the financials regarding deferred revenues other than "company evaluates the collectability of receivables on an ongoing basis". We cannot assume there are deferred revenues in Q2 except that direct costs were 11 million (2015) and 9 million for the comparable period in Q2 2014 suggesting enrollment was steady (probably rising) supporting the likely validity of the Okran (Jan 22) and UHak (Dec 01) acquisitions, notwithstanding they both were written down due to underperformance. It should be recalled the board approved the two agency acquisitions and then participated in the 40 cent PP during March, 2015. It would seem unlikely the 'Korean agency' acquisitions were significantly misrepresented given board scrutiny, 52 cent escrow shares, a significant reduction in the cash component by the vendor take back of LOY receivables and the ample qualifications of Chornoboy. The aggregate tuition flows for the 2 agencies is 60 million/annum. Yet we are witness to a current, highly dilutive financing by insiders and single 3rd party. If there has been a significant deferred revenue recognition in Q2 (which Klerer hints at by stating expected improvements for Q3) it would indicate revenues for Q2 may be better than posted. If there are no deferred Q2 revenues in any significant amount (Klerer does state "We are very disappointed by the second quarter result.....") then revenues for Q2 are a disaster, perhaps much less than 11 million.