Question
From: (redacted)
Sent: Thursday, May 04, 2006 12:36 PM
To: Verne, B. Michael
Subject:Question regarding net sales calculation
Mike,
Thankyou again for helping me this morning with my question about the net salescalculation. I was wondering if you could please help me to confirm myunderstanding of the matter. If this is more properly done through a letter andrequest for an informal opinion, I would be happy to do that. Please let meknow.
Fora recap:
Wehave a client (involved in a potentially reportable transaction) that providesnews via several Internet websites. Our client has agreements with many contentproviders/publishers ("publishers") who write or produce stories forour client's websites.
Theseagreements require our client to share a portion of the revenues derived fromthese websites with the publishers. The portion of revenues due the publishersI will call the "publisher revenues."
Perthe agreements, our client delivers the publisher revenues to the publishers.However, the publisher revenues are included in the gross revenues stated onour client's annual income statement. If these revenues are not included in ourclient's net sales, our client would not meet the size-of-person test.
Iunderstood from our conversation this morning that if the income statementcontains a separate line item identifying the publisher revenues or a note tothe financials identifying the publisher revenues, then the publisher revenuescan be excluded from the net sales calculation for our client. Is myunderstanding correct?