Where is our money?

Sirhc said:

As I have always understood it PED decay is what MA takes out of EU everything else (like auctions, fees, and consumables) is recycled back into the system. Continual removal of PED from the system encourages people to deposit to refill that bucket which in turn refills MA's bank account.

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Yes, they have to balance in world decay with net incomes. This is about 13 - 14K Ped per hour in decay. Anything over that they give back in some way, as HOF, ATH or normal loot. This value may be weighted for the population load. If they match this in world decay they can cover operating costs and more importantly make a reportable profit. From early 2006 post share issure it is this profit that has accounted for the growth in equity. As far as I can tell no dividens have been paided out to date. The capital expendanture (CE2 development and property) could not be matched by current net deposits without reporting a loss so they have taken it from their own reserves (their past profit) to be recovered in latter years. could be totally wrong on this though.

Might have missed it and it might have been mentioned (was reading the thread quite fast):

MINDARK'S LIABILITY TOWARDS YOU SHALL, IF ACKNOWLEDGED, IN EACH INCIDENCE BE LIMITED TO NO MORE THAN THE TOTAL AMOUNT TRANSFERRED INTO THE INVOLVED ACCOUNT BY SAID PARTICIPANT UNDER SIX MONTHS PRIOD PRIOR TO THE INCIDENT.

As far as I understand it, this means their liability towards us is only what we deposited the last 6 months.

MA should report a loss...

Ok... now that I have had time to read this Financial report ... I have to say it's a fine piece of accounting Their accountants know what they are doing... (or not)

If you read MAs comments carefully you will note that some of the main investments have been booked onto the balancesheet as fixed assets although in the past these would have been operating expenses...

So whereas in the past all investments had to be paid for by MA and hence would be an expense... MA now argue that MA has put this money down as an asset that their entities will use up ... and account for it by depreciation.

That in theory is ok if it's buildings and equipment... but this includes "personnel" costs and dev work... Now I aint an expert on how to account for computer software and IT infrastructure but to me the fact that we account for it all as assets is a bit fishy.. (note this financial report is not yet approved by the auditors and maybe it will be but it certainly shows some creative accounting...

So look at it this way... ok MA might have been making a profit as their operating expenses were lower and they increased their assets...
(note how silly it sounds that personel costs and expenses you had suddenly become an asset cos the result = CE2 engine infrastructure is an asset) but if that is depreciated in conjunction with the planet partners then I assume that the planet partners will pay for this investment in some form... i.e. in other words, MA or FPC will have to pay for it ... and as long as there is no other planet partners... FPC pays for it ... (now where is the financial report for FPC then ??? - I would love to see that one... )

So somewhere in all this there is a loss that someone tries to account for against future revenue...

Cos if the 11.7m on the BS would be booked against operating expenses, MA would report a net loss of -2.7m SEK = -350k USD for the year running...

Note that somewhere inbetween that the 3x skillgain event generated about 8.8m SEK = 1.1m USD

Try to figure out what would have appened without this event... also considering that we have a negative cash flow of -15m SEK = nearly -2m USD

MA has about 30m SEK left on the bank account, i.e. 4m USD... considering that the 4th quarter saw inflow of 8.8m in december due to the 3x skill event but the total inflow for Q4 was 17.1, that means that October and November had a total of 8.3m SEK roughly = 1m USD

I have no idea what other costs are lurking out there with respect to their investments (Dresden, CE2)... don't see where this is accounted for (now don't tell me it's all in assets ) ...

I have no idea what/how the adjustment for equity came about...
The ratios look fantastic..
At first glance MA has a very strong balancesheet still. The outlook is good, no liabilities that seem to burden MA.

Their BS is very high level... I wish I could see more details... So no idea what's hiddin inbetween their numbers. If I was an investor, I would not accept this financial statement ...

To sum up by the looks... MA is healthy, MA is looking good.. but their increased costs due to their investments require future income. That's how MA accounts for these expenses. Also MA does not expect all users to withdraw money obviously... there would be no funds for that.
MA will run into a cash flow problem if deposits decline... MA will have to find means of maintaining the level of deposits and to get their planet partners up and running fast... (Q3 2009 seems to be the target date for that as per the report).

So the current state is not bad, but MA need to maintain the deposits throughout the financial crisis... or take out a credit...

Don't put into this game what you are not prepared to loose if things go ****up

AJack10600 said:

Ok... now that I have had time to read this Financial report ... I have to say it's a fine piece of accounting Their accountants know what they are doing... (or not)

If you read MAs comments carefully you will note that some of the main investments have been booked onto the balancesheet as fixed assets although in the past these would have been operating expenses...

So whereas in the past all investments had to be paid for by MA and hence would be an expense... MA now argue that MA has put this money down as an asset that their entities will use up ... and account for it by depreciation.

That in theory is ok if it's buildings and equipment... but this includes "personnel" costs and dev work... Now I aint an expert on how to account for computer software and IT infrastructure but to me the fact that we account for it all as assets is a bit fishy.. (note this financial report is not yet approved by the auditors and maybe it will be but it certainly shows some creative accounting...

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i think you need to look back through the quarterly reports to see how they accounted for assets and indications of what they are. What you interpret as creative accounting wouldnt, as you suggest, get past an auditor - so why present it? I think the main expenses are the purchase of the Mexico studio, the Cryengine licence and a bunch of hardware. the basic rule of thumb is if it can be resold then its an asset, so servers, transferable licences and IP (the product of the devs) are assets. This is only a brief summary with a full annual report to follow later in the year.

~CHOPPER~ said:

And I was thinking recently about the amount of uber items for sale on auction and on EF with the reason of "not selling out, just need some quick cash"

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/shrug no suprise there tho... -


1. there's 20-30 Unclaimed La's just waiting for marcus callendar to sell them..

2. new planets = new investment opportunities.

3. global economic crisis - its not inconceivable that people may need quick cash (mortgages/loan repayments/cars etc etc in the real world)

4. Items are cheaper than ever in EU (Growls at the value of my BP's) - perhaps they need quick cash to purchase said items...

5. fact is - this is a great time to buy in EU, assuming you can dump a few hundred thousand USD$ into the game and just hold onto items... - lots of people of course dont have that kind of liquidity in real life to *gamble* with...

from my last post though -


the company definately needs to retain its customers *ie player base*


constantly *nerfing* items, mobs things that are primarily designed to Upset us, *the player base* - is not a necessarily good thing in these uncertain times..

ie, footguards, mob HP increase, skill gain nerf.. etc etc etc

each time one of these things happens, people (depositers - ) leave... taking their ped out of the game and withdrawing into USD..

if enough leave of course the game will shut down, but these days in EU's lifecycle nowhere has it been more apparent to treat your 'customer' right.

We can always play something else after all, and of course in these uncertain economic times, people may be struggling to deposit the amounts that they once did, therefore value for money becomes a consideration as well..

aridash said:

i think you need to look back through the quarterly reports to see how they accounted for assets and indications of what they are. What you interpret as creative accounting wouldnt, as you suggest, get past an auditor - so why present it? I think the main expenses are the purchase of the Mexico studio, the Cryengine licence and a bunch of hardware. the basic rule of thumb is if it can be resold then its an asset, so servers, transferable licences and IP (the product of the devs) are assets. This is only a brief summary with a full annual report to follow later in the year.

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MAs financial reports have never been really detailed...

What I interpret as creative accounting might very well pass an audit... how do you think companies like Enron could report profits But that's an extreme.. what MA are doing is perfectly feasible and standard practice, but one needs to be aware that it's an accounting classification. MA did an investment and they account for this investment as an asset. Now how do you account for an IT infrastructure as an asset? How do you value it? MA included all the costs associated in creating this asset as "value" of the asset. That might be the right thing to do but beware that this "infrastructure" is worth nothing without the game... i.e a Office building is an asset that can be resold, a car can be resold, a PC can be resold, it's an asset. But who will buy a CE2 engine IT infrastructure ? Maybe someone will.. but it's a very "special" asset we are talking about.

I am not saying what MA are doing is wrong, I am saying this is making a financial statement look good on the prospect of future revenue... that's all I am saying...

In a way that's what the banks did with their Derivative Instruments they are now struggling to "value" cos there is no future value to put against

Interesting this financial crisis isn't it

Jehu said:

I think that MA trying to survive on primarily the players deposits is probably not the safest route to go down. As we have seen in the past with loot and other nerfs due to MA needing more money, the depositors get annoyed and some leave. The rest just grumble and keep on playing and don't deposit as much.

This is where MA should really be trying to get their major income from other sources. I think you know where I am going with this, right?

Yes, adverts.

Yes we have the thread about "where are the coke signs?" but that is really looking at too big a product to advertise. MA should look at what us players will really buy. EA Games have already started to do ingame advertising. BF2142 has ads for Intel ingame. There is so many companies out there just in the gaming industry alone where MA could be advertising for.

Now I know that some will bitch and moan about ads but come on. Would you not rather have a few billboards around with RL companies in exchange for knowing that MA is in a more stable position and your PED is ingame, rather than being used to feed the server hamsters?

Really, if MA get on the ball and use advertising and then let the deposits stay in game more for the players, it ends up a win/win situation for both parties. And that's the bottom line.

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THIS is exactly what ive been on MA about for almost 3 years now. ONE of the replies i had way back was something like this. " Thanks for your intrest. We asure you that our WELL qualified marketing staff is looking in to this. And are tieing up some BIG RL advertisers as we speak ??? And several other similar answers where they even replied that in a "near" future we calculates that a "major" part of our incomes will come from RL adds. etc etc. What did go wrong ?

Ozie said:

/
5. fact is - this is a great time to buy in EU, assuming you can dump a few hundred thousand USD$ into the game and just hold onto items... - lots of people of course dont have that kind of liquidity in real life to *gamble* with...

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IF i had a few hundred thousands of USD $ to play with and "invest" somewhere, i think i rather would invest in ice from Greenland and try to sell it to Saudi or Dubai

fnalig said:

IF i had a few hundred thousands of USD $ to play with and "invest" somewhere, i think i rather would invest in ice from Greenland and try to sell it to Saudi or Dubai

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*gets shovel*, have you got a rowboat???

lets go, mate?

I think you all missed the fact that the PEDs we put in is not directly transfered as a revenue for MA, that means that the TT value of all in Entropia isent even moved to there own bank account but have a seperate bank account thats not tuched by the company.
How do i come to this conclution? As mentioned in the first post Participants total assets on Calypso is 73 877 000 PED at the end of 2008. Well at the end of 2007 it was 59 963 000 PED so it grown by 13 914 000 PED. But if you look 2 lines before you see that the Net funds provided to Entropia Universe has been 112 672 000 PED during 2008 that means 98 758 000 PED has left from EU. That is 9 875 800 USD and if you take into account that the USD during the last year averaged around 1USD=8SEK you get that its around 79 million SEK witch is what if you look at the begining of the income statement its around what they say is there total revenue. That means they dont count the participants total assets as theres but its yours.
So as i see it they got ruffly 147% in cash witch is lot more then they need too pay everyone if they want to take all out.

aridash said:

As technically creditors, we'd be in front of shareholders who are always the very last in the que.

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No - Players have no rights, read the EULA.

heancaze said:

I think you all missed the fact that the PEDs we put in is not directly transfered as a revenue for MA, that means that the TT value of all in Entropia isent even moved to there own bank account but have a seperate bank account thats not tuched by the company.
.

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Also wrong - there is no separation of Player and MA funds, there is no 'Trust Account'

heancaze said:

I think you all missed the fact that the PEDs we put in is not directly transfered as a revenue for MA, that means that the TT value of all in Entropia isent even moved to there own bank account but have a seperate bank account thats not tuched by the company.
How do i come to this conclution? As mentioned in the first post Participants total assets on Calypso is 73 877 000 PED at the end of 2008. Well at the end of 2007 it was 59 963 000 PED so it grown by 13 914 000 PED. But if you look 2 lines before you see that the Net funds provided to Entropia Universe has been 112 672 000 PED during 2008 that means 98 758 000 PED has left from EU. That is 9 875 800 USD and if you take into account that the USD during the last year averaged around 1USD=8SEK you get that its around 79 million SEK witch is what if you look at the begining of the income statement its around what they say is there total revenue. That means they dont count the participants total assets as theres but its yours.
So as i see it they got ruffly 147% in cash witch is lot more then they need too pay everyone if they want to take all out.

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mate check MA's Bank balance... these figures are part of the BS and PnL statements... These ratios at the start mean nothing at all and only serve to explain how many users there are in EU and how much money they put into it... this "GDP" of calypso is a rough estimate based on market value on top of TT value... in other words the EU economy would be worth 420m USD if this value was true. If MA was able to find international approval for this valuation they could bring it into their balancesheet and report profit of nearly half a bn USD... Try to understand numbers before you interpret them..

heancaze said:

So as i see it they got ruffly 147% in cash witch is lot more then they need too pay everyone if they want to take all out.

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And the extra 47% over 100% came from where? The board of directors hunting eco mobs?

Kerham said:

And the extra 47% over 100% came from where? The board of directors hunting eco mobs?

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The 112k Ped = 67k SEK net Sales ..

so the difference is the mysterious "depreciation" or what rightfully belongs to MA.. The rest is pledged and should be sitting on a bank account bearing interest or whatever.. Actually that second number is strange.... I don't believe it ... that would imply that MA only made 3.8 m USD out of the whole deposits... (scratching head)

I agree with a few others....

EU is using its customers as its investors aside from its actual stock holders. So not only did it acquire funds from its IPO of any stock they release, but they also use its customers to supply their activities.

They also essentially use a decay system IMO, on their participants investments. Essentially Im guessing through really complex calculations a a certain amount of PED is calculated to be decayed and then rewards are given out which is below the total decay. This way, even though MA might give someone a big $50,000 HoF its through the activities of others decay that have funded this.

If you compare all the ways our money is decayed its scary.
- Hunting, Repair, Ammo, Missed Shots
- Crafting, % Failure, Partial Successes
- Mining, Bombs, Decay
- Beauty, TT Paint in, no change in TT product
- Pilots, Oil + Decay

Considering crafting uses products from hunting and mining to create others its pretty intense. So lets say hunters and miners get a 80% return on average, then crafters well say gets a 80% return on average.

Thats a 64% return on invested PEDs (taken from random return rates).

Then theres random costs such as:
- Clothes On/Off
- Auction Deposits / Commisions

Anyways, of couse if we all took money out the company would be in problem, but then what company wouldn't be in trouble if their creditors demanded full payment immiediately. Many companies live off the liabilities they have, and they only begin to go up wehn the liabilities begin to increase and the ability to pay the interest is no longer. But as you can see the amount of participant PED is reduced in many ways, and only if your lucky (some will argue skilled) will you manage to profit doing professions.


I dont know the EULA or Swedish Laws or any real laws so I dont know what were as customers guarenteed. Id hope for at least TT.

I forgot to mention,

Decay on Pets and Maintenance fees on buildings and maybe LAs???

Also, whats an LA's TT? And an Estate etc etc. Whats TI worth TT wise? It was sold for XXXX, but its probably worth very little of that TT wise which is the actual cost MA will recognize it for.

When you see TI and CND on the auction block. WORRY

heancaze said:

I think you all missed the fact that the PEDs we put in is not directly transfered as a revenue for MA, that means that the TT value of all in Entropia isent even moved to there own bank account but have a seperate bank account thats not tuched by the company.

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Read their accounting policies in the FS and you will unsurprisingly realise, that what they show as net revenue is deposits from players (gross revenue) minus payouts to players from withdrawals.
What the player has than got in PEDs is accounted for as contingent liability.

So there is absolutely no point in believing all the cash is being held in escro

Im talking about what they defined as profit, and as they have declared it. Only the Income Statement has any actual meaning in this and they say there net income is 8 963 000 SEK or ruffly 1 million USD. All other numbers are just to give you an idea of how the company is going and a where they are useing the money. Now if you say they take all that we put in where is the rest of that "Net funds provided to Entropia Universe"? Thats around 11 million SEK or 1,2 million USD that thay got from partisipans that just vanished? No I think thats our virtual assets. I just think they dont like moving it so withdraws are made from there assets and next deposit will balance it out, becose the less they move money around the less they waist in bank cost, so they put it on you to do bank transfers.
Now a GDP is based on the "value of all final goods and services produced in a country in one year". Now what they have stated is 420m USD is the GNP. Its a small differens in that GNP also count income of its citizens outside and decresses it with the income of foreigners inside the country. but that dosen't matter.
"Value of all final goods and services provided" means that every time something is crafted/looted/found/traded you add that to the GNP. So as money flow back and forth in the craft/loot/findings/trading pools every time we get something its counted to the GNP.
Lets do an example.
I put in 100usd and start mining with tt eq. First round around i got ruffly 950 bombs and in a full round lets say I loss 20%. I added to the GNP 760 in findings and now say I sell it for 110% so now I get 76 in trade thats also added to the GNP witch is now up to 836 just by my 1000ped that i rotated one time.
Now think about how mutch is looted, found and crafted in a year and then add the gain of all trades in a year. So GNP basicly just a number that tells how mutch money is circulating.

heancaze said:

I put in 100usd and start mining with tt eq. First round around i got ruffly 950 bombs and in a full round lets say I loss 20%. I added to the GNP 760 in findings and now say I sell it for 110% so now I get 76 in trade thats also added to the GNP witch is now up to 836 just by my 1000ped that i rotated one time.
Now think about how mutch is looted, found and crafted in a year and then add the gain of all trades in a year. So GNP basicly just a number that tells how mutch money is circulating.

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Holy smokes...
I guess you might want to revisit your scenario...

edit: this reminds me a little bit of "Buying sweat .5 selling sweat .6 @turret". The logic of both is quite similar

The most interesting thing i see about this thread, is that this is Coubo's first post. And talking about "Our" money. I would seriously doubt we're talking about "Our" money.

There's also a huge number of orphaned accounts, folks that depo small sums, play for a while, then move on. That ped is forfeited in most instances, and just rolls into income.

I correct myself, your all right, its just me counting wrong, the avrage value of the USD was 7SEK last year not 8SEK, so you are all right they actualy do take all the PED and count is as revenue. my bad.
By the way about swedish banking laws, it applyes to any biz that operate in Sweden. It just regulate a bank more then any other biz. I so hope thats how it done in US too or i can see how they are on there way to a depression.

heancaze said:

Now a GDP is based on the "value of all final goods and services produced in a country in one year". Now what they have stated is 420m USD is the GNP. Its a small differens in that GNP also count income of its citizens outside and decresses it with the income of foreigners inside the country. but that dosen't matter.
"Value of all final goods and services provided" means that every time something is crafted/looted/found/traded you add that to the GNP. So as money flow back and forth in the craft/loot/findings/trading pools every time we get something its counted to the GNP.
Lets do an example.
I put in 100usd and start mining with tt eq. First round around i got ruffly 950 bombs and in a full round lets say I loss 20%. I added to the GNP 760 in findings and now say I sell it for 110% so now I get 76 in trade thats also added to the GNP witch is now up to 836 just by my 1000ped that i rotated one time.
Now think about how mutch is looted, found and crafted in a year and then add the gain of all trades in a year. So GNP basicly just a number that tells how mutch money is circulating.

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..errrr no

GDP the way MA calculate it is the market value of all the goods flying about in their world. It's not what's circulating cos there was never an inflow of 420m USD... this figure is purely fictional and talking about a GDP is in some way ridiculous anyway cos all the value in this game is not produced by people but by MA... It;s pure marketing..

So not only did it acquire funds from its IPO of any stock they release, but they also use its customers to supply their activities.

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I hate to break this to you but the IPO got cancelled so the majority of funds they acquired came entirely from the player base.

SpikeBlack said:

I hate to break this to you but the IPO got cancelled so the majority of funds they acquired came entirely from the player base.

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Partly wrong... yes the IPO got cancelled but MA shares where offered to private investors... the equity out there reflects that. That is money MA received. That's the bit I don't understand... how can they increase the equity on these shares... I don;t get it... did they revalue the company ? Maybe someone who's a financial analyst can explain this to me ...

AJack10600 said:

Partly wrong... yes the IPO got cancelled but MA shares where offered to private investors... the equity out there reflects that. That is money MA received. That's the bit I don't understand... how can they increase the equity on these shares... I don;t get it... did they revalue the company ? Maybe someone who's a financial analyst can explain this to me ...

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Sort of, yes.
I am sure there have been different valuations on a discounted cash flow basis, thus determining the agio on shares issued (representing the goodwill).
The cash inflows from the agio on shares issued always needs to be recognized as equity, namely share premium/capital reserve.

RagLodbrok said:

Sort of, yes.
I am sure there have been different valuations on a discounted cash flow basis, thus determining the agio on shares issued (representing the goodwill).
The cash inflows from the agio on shares issued always needs to be recognized as equity, namely share premium/capital reserve.

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Call me an idiot... of course... since they beef up the assets they have to raise the equity... am I stupid or what

And we go back to our initial first accounting class

Assets = liabilities + equity

sigh

I love those EF accounts that are just being registered to create a stir with no real substance
And yes, I can read annual and quarterly reports, I probably just interpret them differently

I got nothing more to say....well...cept....the sky is falling....take cover

Zefram said:

I love those EF accounts that are just being registered to create a stir with no real substance
And yes, I can read annual and quarterly reports, I probably just interpret them differently

I got nothing more to say....well...cept....the sky is falling....take cover

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That's the same as before the financial crisis... there was those that said carefull there is a problem and others that said naaaa stop being negative the future is ours