GOTHAM CITY RESEARCH’S OPINIONS

  • MDCA shares are worth less than $1.00 per share, implying 96%+ downside.
  • MDCA will restate several years’ historical results as a result of the issues covered in this report and elsewhere.
  • The on-going SEC investigation will lead to new revelations of wrong-doing.

SUMMARY OF FINDINGS

  • 2015 organic revenue growth is ~1.5%, not 7.2% as reported. Organic growth well below industry averages.
  • MDCA’s true Debt is understated by ~$300 million, or 23% of stated Debt as of 2015.
  • At least 42%-53% of reported profits are suspect.
  • 7+ executive departures within recent quarters. At most 3 of Crispin Porter Bogursky’s original 13 partners remain.
  • Doner lost a key 16 year-old client account in Q4 2015.
  • 72andSunny was recently sued twice for copyright infringement. Crispin Porter Bogursky was similarly sued several years ago before CP+B’s fell from grace.
  • BDO and David Wiener & Co are quasi-captive entities MDCA used to structure its dubious accounting strategies.
  • Tax deductible intangibles and goodwill have declined from 100% tax deductible in 2013 to only 16% in 2015.
  • MDCA’s former auditor KPMG expressed “an adverse opinion on the effective operation of, internal control over financial reporting”. MDCA soon after hired BDO.
  • The BDO audit partner assigned to MDCA, after MDCA’s switch from KPMG to BDO, was sued in Nussdorf v BDO Seidman for promoting fraudulent & illegal tax shelters.
  • Deferred acquisition considerations paid out to acquired companies’ partners may be taxed at ordinary income.
  • Dubious related party transactions continue, despite Miles Nadal’s departure, e.g. Lori Senecal’s husband hired last year & compensated $1 million for 5 months’ work.
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