I can't explain it any other way. The company has explained it...

I can't explain it any other way. The company has explained it exactly the same way that I have as well.

Add the payments to merchants as cash receipts because that's where they end up. It's recorded as a loss in a cash flow statement because it's cash used in operating activities. However, in a financial statement it's recorded as accounts receivable which is an asset. The cash flow statement will always show payments to merchants as an accumulated loss however this is not what you would see in a year end financial statement as it's actually money owed by customers, hence accounts receivable.

If you added the payments to merchants straight to the cash receipts and then added in the operating expenses from December you would have the March quarter figures excluding new cash receipts and any payments to merchants. Net it off and the loss is around $3.5m over 9 months.