While we’re not required to file semi-annual financials, we think it’s a good practice to make sure that our shareholders have the ability to see how we’re doing.
There is a discussion of our results included in the financials. I urge you to read them. But here are the two most important things to understand.
First is cash, and the distorting effects of members earning equity (stock in iConsumer) for their iConsumer activities. We are required to treat the equity a member earns as an expense. Which is fair. But, it’s not a cash expense. And as they say, cash is king.
So you may want to concentrate on the Statement of Cash Flows (page 10) to get a better idea of our cash position. You’ll see that we used $57,915 more cash than our operations took in. The next portion of that statement shows how we funded that cash outflow.
Second is gross profit. We think that this is the most important measure of growth and health. We’ve started showing only the cash expense associated with member activity as our cost of goods on our Statement of Operations (page 8). The expense of issuing stock is now completely in the marketing expense category. That’s a change from prior financial statements, so we’ve restated the prior numbers so that you can compare results more easily.
The change means that you can quickly and easily see how much our operations are generating, without the distorting effects of the stock being issued.
Revenue isn’t as good a number to watch in our position. As you’ll see, as of June 30, 2016, our revenue was $328,478. And it went DOWN for the period ending June 30, 2017 to $210,706. But that was an “ok” thing. Because, our Gross Profit went up. We had negative gross profit for the period ending June 30, 2016. And it went up to $24,168 for the period ending June 30, 2017. That’s a positive swing of almost $136,000.
What I really like to see is both revenue and gross profit going up, so long as other expenses don’t grow too fast. But 2016 was a year of experimentation, so I’m not unhappy.
So why the improvement? In 2016, we used increased cash back as a way to attract new members. We rebated more cash than we took in as income. We did that on purpose, and it worked well as a way to launch our business. But long term, it would be disastrous. In 2017, we no longer needed to do that to attract new members. And so we stopped!
Audited vs. Unaudited Financials
One of the things we’re hoping to accomplish with Shareholder Academy and our blog posts is to give our members a little bit of insight into crowdfunded startups. And not all of our members are familiar with all of the lingo.
Audited financials are prepared by the company, and then an auditing firm (a bunch of highly trained CPAs) looks at them to make sure we’re telling the truth, and telling the whole truth. In many respects, while we pay the auditors, they work for our investors, lenders, and others that want to make sure the financial information we provide is accurate.
Unaudited financials are prepared by the company, but nobody outside the company is responsible for reviewing them, to test to make sure we didn’t make a mistake. So, they may be less reliable than audited financials. Having said that, we think they’re reliable, and we work really hard to make sure there aren’t any mistakes!