As another former CPA and frequent poster on this board, I thought I would add my comments about the newly issued financials.
1. Audited. By definition, audited financials must have an auditor's report. These don't, therefore they aren't. They are already late -- if an auditor's report is due out in a day or two, why not wait??? Doing it this way just hurts credibility, reeking of desperation.
Observation: the listed accountant in Clearwater, FL is the same one who was shown as the accountant for the 2013 annual financials, but NOT the same as the WA accountant for prior financials. Likely the Clearwater person was pushed to get out the 2013 financials but spent more time on these.
2. Arithmetic, Appears much better. The balance sheet actually balances, the Comparitive (sic) Statement of Cash Flow foots, etc., creating more confidence.
Net, even if not audited, I have substantially more confidence in these statements than prior ones (other than the treatment of stock issuance, where I am uncertain about treatment).
3. Operations.
- Revenues have suffered a 15% decline, per the current financials, from $366K in Q1 2013 to $318K in Q1 2014. Hard to reconcile with the claim of 'fastest growing....'
- Or even more?? Interesting that revenue was originally reported as $433K for Q1, 2013, but is now reported to have been $366,673. 15% less.
- And -- no surprise -- the company was unprofitable in Q1.
- While the 2013 restated report is not out, review of the Issuance History shows that rather than a profit in 2013, the company had a loss of $1.4M, likely more than sales when the final numbers are out, particularly if sales for the entire year are reduced from prior financials.
4. Stock Issuance.
- Limited in Q1, good.
- BUT, the company is now using .01/share for many of the earlier shares issued -- better than the previous (Q1 2013 and earlier) par value of .001, but not market value.
Though not stated, my supposition would be .01 is being justified by restrictions on sale of the stock -- but if so a more logical approach would be as a percent of market (not sure what accounting standards say here). Some of the shares issued are shown at market value, indicating some thought given to the subject.
- Per these financials, a total of $150K of stock was issued in Q4; but the company's 1 October 2013 PR (no longer on website) said that $1.7M worth of advertising was purchased in return for a subset of the total stock issued in the quarter. And certainly, we have seen a lot of advertising of late!!!
This latter point is yet another reason to question the use of .01, and the use of .025 for preferred stock -- but I do not know the appropriate standards.
5. Intangible Assets
- Substantially reduced from prior reports, when the account was tagged as 'Unidentified Intangible and Tangible Assets.'
- Appears to have reduced for two reasons:
- Allocation to prior period expenses; and
- Use of .01 per share for many of them, versus market values in the Q2, Q3, and Annual 2013 reports.
- I agree with those posters who suggest the company should present a rationale as to why these assets are on the balance sheet, and the strategy for their amortization. Whether such disclosure is required, I don't know.
6. Fixed Assets.
- Not sure if the 2013 numbers are for 6/30/2013 (header on the column) or 3/31/2013 (upper left hand corner) or 12/31/2013 (prior year end, the traditional comparative date on interim financials).
- But, they are dramatically down. The 2013 financial statements showed net fixed assets at 12/31/13at $520K; the second column of the current balance sheet shows them having been at $212K; and the 3/31/14 number is $129K.
- To me, this writedown is encouraging, suggests someone is actually paying attention to the financials.
