At The Motley Fool, we champion the rights of the individual investor, and value transparency and accuracy from the companies we recommend. (For background, we championed the retention of the FoFA rules, and in the US, appeared before a US House Committee to give evidence on their 'Regulation FD'.)
One of our recent Buy recommendations at Motley Fool Hidden Gems was Mobile Embrace Ltd (ASX:MBE). We subsequently recommended our members sell, for a significant profit. Part of the reason we made that call was because we were unable to have company management answer a question on their financial statements.
Specifically, there was an item on the Statement of Cashflows that we couldn't understand — it seemed to be a non-cash item. We tried several times to get an answer, but were unable to.
Our question related to the company's most recently submitted accounts.
You can see this item on the Statement of Cashflows:
And this note:
The total of the Clipp investment in the note tallies to the $1,936,722 in the cashflow statement, but is majority non-cash, according to the company.
And we think it should be non-cash. Here's why: We went back to the announcement of the Clipp investment on June 10, 2015. The company states:
Now, 4.59m shares at $0.26 works out to $1.19m. We assume the residual between the $1.19m and the $1.353m above is the implied value of the options.
So here's our question: if the $1,353,389 is non-cash, but the total of the 'investing cashflow' tallies the total of the Clipp investment — what are we missing?
We've raised the question with the company — multiple times — but haven't yet received a suitable answer. We'll keep asking.
