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Session 5 - Forecast - Spin Kicks Case - QUESTION
Session 5 - Forecast - Spin Kicks Case - QUESTION
Spin Kicks Limited ("Spin Kicks" or the “Company”) is an interactive fitness platform with a
loyal community of Members. The Company created and sells interactive spin bikes ("Spin Bike
Products") and streams immersive, instructor-led boutique classes to its Members anytime,
anywhere. The Company makes fitness entertaining, approachable, effective and convenient
while fostering social connections that encourage its Members to be the best versions of
themselves.
The Company’s primary source of revenue is from sales of its Connected Spin Bike Products and
associated recurring subscription revenue.
Connected Spinning Products
The Company recognizes Connected Spin Bike Product revenue net of sales returns and
discounts when the product has been delivered to the customer.
Subscription
The Company’s subscriptions provide unlimited access to content in its library of live and on-
demand fitness classes. The Company’s subscriptions are offered on a month-to-month basis and
revenue is recorded each month. Members pay their monthly fees in the month the Company
records revenue.
The Company became a public corporation in 2019. Revenues have increased significantly in
2019, however the Company continues to report losses and negative cash from operating
activities. Attached are the financial statements for 2019 and 201
LIABILITIES
Accounts Payable and Accrued Liabilities $ 13,600 $ 5,000
Current portion of long term debt 100,000 41,000
Total Current Liabilities 113,600 46,000
SHAREHOLDERS' EQUITY
Common Shares 1,550,400 1,033,000
Retained Earnings (724,400) (630,000)
826,000 403,000
Total Liabilities and Shareholders' Equity 1,234,600 510,000
Revenue
Spin Bikes Product $ 158,000 $ 78,000
Subscription 70,000 34,000
Total Revenue 228,000 112,000
Cost of Revenue
Spin Bikes Product 68,000 42,000
Subscription 21,000 11,000
Total Cost of Revenue 89,000 53,000
Gross Profit 139,000 59,000
Sales and Marketing 78,000 46,000
General and Administrative 61,000 50,000
Reseach and Development 17,000 12,000
Depreciation 60,000 25,000
Operating Income (77,000) (74,000)
Interest expense 17,400 11,000
Pre-tax Earnings (94,400) (85,000)
Income taxes - -
Net Earnings (94,400) (85,000)