Report on 2023 financial results

Dear stakeholders,

We are pleased to present our financial and compliance information for 2023. Like many nonprofit organizations, May 15th was our deadline for submitting a Form 990 to the IRS, reporting on the prior year’s finances and activities, and many state forms share the same deadline for their registration forms. We submitted our forms on time, of course!

We set 5 key financial goals for ourselves for 2023: (1) cut overhead costs in half from 2022, (2) have the majority of expenses go towards program services, not overhead, (3) prioritize investment in in-house research as compared to giving out external grants, (4) decrease our reliance on major donors in favor of broader support, and (5) change our banking processes to reduce fees and improve budgeting ability. We succeeded at all 5 goals.

In 2023, we earned $23,125.34 in revenues and had $9,374.15 in expenses for a net income of $13,751.19. Several shifts in focus, especially towards in-house research and volunteer work, are revealed in the numbers. Detailed discussion follows the table below.

1 – A leaner, volunteer-only organization

In 2022, we stopped employing a couple part-time folks, and 2023 was our first full year in a long time where we didn’t have any employment-related expenses. No paid time, no payroll taxes, no payroll service fees.

Even though the employees’ paid time went towards a lot of research hours, IT work, compliance work, and other odds and ends, at the end of the day, it was overkill for what we needed. In 2023, without anyone on payroll, we did not slow down on our progress on the tail neuroprosthetic project, the integument review project, the Wnt-Frizzled wet-lab project, or our work to understand, model, and engineer anatomy across the body, especially the head. Nor did we experience any setbacks with IT, compliance, or community outreach.

We made the right call on sticking with only volunteer effort, and learned our lesson.

The lesson, by the way, is an open secret: the volunteers in our organization are intimately interested in making sure we succeed at our goals in freedom of form, whether because they are directly affected by it, or know someone who is. A paycheck will never really be impetus for someone to work on our mission.

My point is, we will only be able to increase the amount of work we get out of any given person if we can replace their day-job. Part-time pay will not be effective at increasing work output, because folks are already volunteering as much time as they can without sacrificing their other obligations.

Due to having no employees, again, the associated costs and fees went away. Furthermore, spending on compliance and IT/office supplies declined in 2023 ($2,002.15 and $2,359.17 respectively) compared to 2022 ($3,243.08 and $3,323.13 respectively). The biggest remaining contributors to compliance costs are maintaining registered agents in a few states, and a variety of filing fees in several states. The largest drivers of IT/office expenses are our website and platforms, which includes an actively managed website hosting service (which has proven to be very useful!).

Overall, we have cut our overhead costs from $11,998.85 in 2022 to $4,587.49 in 2023. Slice!

2 – Majority of spending towards program services

We want to focus most of our effort on solving the key barriers to making freedom of form a reality. While there will always be costs associated with keeping the lights on/administrative expenses, administration should not take the majority of resources for any organization.

So what should? Program expenses of course! For us, preferably dominated by research expenses.

In 2023, we spent $708.49 on the tail neuroprosthetic project, $3,279.27 on the Wnt-Frizzled pathway project (with most of those costs going towards purchasing reagents), and $798.90 going towards work on craniofacial anatomy and modeling. Program expenses in 2023 came to $4,786.66.

Overall, out of $4,587.49 + $4,786.66 = $9,374.15 in total expenses, program services spending came to 51.1%. (We almost hit a much higher research proportion than that, though a big research expense of another few thousand dollars didn’t happen until January 2024. Oh well, that will make our 2024 program services spend look fantastic, for those of you interested in big numbers!)

3 – Changing the focus of research expenses

In 2022 and even 2021, we spent a lot of money on program services, including research. However, looking at the cash flow history above, there is a clear shift in our focus.

In 2021 and 2022, we committed funds towards outgoing grants or external research activities. The 2021 grant of $4,000 was for Hugh Herr’s laboratory at MIT, and the $2,550 in 2022 was for defraying open-access license costs for a journal article we had previously supported. While we are proud to have supported those efforts, it is frankly easier to judge whether or not something is working when we do it in-house, as compared to external efforts.

Also, in prior years, a significant portion of former employee time was spent on research activities. As we discussed above, though, we found that part-time pay, no matter how much we hoped, was not effective at getting more useful work done. The amount, and value, of research done in 2023 surpassed that of prior years, made possible by volunteer work, and by reagents and supplies funded by donations.

Our volunteers are insanely talented. When I sit in on meetings for the tail neuroprosthetic project, I’m always in awe listening to the electrical engineers and programmers chat – I can barely keep up, but they’re genuinely understanding the problems and solving them. And they will continue solving various challenges until they get the sensors and signal processing working paw-in-paw with a mechanical tail that moves naturally without the user’s conscious thought. They’re that committed. You simply cannot get that sort of dynamic from an external team.

4 – Increasing our base of support

In 2023, we earned a total of $23,125.34 in revenues. Donors giving through Patreon led the way, generously contributing $18,687.53 to our organization. Major donors – who prioritize funding overhead expenses – contributed $4,000 in 2023, a decline from 2022 and reduced again from 2021. Other donations, mainly coming through PayPal, came to $434.49. And finally, we earned a cute $3.32 due to interest and currency fluctuations.

Our major donors continue to be committed to supporting our organization, including their commitment to cover most overhead expenses. This is why we are able to say that when folks from the public donate to us, the vast majority of their donations go towards program services (or are saved for future program service spending when we can use the money effectively).

In the next couple years, as we wrap up our literature review and model-building projects (integument and craniofacial especially), we will have many follow-up projects lined up that will require wet-lab or otherwise hands-on work and would be accelerated if researchers could work on them full-time. We have made phenomenal progress towards being able to do this, thanks to community support. And honestly, with just another one or two doublings in revenue, we should be able to do that. In fact, on December 31st, 2023, 67 folks were donating to us on Patreon, whereas as of this writing, on May 30th, 2024 there are now 89 – a 33% increase. As several of our projects are reaching the point where results are becoming more visible and verifiable by outside parties, we should be able to make even more headway towards being able to conduct the sorts of wet-lab and hands-on research we need to do.

5 – Changing our banking processes

In 2023, Serathin, our Treasurer and CFO, led our efforts in looking into a bank that would give us greatly reduced fees, better customer service, improved data organization, and increased financial resources to help the Freedom of Form Foundation grow.

It took a few months to research and carefully consider our options. US Bank rose to the top of the list, and Serathin had the pleasure of meeting with their business manager for the means of opening accounts. They were more than helpful and answered many questions we had. Finally, we moved forward with opening a new checking and money market account, and also opened our first lines of credit.

Around the middle of 2023 we successfully moved from Bank of America to US Bank. At the end of 2023, we also opened a money market account with much better interest rates. Their dashboard also gives us better organization and categorization so that we can better track and finance for bigger and better projects.

Looking ahead

In 2024, research is on track to dominate our expenses, and we are happy with this! It means we are spending money on the things we most want to do. In round numbers, we’ve spent upwards of $6,000 so far in 2024. For example: we bought a (small) -80 °C freezer!!

We have several actionable tasks that purchases – reagents, supplies, electrical components – can help with, and we are thrilled to be able to make them happen.

As well, we are (finally) content with our overhead expenses! If we can keep our overhead approximately level in 2024 from 2023, that will be a success.

In 2024, we have started saving net income in the aforementioned money market account, a safe investment vehicle to gain some amount of interest while keeping that money available if it is needed. We are additionally looking into opening an investment account at a financial institution so that we can get slightly higher returns for money we don’t need immediately (though still erring on the side of safety).

Our official Form 990-EZ we filed with the IRS can be accessed from the right side of this page (if on desktop) or at the top or bottom of the page if on mobile. If you have any questions, please feel free to reach out.