Comparative income statements for Grammar Inc. are as follows:

.............................................         2012                 2011

Sales.........................................$1,000,000.......$500,000

Cost of sales....................................500,000.........300,000

Gross profit..................................$ 500,000.......$200,000

Operating expenses...........................120,000.........100,000

Operating income...........................$ 380,000.......$100,000

Loss on sale of subsidiary....................(400,000)...............-

Net income (loss)............................$ (20,000)......100,000

Required

The president and management believe that the company performed better in 2012 than it did in

2011. Write the president's letter to be included in the 2012 annual report. Explain why the company is financially sound and why shareholders should not be alarmed by the $20,000 loss in a year when operating revenues increased significantly.