We’ve published our 2020 year-end financial statements, our SEC mandated 1-K. In the traditional public company world (if we were a “fully-reporting” company), they would be called a 10-K. The important difference between the two is the depth that we’re required to go into creating the statements, plus the level of audit required. For a company the size of iConsumer, I don’t believe there’s a substantial qualitative difference.
The year of the coronavirus pandemic
What a year. Starting in March, we spent most of the rest of 2020 worrying about survival as a company. We first reacted with a Pandemic Pivot. We knew our member / investors were also worried about survival. We began to offer 95% Cash Back. We figured we’d try to help your pocketbook today, and not focus on future growth.
We knew that 95% Cash Back wasn’t a long-term strategy. It doesn’t provide sufficient cash internally to begin to fund our operations. Between $60,000 in a government loan, the patience of some investors, and mainly my ability to support iConsumer, we made it through to October, when we pivoted back to our singular message of Stock Back.
Along the way, our revenues increased (people love “free money”), our membership increased, and we continued to improve our operations.
Perhaps the most important hangover from the Pandemic Pivot was the need for my continued support of the operation. I continue to support iConsumer by covering the cost of its overhead through another company I own. I view it as a great investment. Obviously, I’m buying, not selling.
By the end of the year, it was possible to be hopeful about the future. Of course, everybody figured out Amazon was a great place to shop. We love the fact that people chose to use iConsumer to shop at Amazon. We talk about our progress at Amazon monthly on Shareholder Academy.
We had an investor put in $100,000 in late December. As I write this, we’ve begun advertising campaigns on Reddit and Facebook to increase membership, our revenues and membership numbers are headed in the right direction, and potential larger investors have begun sniffing around us. Important stores that had ceased doing business with us are returning (think Walmart). And, travel is beginning to happen again.
I’m going to go into some detail about the past year, but other than proving that we can survive a world-changing pandemic, I’m not sure what the long-term implications of analyzing our last year’s results might be.
On the other hand, the change in the market and peoples’ buying behavior due to the pandemic are profound, and I believe that iConsumer is very well positioned to take advantage of those changes.
Stock market observations
While I continually caution that investing in iConsumer is a long-term horizon kind of thing, and that we shouldn’t watch the stock price, it’s impossible not to peek at the price occasionally (like every morning and dinnertime, if you are me). Especially when it goes up. Or down. To reiterate, we’re still low liquidity / high volatility. Just one or two transactions can swing our stock price wildly. From a brief low in the October time frame, to around $.15/share now, the trend (and volume) has been pleasing. I look forward to iConsumer being worthy of an even higher price.
Elsewhere I have written about our longer term goal of being able to uplist to the NASDAQ or NYSE. And my belief that it’ll take a $4/share stock price to make that possible. We have a way to go still.
The biggest changes of 2020
We went from generating healthy cash per transaction at the beginning, to next to no cash per transaction from mid-April to late October, back to generating healthy cash. Our transaction volume did pick up during the period we offered 95% Cash Back, and as expected, dropped back down with the return to solely Stock Back. But the overall cash generated went up, even with fewer purchases being made.
A quick financial statement primer
There are four separate sets of numbers that make up the “financial statements“: The statements of operations (income statement / profit and loss statement); the balance sheet; statements of cash flows; and statements of changes in owners’ equity.
The balance sheet is a picture in time. As of December 31, 2020, what were the balances (how much cash did we have, how much money did we owe, etc.). The other statements cover a period of time (in this case all of last year). In other words, how did we get to where we are?
The important questions
We’re still in startup mode. Cash is still the most important thing to watch (that’s true for most businesses, but even more so for startups). How did we generate cash last year? How did we spend that cash? How did we finance the fact that we spent more cash than we took in?
I focus on our gross profit as the best indicator of our “goodness”. More specifically, on the cash portion of the gross profit. For a startup where cash is king, focusing on that metric eliminates the distortion caused by the awarding of stock, and, this year, the effects of 95% Cash Back. For the year, cash generated was down ($86,502 vs. $118,875 in 2019). Those numbers are derived by taking the Gross Profit (Loss) and adding back the non cash Member Stock Back Rebate from page 15 of the financial statements.
Another, more detailed way, of getting to that understanding is to look at the Statements of Cash Flows (page 16).
The “M, D & A” (Management’s discussion and analysis) starting on page 4 goes into detail. Note that we call out where some of that expenditure was in the form of our stock, which is definitely not cash.
We prefer to use stock to pay our bills. The biggest downside to that is that using stock dilutes the value of the stock you own. But it certainly conserves cash. The more valuable the company becomes, the easier it is to use stock, and the less stock we have to use. Read about dilution here (scroll down a bit to get the juicy bits).
Financing negative cash flow
Negative cash flow is a simple concept. More cash goes out than flows in. Positive cash flow leads to a growing bank balance. The question we need to answer every day is “where are we going to get the cash to pay our bills”.
The Statement of Cash Flows (page 16) gives this detail.
There are typical ways to finance a growing business. We can try to sell stock for cash. We sold $222,949 of stock for cash in 2020. We can try to borrow money. We borrowed $61,217 from the government in the form of an EIDL loan. On the other hand, we actually paid my other company back a bit – $40,330. That’s the related party transaction. The best way, and we’re not there yet, is to generate positive cash from operations.
Related party transactions
The financial arrangement that made iConsumer possible was the fact that I own a company in a related business, called OSS. We leverage OSS’s resources: OSS actually employs everybody who works for iConsumer, and in turn, iConsumer pays (when it has the cash) OSS a fee. That fee is based on revenues. Beginning in March, 2020 OSS started waiving this fee, and as of today, has not reinstated it. In part, this is because iConsumer, having no employees, did not qualify for a PPP loan, and OSS did.
Had iConsumer paid full price for the services that OSS provided, iConsumer would have lost a lot more money, and it would have had to figure out how to pay for those services.
The cost of being public
Our legal and accounting bills are really independent of our revenues. If we weren’t required to do a public-level reporting and regulatory compliance and stock issuance, they’d a lot less. This year, we managed to reduce our expense from about $100,000 last year to about $50,000 in 2020.
What’s next on the regulatory and investment fronts?
This year, we changed up how we’re filing the paperwork that allows us to offer stock as an incentive for shopping and other activities. In March of 2021 the SEC qualified our latest offering, which also means that our timing for filings in future years will be a bit easier.
In 2021 and beyond
We’ve working to leverage our status as a publicly-quoted company to raise money to expand our marketing and to pursue potential acquisitions. The pace of those kind of conversations has picked up. For members, we continue to emphasize the long-term nature of earning iConsumer stock as a reward. We expect the U.S. economy to be strong for at least a year. While it is uncertain exactly how much more stimulus money will be injected into the economy, our expectation is that it will be sizable. One fear is that this will cause inflation. iConsumer’s revenues and primary operating costs are tied to the price of goods, giving us some protection from inflationary pressures.