Cash is King – Interpreting iConsumer’s Financial Statements

By: Robert Grosshandler | February 17, 2017

We’re required to prepare and publish audited financial statements yearly.  Understanding those statements can be challenging.

Early stage companies almost always show losses.  Amazon showed losses for most of its history.  It’s the very rare company that doesn’t show losses as it is getting started.  Facebook, Google, Uber …. you can take your pick.  All had losses for many years.

Usually, a company doesn’t go public until those early years are behind it.  Amazon was a notable exception to that practice.  iConsumer is an exception.

Losses can have two parts.  Cash and accounting.  An accounting loss is a “paper” loss.  Important, but not vital to the eventual success of a business.

The absolutely vital loss is a cash loss.  It’s why many business people say “Cash is King“. Without cash, a company will fail.

A major component of iConsumer’s loss is an accounting loss – a non-cash loss.  Whenever we use our stock to reward members, we’re required to account for that stock.  When a member gets 100 shares for registering, that “costs” iConsumer $9.00.  But it’s not cash.

On a cash basis, we don’t expect iConsumer to be self-sufficient for several years.  Our estimates are that somewhere around 250,000 members, we’ll be cash-flow break even.  That’s what makes us early stage.  It’s why we’re raising money via our offering.  It’s why having the crowd help to build the company is so interesting.  The faster we grow via our members telling other people, the less cash we’ll need to be successful.

Until we reach break even, we’ll need to continue to find outside sources of cash.  Until we have sufficient cash in the bank, and until our operations are consistently break even, we expect our very conservative auditors to say “this company may not survive”.  That’s one of their jobs, to make sure everybody has the right information to understand the risks involved in an early stage company.