First, let me thank you for supporting iConsumer as a member and as a shareholder. These monthly letters are one of the most fun things I get to do. We’ve over 50,000 shareholders and soon-to-be-shareholders, all experiencing what it’s like to own a piece of a publicly traded start up. We’re proud of iConsumer, and you should be too. It’s some sort of record.
This month’s most important news is the filing of our Form 1-SA, our six-month financial statements for the period ending 6/30/2018. Private companies don’t have to report to their shareholders. The filing includes lots of numbers and an analysis of those numbers. I urge you to read it, there’s some good stuff there. But it is 21 pages long. I’m going to focus today on what I think are the most important bits.
Overview
This set of statements are the first to show an entire period where we were offering Bitcoin in addition to our equity as a reward. We settled on this formula at the very end of 2017. These financials give us the best insights as to how the various pieces of the business are working, now that we’ve settled on a business model.
The effect of “giving away” our equity
You actually earn our equity (the SEC and our accountants really want us to emphasize that). I agree, it’s important to account for that. But it has no cash effect. That is, you are getting value, but our bank account balance doesn’t go down. Cash is king. Especially for startups.
The inclusion of the stock portion of the reward in these statements masks the cash effect, and that’s distracting for cash management purposes. The Statement of Cash Flows goes a long way to present the numbers in a helpful manner. I’m going to go one step further to help you look at what I look at by also unpacking the Gross Profit number in more detail to focus on cash.
First, we’ll start with the Statement of Operations (you may know of it as a Profit and Loss statement (P&L), or an Income statement.
Revenue / Income
We changed our business model in 2017. We were learning lots of things, so we wanted people to become members, almost at any cost. One way to do that was to bribe them … to give more cash back than was prudent in the long run, even in some cases giving more cash back than we earned from stores. When we stopped doing that, people stopped using us as much. So our Income dropped from $211,266 to $73,738. That would be scary, but we actually INCREASED our Gross Profit. We sold less and made more.
Gross Profit
I think this is the most important number on the financial statements at this stage of iConsumer’s growth. It improved by almost $95,000. That’s before adjusting for the non cash expense of the stock that members earned.
To figure out the cash number, we add back in the Member Stock Back Rebate. After doing that, you’ll see that we generated almost $21,000 more in 2018 over 2017. In other words, we cut our revenues by 66%, and almost doubled our “cash gross profit”.
This tells us how much cash we generated from our members’ shopping. More is better. If we don’t generate sufficient cash this way, we have to find the cash somehow else. Maybe we borrow it or maybe we sell some stock. But generating cash from operations is by far the best way.
Net loss
We went from a loss of $589,132 to a loss of $196,256, an improvement of $392,876. Pretty good for a startup. That still includes the distorting non-cash effects of the stock. To come up with a more useful number we’ll back out the stock rebate and rewards. For 2017 we’re backing out $403,104 and for 2018 $104,198. That means our Net Loss (ignoring the non cash cost of the stock) was $186,028 for 2017, versus $92,508 in 2018. We cut our loss in half.
Statement of Cash Flows
For iConsumer, this is perhaps the key set of numbers to show how we’re doing. It shows how much cash we used and where that cash came from. We used $91,375 in the first half of 2018, versus $142,907 in 2017. An improvement of over $50,000.
The eventual goal is to see the word “generate” instead of “used”. In other words, Net cash provided by Operating Activities would be a positive number. Until then, that cash has to come from someplace. This table shows that we raised about $31,000 from investors, and that I lent iConsumer $104,265 (I’m the related party).
Big Disclaimer
My discussion of these derived numbers does not follow GAAP or SEC rules. They are the numbers I use to understand how we’re doing at the most basic level, and they’re not official accounting numbers. Also, to be very precise, members earn our shares provisionally. That is, we account for them because we assume the member is going to complete the process by, among other things, providing the right ownership information (like social security number), transferring them to the transfer agent, and the purchase isn’t returned.
In other news
The holidays are coming (make sure your iConsumer Button is working), we’re still raising money if you’d care to invest, the volume of stock trades seems to be going up, and we’re still a very volatile stock. A single trade can easily move our stock price up or down a lot.
To Close
Go shop! Tell Friends! Tell Friends to Go Shop – you’ll earn a stock bonus when they do, and they’ll help make iConsumer more valuable! While there’s no guarantees, more valuable may just turn into a higher stock price. And that’s GOOD.