PRELIMINARY OFFERING CIRCULAR DATED JANUARY 18, 2017
iConsumer Corp.
Suite 351
19821 NW 2nd Avenue
Miami Gardens, FL 33169
(800) 372-6095
94,573,561
Series A Non-Voting Preferred Stock
SEE “SECURITIES BEING OFFERED” AT PAGE
26
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Price to
Public
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Underwriting discount and commissions1
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Proceeds to issuer2
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Proceeds to other persons
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Per share
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$0.09
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N/A
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Total Maximum
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$1,852,475
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0
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1,852,475
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N/A
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(1)
The company does not currently intend to use commissioned sales
agents or underwriters. In the event it uses commissioned sales
agents or underwriters, it will file an amendment to this Offering
Circular.
(2)
Does not include expenses of the Offering, including costs of blue
sky compliance. See “Plan of
Distribution.”
The company is offering a maximum of 94,573,561 shares of Series A
Non-Voting Preferred Stock on a “best efforts” basis
(the “Offering”). The Offering will continue until the
earlier of (1) the date which is one year from the date on which
the Offering Statement of which this Offering Circular forms a part
is re-qualified by the Commission, (2) the date when all shares
have been sold and (3) the date on which the Offering is earlier
terminated by the company at its sole discretion. See “Plan
of Distribution” and “Securities Being Offered”
for a description of the company’s capital
stock.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS
UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR
THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR
COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION
MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION
FROM REGISTRATION WITH THE COMMISSION; HOWEVER THE COMMISSION
HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES
OFFERED ARE EXEMPT FROM REGISTRATION.
GENERALLY NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE
AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF
YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO
ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING
ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE
THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF
REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE
YOU TO REFER TO www.investor.gov.
This offering is inherently risky. See “Risk
Factors” on page 6.
Sales of these securities will commence on
approximately
.
The company is following the “Offering Circular” format
of disclosure under Regulation A.
AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING
CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE
OFFERING STATEMENT FILED WITH THE COMMISSION IS RE-QUALIFIED. THIS
PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION
UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS
OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A
NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE
COMPANY’S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL
OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL
OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.
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Letter
to Prospective Shareholders
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4
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Risk
Factors
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6
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Dilution
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9
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Plan
of Distribution and Selling Securityholders
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12
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Use of
Proceeds to Issuer
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15
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The
Company’s Business
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16
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The
Company’s Property
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17
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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18
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Directors,
Executive Officers and Significant Employees
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22
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Compensation
of Directors and Officers
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23
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Security
Ownership of Management and Certain SecurityHolders
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24
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Interest
of Management and Others in Certain Transactions
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25
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Securities
Being Offered
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26
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Financial
Statements
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F-1
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In this Offering Circular, the term “iConsumer” or
“the company” refers to
iConsumer Corp.
THIS
OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND
INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS
BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING
STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND
INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT.
WHEN USED IN THE OFFERING CIRCULAR, THE WORDS
“ESTIMATE,” “PROJECT,”
“BELIEVE,” “ANTICIPATE,”
“INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH
CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT
MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND
ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE
COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE.
THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE
THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED
EVENTS.
SUMMARY
LETTER TO PROSPECTIVE SHAREHOLDERS
If
you’re like us, you believe that a company can both make
money and, to paraphrase Steve Jobs, make a dent in the
universe.
We
live in a world where a whole generation worries about their
future. Millennials worry about college debt and income inequality.
They fear Wall Street, they don’t understand investment, and
they worry about being stuck in the 99%. They don’t believe
they’ll ever be able to participate in the economy the way
their parents did. They’re giving up on the American Dream.
That’s a real problem for all us.
At
the same time, Millennials are picky, educated consumers. They want
great deals. They want to save money. And they want to save the
world. Like the generation before them, they love coupons, free
shipping, and getting cash back on their purchases. Traditional
desires that built eBates, ShopAtHome, RetailMeNot, Groupon, and
Coupons.com into companies with billion-dollar valuations and
enviable exits for early investors.
iConsumer
is eBates meets Wall Street. Where every customer is also a
shareholder. Consumers save money with coupons, earn money with
cash back rebates because they shopped participating retailers, and
get tangible, freely transferable (and if a market develops, easily
tradeable) equity in iConsumer simply as a result of being a
customer. Skin in the Wall Street game. More shopping gets them
more skin. All because they signed up, for free, to be iConsumer
members.
It’s
why we say that “Ownership is the Ultimate Loyalty
Program”.
Companies
in this business make money by getting consumers to use them to
shop at retailers. Consumers save money by doing so. Retailers pay
for that traffic and loyalty. Companies attract consumers by
aggregating retailers’ deals and offers, delivering those
coupons to consumers, and then sharing the revenue that traffic
generates with the consumer in the form of cash back
rebates.
That
worked well, 10,000,000+ consumers well, but it’s
yesterday’s news. iConsumer goes one major step farther.
Millennials are demanding more. They want to change the world AND
get great deals. By making customers shareholders, we’re
changing their world in addition to giving them rebates and saving
them money. We’re also creating opportunity for iConsumer by
giving customers a vested interest in the success of
iConsumer.
The
hardest part of creating a company with zillions of customers is
acquiring those customers affordably. Title IV of the JOBS Act made
it economically feasible to use stock to attract and reward
zillions of customers by updating Regulation A. By making a
Regulation A offering, iConsumer becomes available to ordinary
people, with each customer and investor owning stock in that
company.
Usually
companies like iConsumer need to raise lots of cash from investors
to build technology or sales teams. Instead, iConsumer licensed
technology and services from iGive, a company Rob founded in 1997
and still controls. We’ve leveraged iGive’s
relationships with over 1,700 retailers.
Act
I is complete. We’re in business. We’re attracting
customers on an exploratory budget. We’ve spent the last
twelve months being the Regulation A pioneers, testing, refining,
building out web sites, the apps, and the support systems.
We’re doing real transactions with real people on production
systems. We had about $40,000 of revenue in January, 2016, from
next to nothing in all of 2015, and about $371,000 of revenue,
4,700 shoppers, and 11,000 members through August 2016. All this
has happened before our offering is qualified, so without the most
important ability … the ability to get customers iConsumer
stock. Now we’re ready for Act II.
Act
II is simple. We need to be quoted. We need to complete this
offering so that prospective customers can see that they’re
getting real stock that has a real worth established by somebody
other than a founder, because somebody paid cash for that stock.
Consumers need to see how much others are paying for the stock
they’re getting just for becoming members and just for
earning cash back rebates.
Act
III is all about marketing. Spending the money we raise in this
offering to let the world know that they can save money and be Wall
Street investors, all at the same time. We have a first-mover
advantage that we want to exploit fully.
Companies
usually wait to offer shares to the public, but we’re unique,
with a first of a kind opportunity to leverage new laws and
technologies to create a successful company. These changes allow us
to include ordinary people in the creation of a new business, to
get ordinary people involved in the early stages as investors and
as customers. These new regulations give us all a chance to create
a company that, with your help, can make a dent in the
universe.
Thanks
for considering us.
Robert
N. Grosshandler
Sanford
D. Schleicher
Co
Founders
P.S.
On September 29, 2016, the SEC qualified our offering. In December,
2016, we did our first closing because we received in excess of our
minimum subscription amount. We’re now on to Act II –
getting ready to be quoted. The funds we’ve raised so far are
assisting us in that quest. Once quoted, we plan a marketing
campaign to take advantage of that fact, in an effort to create a
more liquid market for our shareholders’
investments.
For
the second phase of this offering, we’ve done two things.
First, in recognition of our progress, the price of each share
we’re offering has been changed to $.09. Second, we’ve
lowered the minimum amount an investor can start with to $25.
We’re very interested in having the greatest number of
shareholders possible. As we say, the ultimate loyalty program is
ownership.
Since
qualification, we’ve accomplished securing a Transfer Agent,
we’re in negotiations for a market maker (necessary to have
our stock traded on the OTC QB), we raised some capital
(establishing third party validation for our stock price),
we’ve filed for DTC (necessary to have our
shareholders’ stock transferable into brokerage accounts),
gained a thousand more customers, sent out cash and stock (the
rebates our members have earned) to thousands of people, and
established the basis for a wide audience marketing
campaign.
RISK FACTORS
The
SEC requires the company to identify risks that are specific to its
business and its financial condition. The company is still subject
to all the same risks that all companies in its business, and all
companies in the economy, are exposed to. These include risks
relating to economic downturns, political and economic events and
technological developments (such as hacking and the ability to
prevent hacking). Additionally, early-stage companies are
inherently more risky than more developed companies. You should
consider general risks as well as specific risks when deciding
whether to invest.
The company has only recently commenced its planned principal
operations.
iConsumer
was formed in 2010 and recognized no significant revenues prior to
2016. In the first quarter of 2016, the company experienced
positive results from its market testing. This testing was limited
in scope and duration. After the positive testing results, the
company reduced its marketing expenditures in anticipation of
closing on this Offering. Throughout the balance of 2016, and until
the date of this offering, its focus has been on preparing a
marketing campaign, not member acquisition or revenue growth.
Accordingly, the company has a limited history upon which an
evaluation of its performance and future prospects can be made.
iConsumer’s current and proposed operations are subject to
all the business risks associated with new enterprises. These
include likely fluctuations in operating results as the company
reacts to developments in its market, including purchasing patterns
of shoppers and the reaction of existing competitors to
iConsumer’s offerings and entry of new competitors into the
market. iConsumer will only be able to pay dividends on any shares
once its directors determine that it is financially able to do
so.
The company depends on one source of revenue.
The
company is completely dependent on online shopping. If this market
were to cease to grow, or to decrease, for reasons that may include
economic or technological reasons (including, for example,
recessions or loss of confidence in online commerce due to hacking)
the company may not succeed. The company’s current customer
base of members is very small, having just begun operations, and
the company will only succeed if it can attract a significant
number of customers.
The
company’s current customer base of retailers and advertisers
(to whom it provides advertising and loyalty services) numbers
approximately 1,800. The company will only succeed if these
retailers choose to continue to do business with iConsumer. They
may choose to stop doing business with the company for reasons in
or out of control of the company. There are no contractual
requirements binding the retailer or advertiser to continue a
relationship.
The company is depending on the incentive of ownership in the
company to attract customers.
iConsumer
is using the prospect of ownership in the company and the ability
to share in its success as an incentive to use the company’s
products. If potential consumers do not find this a compelling
reason to use iConsumer as opposed to its competitors, the company
will have no unique selling proposition to distinguish it from its
competitors. This incentive requires that potential shareholders be
able to ascertain the value of their ownership, which may be hard
or impossible to do. The amount of the incentive is calculated
based upon a consumer receiving ownership valued at $1 for each
dollar of cash back earned by the consumer. This calculation may
need to change, up or down, due to market or other
forces.
The value of the ownership earned by consumers is a non-cash
expense to the company.
This
non-cash expense will depress earnings for the foreseeable future.
This may affect the price future prospective shareholders are
willing to pay for the stock. The company’s financial
projections assume that there is a tax benefit to this non-cash
expense. If that assumption is false, the company will have a
larger tax liability than anticipated. The company anticipates
recording the cost of the incentive compensation at the last public
price paid for its stock. If there is no price quoted publicly, the
company will need to use other valuation
methodologies.
The company’s operations are reliant on technology licensed
from a related company.
iConsumer’s
operations are run on technology licensed from Outsourced Site
Services, LLC (“OSS”), a company under common control,
pursuant to an Amended and Restated License Agreement dated May 25,
2016 (the “License Agreement”), which is summarized
under “Interest of Management and Others in Certain
Transactions.” iConsumer pays OSS a license fee for the use
of this technology, and it is the intention of Robert Grosshandler,
who controls both companies, to reduce the fee over time, as
described in “Management’s Discussion and
Analysis.” Changes in the license fee will impact the
company’s expenses and net revenue. Since Mr. Grosshandler
controls both companies, and will continue to control iConsumer
after this offering, he will have the power to determine whether
the company will continue to be able to rely on the OSS license,
and the price (whether at market rate, or above or below market
rate) it pays for the license.
A related company provides
operational and other services, which eventually the company will
have to pay for at market rates.
The
company’s personnel and other operational support such as web
hosting, site maintenance, customer support, retailer support and
marketing are currently provided by OSS, pursuant to the License
Agreement, as described in “Interest of Management and Others
in Certain Transactions.” The company will eventually have to
pay its own personnel and perform these functions itself, or
outsource them to other providers. This may have the result of
increasing the company’s expenses. The current arrangement
also means that the financial results of the company in its early
stages of operations are unlikely to be a good indicator of future
performance.
The company depends on a small management team.
The
company depends primarily on the skill and experience of three
individuals, Robert Grosshandler, Melinda Moore, and Sanford
Schleicher. If the company is not able to call upon any of these
people for any reason, its operations and development could be
harmed.
The company is controlled by its officers and
directors.
Robert
Grosshandler currently holds all of the company’s voting
stock, and at the conclusion of this offering will continue to hold
all of the company’s common stock. Investors in this offering
will not have the ability to control a vote by the shareholders or
the board of directors.
Competitors may be able to call on more resources than the
company.
While
the company believes that its approach to online bargain shopping
is unique, it is not the only way to attract users. Additionally,
existing or new competitors may replicate iConsumer’s
business ideas (including the issuance of shares to users) and
produce directly competing offerings. These competitors may be
better capitalized than iConsumer, which might give them a
significant advantage, for example, in surviving an economic
downturn where shoppers pull back. Competitors may be able to use
their greater resources to provide greater rebates or cashback to
consumers, even to uneconomic levels that iConsumer cannot
match.
There are logistical challenges involved in the management of large
numbers of shareholders.
iConsumer’s
business plan is based upon using share ownership as a way to
attract online shoppers to its services, and the more it succeeds
in doing so, the larger the number of shareholders it will have to
manage. The need to address shareholder concerns with respect to
recording of ownership, transfer and communications with
shareholders may take up a disproportionate amount of management
time.
Cash back customers are demanding and
aggressive.
Companies
such as iConsumer attract customers who enjoy pushing the limits in
order to maximize their cash back and stock compensation. This
aggressive buying behavior can turn into fraudulent behavior
against iConsumer or its partners. The company will need to manage
this risk and behavior. Doing so may take up a disproportionate
amount of management’s time. This behavior may have unknown
financial exposure for iConsumer.
There is no current market for the preferred
stock.
There
is no formal marketplace for the resale of the company’s
preferred stock. The shares may be traded on the over-the-counter
market to the extent any demand exists. Investors should assume
that they may not be able to liquidate their investment for some
time, or be able to pledge their shares as collateral, or be able
to hold the stock in a traditional brokerage account. Without a
market for the preferred stock, it may be impossible for
member-shareholders to be able to value their stock, reducing or
eliminating the value of the stock as an incentive.
DILUTION
Dilution
means a reduction in value, control or earnings of the shares the
investor owns.
Immediate dilution
An
early-stage company typically sells its shares (or grants options
over its shares) to its founders and early employees at a very low
cash cost, because they are, in effect, putting their “sweat
equity” into the company. When the company seeks cash
investments from outside investors, like you, the new investors
typically pay a much larger sum for their shares than the founders
or earlier investors, which means that the cash value of your stake
is diluted because each share of the same type is worth the same
amount, and you paid more for your shares than earlier investors
did for theirs.
The
following table demonstrates the price that new investors are
paying for their shares with the effective cash price paid by
existing shareholders for pre-financing shares of $0. Investors who
participated in the first tranche of this offering paid $.045 per
share. Investors in this tranche will pay $.09 per share. It
reflects all transactions since inception (including the
Recapitalization and Exchange effected in July 2015 and discussed
in more detail in “The Company’s Business”),
establishing a net tangible book value deficit of $(57,614) or
$(0.000288) per share as of December 31, 2015. It also reflects an
unaudited net tangible book value deficit of $(491,880) as of June
30, 2016 which includes an adjustment for the investment received
at first closing in December, 2016. Net tangible book value is
calculated as tangible assets less tangible liabilities. This
method gives investors a better picture of what they will pay for
their investment compared to the company’s insiders and
earlier investors than just including such transactions for the
last 12 months, which is what the SEC requires. The table then
gives effect to the sale of shares at: A) the minimum number of
shares issued, B) the mid-range number of shares issued, C) the
maximum number of shares issued.
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Minimum
Raise
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Mid-Range
Raise
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Maximum
Raise
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Price per
Share
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$0.09
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$0.09
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$0.09
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Shares
Issued
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55,556
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10,000,000
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20,583,056
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Capital
Raised
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$5,000
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$900,000
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$1,852,475
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Less: Offering
Costs
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$(450)
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$(90,000)
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$(200,000)
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Net Offering
Proceeds
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$4,550
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$810,000
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$$1,652,475
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Net Tangible Book
Value Pre-Financing (6/30/16)
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$(491,880)
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$(491,880)
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$(491,880)
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Increase to Net
Tangible Value from First Closing
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$147,525
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$147,525
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$147,525
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Net Tangible Book
Value Post-Financing
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$(339,805)
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$465,645
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$1,308,121
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Shares Issued and
Outstanding Pre-Financing (6/30/16)
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200,000,000
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200,000,000
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200,000,000
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Shares Issued at
First Closing
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3,278,333
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3,278,333
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3,278,333
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No-fee Shares
Earned & Issued to Members (12/31/16)
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2,462,942
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2,462,942
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2,462,942
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Post-Financing
Shares Issued and Outstanding
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205,796,831
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215,741,275
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226,324,331
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Net tangible book
value per share prior to offering / post First Closing
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$(0.0017)
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$(0.0017)
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$(0.0017)
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Increase/(Decrease)
per share attributable to new investors
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$0.0000
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$0.0039
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$0.0075
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Net tangible book
value per share after offering
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$(0.0017)
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$0.0022
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$0.0058
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Dilution per share
to new investors
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$0.0917
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$0.0878
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$0.0842
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The
table reflects past issuances to customers on a no-fee basis, which
commenced after the first closing of this offering. It does not
reflect future issuances to customers on a no-fee basis. Any no-fee
issuances to customers will further dilute investors in this
Offering.
Future dilution
Another
important way of looking at dilution is the dilution that happens
due to future actions by the company. The investor’s stake in
a company could be diluted due to the company issuing additional
shares, whether as part of a capital-raising event, or issued as
compensation to the company’s members, employees, or
marketing partners. In other words, when the company issues more
shares, the percentage of the company that you own will go down,
even though the value of the company may go up. You will own a
smaller piece of a larger company. This increase in number of
shares outstanding could result from a stock offering (such as an
initial public offering, another crowd funding round, a venture
capital round, angel investment), employees exercising stock
options, compensation to members, or by conversion of certain
instruments (e.g. convertible bonds, preferred shares or warrants)
into stock.
If
the company decides to issue more shares, an investor could
experience value dilution, with each share being worth less than
before, and control dilution, with the total percentage an investor
owns being less than before. There may also be earnings dilution,
with a reduction in the amount earned per share (though this
typically occurs only if the company offers dividends; early stage
companies such as iConsumer do not pay dividends for some time and
iConsumer does not anticipate paying dividends).
The
type of dilution that hurts early-stage investors most occurs when
the company sells more shares in a “down round,”
meaning at a lower valuation than in earlier
offerings.
An
example of how this might occur is as follows (numbers are for
illustrative purposes only):
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In June
2014 Jane invests $20,000 for shares that represent 2% of a company
valued at $1 million.
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In
December the company is doing very well and sells $5 million in
shares to venture capitalists on a valuation (before the new
investment) of $10 million. Jane now owns only1.3% of the company
but her stake (at least on paper) is worth $200,000.
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●
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In June
2015 the company has run into serious problems and in order to stay
afloat it raises $1 million at a valuation of only $2 million (the
“down round”). Jane now owns only 0.89% of the company
and her stake is worth only $26,660.
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If
you are making an investment expecting to own a certain percentage
of the company or expecting each share to hold a certain amount of
value, it’s important to realize how the value of those
shares can decrease by actions taken by the company. Dilution can
make drastic changes to the value of each share, ownership
percentage, voting control, and earnings per
share.
PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS
Plan of Distribution
The
Offering Statement filed with the Commission covers the offer and
sale of preferred shares to:
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New
investors in the company who will pay cash for their investments;
and
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Members
of the company (shoppers who use the company’s website) who
will be awarded preferred shares in reward for using
iConsumer’s services and to encourage them to shop more
through iConsumer and urge their friends to do the same. Members
will earn shares of the company based on the amount of shopping
rebates they earn. Members may also earn shares as incentive for
other activities, including, but not limited to, signing up to
become a member. The issuance of shares to members in exchange for
their activities is a “sale” of shares under securities
law, and thus must be registered with the SEC or made in reliance
on an exemption from registration, such as Regulation A. This
Offering Circular therefore covers the issuance of 75,000,000
preferred shares to members. The company will not receive cash from
the issuance to members; the cash accounted for in “Use of
Proceeds” will come from new investors. As of December 31,
2016 the company had transferred 2,462,941.89 shares to the
transfer agent to reflect the earnings of 1,632
members.
|
TAX
CONSEQUENCES FOR RECIPIENT (INCLUDING FEDERAL, LOCAL AND FOREIGN
INCOME TAX CONSEQUENCES) WITH RESPECT TO THE ISSUANCE OF SHARES TO
MEMBERS ARE THE SOLE RESPONSIBILITY OF THE INVESTOR. INVESTORS MUST
CONSULT WITH THEIR OWN PERSONAL ACCOUNTANT(S) AND/OR TAX ADVISOR(S)
REGARDING THESE MATTERS.
The
cash price per share of Series A Non-Voting Preferred Stock is $.09
.
The
minimum investment is $25.
As
the Company closed over $100,000 in cash sales to new investors in
December, 2016, it has begun to issue no-fee shares to iConsumer
members.
The
company intends to market the shares in this offering both through
online and offline means. Online marketing may take the form of
contacting potential investors through social media and posting the
company’s Offering Circular or “testing the
waters” materials on an online investment
platform.
The
company may also utilize other online investment platforms, which
may have different financial arrangements and costs.
The
company is offering its securities in all states other than Texas,
Florida, Arizona and North Dakota. In the event the company makes
arrangements with a broker-dealer to sell into these states, it
will file a post-qualification amendment to the Offering Statement
of which this Offering Circular forms a part.
No
securities are being sold for the account of security holders; all
net proceeds of this offering will go to the company.
Investors’ Tender of
Funds After the Offering
Statement has been re-qualified by the Securities and Exchange
Commission, the company will accept tenders of funds to purchase
the preferred shares. The company may close on investments on a
“rolling” basis (so not all investors will receive
their shares on the same date). The funds tendered by potential
investors will be held by the Escrow Agent, and will be transferred
to the company upon Closing. Each time the company accepts funds
(either transferred from the Escrow Agent or directly from the
investors) is defined as a “Closing”. The escrow
agreement can be found in Exhibit 8 to the Offering Statement of
which this Offering Circular is a part.
In
the event that it takes some time for the company to raise funds in
this offering, the company will rely on income from sales. It has
only a limited amount of cash on hand, but the License Agreement
with OSS provides that OSS will be responsible for much of the
company’s operations as set out in “Interests of
Management and Others in Certain Transactions.”
Processing of Subscriptions
You
will be required to complete a subscription agreement in order to
invest. The subscription agreement includes a representation by the
investor to the effect that, if you are not an “accredited
investor” as defined under securities law, you are investing
an amount that does not exceed the greater of 10% of your annual
income or 10% of your net worth (excluding your principal
residence).
The
company has agreed to pay Issuer Direct Corp., a technology and
escrow service provider, an escrow fee of $995. Additionally, the
company will pay Issuer Direct Corp. $1.00 per transaction
processed for investments under $250, $2.00 per transaction for
investments under $500, and $3 for investments $500 and greater. In
addition, the company will pay Issuer Direct Corp (i) $2 per
domestic investor for anti-money laundering check ($65 for
international investors), and (ii) any applicable fees for fund
transfers (ACH $1.50, wire $25). Direct Transfer, LLC, an affiliate
of Issuer Direct Corp., will serve as transfer agent to maintain
stockholder information on a book-entry basis and will charge $2.50
for a new cash shareholder who invests less than $1,000, $5.00 for
new cash shareholder who invest $1,000 or more, and $1.50 for each
new no-fee shareholders. If each investor were to invest a
subscription amount of $200.00 for the Offering per investor, the
company estimates the maximum fee that could be due to Issuer
Direct Corp. for the aforementioned fees would be $64,837 if it
achieved the maximum offering proceeds.
The
company may also engage additional broker-dealers to perform
administrative functions, who may have different financial
arrangements and costs.
USE OF PROCEEDS TO ISSUER
Assuming
the Maximum Offering amount is raised, the net proceeds of this
offering to the issuer, after expenses of the offering (payment to
Issuer Direct Corp. LLC, professional fees and other expenses) will
be approximately $1,652,000. All cash proceeds will be derived from
the sale of preferred shares to new investors as opposed to the
issuance of preferred shares to members.
If
iConsumer receives the maximum proceeds under this offer, it plans
to use these proceeds as follows:
|
|
●
|
Marketing
expenses in the amount of approximately $1,252,000.
|
|
|
●
|
Expenses
for website development in the amount of approximately
$200,000.
|
Approximately
$200,000, or 12% of the net proceeds assuming the maximum amount
offered is raised, has not been allocated for any particular
purpose.
Because
the offering is a “best efforts” offering, iConsumer
may close the offering without sufficient funds for all the
intended purposes set out above. In that event it will
“bootstrap” its expenses and only spend funds on
marketing and website development when it has revenues to do
so.
The company reserves the right to change the above use of proceeds
if management believes it is in the best interests of the
company.
THE COMPANY’S BUSINESS
Overview
The
company was founded in 2010 and began operations in 2015. Since
founding, it has not undergone any reorganization or acquisitions.
Prior to beginning its online bargain shopping operations it acted
as a marketing agent for iGive.com, an affiliated company,
attracting online traffic and directing it to iGive.com. In July
2015, it executed a recapitalization and exchange with its sole
stockholder, Robert Grosshandler, exchanging the existing
outstanding Class A Common Stock, all of which was held by Mr.
Grosshandler, for newly reclassified Common Stock and Preferred
Stock. In January, 2016 it began testing of a series of new offers
and promotions. From these exploratory efforts, the company gained
approximately 11,000 members (customers) and began to generate
revenue. Through June 30, 2016 it generated unaudited revenues of
$328,478, and incurred a loss of $434,266.
Principal Products and Services
The
company is an online bargain shopping (cash back rebates and coupon
shopping) company that makes money by driving consumers to
retailers so that they can take advantage of coupons and cash back
rebate offers for products and services displayed on its site and
by the retailers. The company is paid by participating merchants
when iConsumer members click on those offers and when iConsumer
members reach participating merchants’ sites via iConsumer,
and make purchases there.
The
company launched its online bargain shopping services to the
general public on June 19, 2015.
Market
The
company’s target market encompasses all online shoppers, with
the initial target being those shoppers located in the United
States. The company’s direct competitors estimate that they
have nearly 100 million global users, and those shoppers located in
the United States are the initial target of the company’s
marketing efforts.
The
company uses social media, PR, display and other forms of paid and
unpaid advertising to attract new members to its site. The initial
marketing strategy includes “influencers” such as
bloggers, writers, and other outlets reachable through social media
and public relations. After establishing this beachhead, the
company intends to use its own members to spread the word about the
advantages of the company’s offering.
A
further source of potential customers is the people who have
expressed interest in the company’s offering of shares
through this Offering.
Competition
The
company’s competitors include eBates, Shopathome,
RetailMeNot, MyPoints, CouponCabin, Brads Deals, swagbucks, and
Mainstreetshare. iConsumer offers the same ability to save money
shopping by offering coupons and cashback rebates but
differentiates itself by additionally offerings its members the
ability to “earn” ownership in the company through the
acquisition of shares. This further incentivizes members to prefer
iConsumer’s offering and to encourage their friends to do the
same.
Participating Merchants
Through
an agreement with OSS, iConsumer represents over 1,700 retailers,
providing cash back and coupon based savings to consumers when they
shop at these retailers. OSS personnel are responsible for
attracting and maintaining those relationships. iConsumer pays OSS
a fee based on revenues for this service. OSS provides similar
services to iGive.com Holdings, LLC, an affiliated
company.
Research and Development
The
company is licensing technology developed by its affiliate OSS and
has not yet made any expenditures on research and
development.
Employees
The
company has no directly paid employees at present. While Messrs.
Grosshandler and Schleicher currently work full-time on developing
the company’s business, its management is provided by the
affiliated company OSS, as described in “Interest of
Management and Others in Certain Transactions.”
Intellectual Property
iConsumer
has a copyright in its web site, applications, and other computer
software. It has received trademark registrations for iConsumer,
the logo, and related marks. The technology upon which the company
is relying for its operations is owned by OSS, and licensed to
iConsumer.
Litigation
The
company is not involved in any litigation.
THE COMPANY’S PROPERTY
The
company does not own any real estate or significant real assets.
The company owns, to the extent permitted by law and end-user
agreements, the data generated by its members, and about its
members. The cost of creating this data is reflected on the
company’s financial statements. The value of these assets is
not reflected in the financial statements.
MANGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The
company is in the very earliest stages of development. Operations
prior to January 2016 produced minimal revenues. Unaudited revenues
through June 30, 2016 were $328,477.90.
The
company earns revenues through royalties and advertising on its
website and earns revenues through agreements with vendors for web
traffic and sales referred through the iConsumer.com website. The
company recognizes revenue only when the price is fixed or
determinable, persuasive evidence of an arrangement exists, the
services have been provided, and collectability is assured.
Insignificant revenues have been earned or recognized for the years
ended December 31, 2015 and December 31, 2014.
Measurable
revenue from operations began in January 2016. The company
anticipates that revenues throughout 2016 will vary widely each
month, as it refines its marketing and promotional offers.
Beginning in June 2015, the company began to earn commission
revenue by directing customers to participating
retailers.
In
August, 2016 the company engaged a full-service marketing agency to
prepare a launch of the brand in anticipation of qualification
before the start of the Christmas holiday shopping season.
Deliverables from this engagement included new branding, site
redesign, and marketing collateral.
During
the third quarter of 2016 the company launched the second
generation of its mobile apps for Apple IOS and Android. It also
launched an updated version of the iConsumer Button for Chrome,
Safari, Firefox, Internet Explorer, and Microsoft
Edge.
The
primary factors affecting gross income are the number of users of
the company’s services (members), the amount each member
spends and the amount spent on marketing to attract those members.
The amount spent on marketing is likely to be larger in relation to
the number of members in the earlier days of operations, decreasing
as the number of members grows.
The
provisions of the License Agreement with OSS will significantly
affect the company’s financial results. As described in
“Interest of Management and Others in Certain
Transactions,” the company will pay 20% of its gross revenues
to OSS for the license of the software on which its operations rely
and other support services, or 5% of its gross revenues if it uses
the software and not other services from OSS. In the event the
company decides to provide for itself the support services provided
by OSS, the company’s gross margins and profitability are
likely to change.
Results of Operations
Through
June 30, 2016 merchant commissions accounted for 100% of the
company’s revenues of $328,477.90. The company’s cost
of goods consists of the rebates (cash and stock) earned by its
members for making the purchases that generated those
revenues.
The
company has two major expenses reflected on the June 30, 2016
unaudited statements. The first is marketing expense. The company
prepares and launches marketing campaigns that utilize paid media
(e.g. Facebook, Google Adwords, and other sites). It incents third
parties to promote iConsumer utilizing cash and stock. It incents
members to join iConsumer using cash and stock. It further incents
members to recruit members utilizing cash and stock.
As
of First Closing, the Offering is successful. Therefore, expenses
incurred to promote this Offering are charged against
shareholder’s equity, in accordance with appropriate FASB and
SEC rules, as outlined in the accompanying Statement of
Operations.
Of
the $407,127 in marketing expense, $229,534 was in the form of
preferred stock, a non-cash item. The stock was valued at $0.045
per share, the price paid by third party purchasers in the portion
of this offering that closed in December, 2016.
The
second major expense is the fee owed to Outsourced Site Services,
LLC (OSS). This affiliated company (owned by Mr. Grosshandler)
provides most of the services needed to operate iConsumer. Most
specifically, the overheads of creating member-oriented marketing
campaigns. and the overhead of managing the network of 1,700
retailers are borne by OSS. The expense for the six months ended
June 30, 2016 was $65,696, and is calculated as 20% of gross
revenues. If iConsumer was not using OSS to provide these services,
the results of its operations might be significantly
different.
Plan of Operations
Overview
The
company launched on June 19, 2015. At that time its suite of
services, technical offerings (e.g. web site, apps), and depth and
breadth of participating retailers were fundamentally feature and
function complete and approached parity with the company’s
competition.
The
company believes that feature and function parity is necessary, but
not sufficient, for it to succeed. Attracting and retaining a large
number of members (people who use the iConsumer services and
offerings to shop at participating retailers) is the single most
important goal.
Marketing
is the linchpin in attracting members. Fundamental to the
company’s marketing plan is the ability to offer and deliver
tradeable stock in the company as incentive and reward for
participation. For the company stock to have power as an incentive,
the member needs to be able to determine the value of that stock.
The best way to do that is to have third-party investors pay cash
for stock, through this offering, in the secondary market, or in
other offerings.
The
company will commence full-scale marketing operations upon the
successful raising of capital under this Offering. The raise of
capital from outside investors will create a reference point that
members can refer to when receiving stock as an
incentive.
The
company has reached milestones in its development as
follows:
The company is operational, has raised $147,525 in the offering so
far and has already taken the following steps:
|
|
1)
|
iConsumer
Web Site launch and rebranding
|
|
|
2)
|
Data
integration with retail partners
|
|
|
3)
|
Data
integration with advertising partners
|
|
|
4)
|
“Shareholder
Academy” launch
|
|
|
|
(This
is a site owned and operated by iConsumer, reachable
at www.ShareholderAcademy.com. It contains information about
iConsumer, and equity crowdfunding in general.)
|
|
|
5)
|
Facebook
data integration
|
|
|
6)
|
Twitter
data integration
|
|
|
7)
|
Member
reporting
|
|
|
8)
|
Customer
support testing and training
|
|
|
9)
|
Marketing
tool integration
|
|
|
|
(The
company uses third party tools to market and test
campaigns.)
|
|
|
10)
|
Strategic
public relations campaign – design and test
|
|
|
11)
|
Tactical
public relations campaign – design and test
|
|
|
12)
|
Test
Facebook ad campaign
|
|
|
13)
|
Test
Google search campaign
|
|
|
14)
|
Test
Google /others display ad campaign
|
|
|
15)
|
Member
cash back fulfilment
|
|
|
|
(Members
earn cash rebates by shopping at participating stores, in addition
to earning stock in iConsumer. Those rebates must be transmitted to
members. Fulfilment may be in the form of checks, Paypal, or ACH
transfers.)
|
|
|
16)
|
Amazon
data integration
|
|
|
17)
|
Internal
reporting, A/R collections, Member Support
|
After approximately three months from receipt of funds from first
Closing):
|
|
1)
|
Create
full scale marketing/advertising campaign
|
|
|
|
|
a.
|
Facebook
|
|
|
|
b.
|
Google
search
|
|
|
|
c.
|
Google
display
|
|
|
|
d.
|
Retargeting
/remarketing
|
|
|
|
e.
|
Others
|
|
|
2)
|
Create
full scale PR campaign
|
|
|
|
3)
|
Launch
revamped Android /IOS and browser apps
|
|
|
|
4)
|
Pursue
listing on OTC QB market (DTC / DWAC qualifications)
|
|
After receipt of funds totaling at least $500,000:
|
|
1)
|
Begin
web site revamp
|
|
|
2)
|
Launch
full scale marketing campaign, including PR, designed to raise the
balance of the offering and attract new customers.
|
Prior to Initial Qualification
of the Offering The company has
developed and tested marketing messages to attract customers and
partners. Efforts include public relations, Facebook advertising,
remarketing, and Google search advertising. These built upon
previous mentions in Forbes, INC Magazine, StackingBenjamins.com,
Cashbackwatch, and others. This effort has resulted in a steady
small stream of traffic and new members.
The
traffic generated by these marketing test efforts also allows the
company to test its systems and procedures. In the approximately
twelve months since launch, we’ve confirmed that our
consumer-facing offerings are working as planned. Our data
integration with retailers and advertisers is working.
As part of the testing and research, the company
determined that supporting its target audiences economically
required a substantial investment in supporting materials. To that
end, it created and launched Shareholder Academy
(http://shareholderacademy.com).
Operations after Qualification
The
offering was first qualified by the SEC on September 29, 2016.The
company began to use its website to raise capital from third party
investors. The company commenced a marketing campaign to support
that effort, focused primarily on individuals who have exhibited an
interested in investing and crowdfunding products.
Operations after First Closing
The
company had established a minimum raise of $100,000. It believes
that establishing that third party investors were willing to pay
cash to invest in iConsumer was important to its marketing message
to prospective customers.
The
Company had its first closing in December, 2016 and raised
$147,525. The company will expend that raise, less the costs of the
fund raising, on designing and launching marketing efforts designed
to increase membership. It will also begin the process to rollout
revamped and improved mobile offerings (Android and IOS apps). It
has begun the process to enable it to be quoted on the OTC QB
marketplace. While the company cannot guarantee liquidity for
investors, it believes that being quoted is a necessary precursor
to having a liquid market for shareholders.
Operations after receipt of at least $500,000 in funds
The
company is seeking to raise a total of $2,000,000 under this
offering, of which it has already closed upon $147,525. Upon
receiving at least $500,000, it will increase its marketing efforts
to raise the balance of the offering, and repay any monies advanced
by OSS on behalf of iConsumer (primarily organizational and
marketing costs).
The
company’s marketing efforts are focused on building its
membership base quickly. The company forecasts that it will be cash
flow neutral at about the 250,000 member level. Depending upon the
speed of success of its marketing efforts, the company may need to
raise additional capital.
Liquidity and Capital Resources
As
of the date of this Offering Circular, iConsumer has a low level of
liquid assets. The company is completely dependent on the proceeds
from this offering and support from affiliated companies to execute
its plan of operations. The company has no debt, outside of its
obligations to remit earned cash back to members when due, and no
obligations to make any capital expenditures. The company has no
bank lines or other financing arranged.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT
EMPLOYEES
The
company’s officers and directors are as follows. Both are
occupied full-time on the company’s business, but are
employed by an affiliate of the company as described in “The
Company’s Business – Employees.” The company does
not currently employ any “significant employees” as
defined by the Commission.
|
Name
|
Position
|
Age
|
Term of
office
|
|
Executive officers
|
|
|
|
|
Robert
N. Grosshandler
|
President
|
61
|
Indefinitely from
December 2010
|
|
Sanford
David Schleicher
|
Chief Technology Officer
|
49
|
Indefinitely from
April 2015
|
|
Directors
|
|
|
|
|
Robert Grosshandler
|
|
61
|
Since December
2010
|
Robert N. Grosshandler, President
Robert
Grosshandler has been President of the company since its inception.
In 1997, he founded iGive.com, a company that helps consumers raise
money for charities by shopping online. He founded iGive and has
acted as CEO of iGive from that date to the present. iGive today
helps 350,000 consumers contribute to 35,000 charities. He is also
founder and CEO of OSS. Between 1976 and 1981 Mr.Grosshandler
participated in real estate and industrial workouts. In 1981, he
co-founded The SOFTA Group, Inc., which grew to 160 employees when
it was sold in 1993.In 1995 he founded and sold a company to a West
Coast integrated circuit manufacturer.
Sanford Schleicher, Chief Technology Officer
Mr.
Schleicher is Chief Technology Officer, which position he has held
since April 2015 and in that capacity he oversees engineering,
production and development. From 2009 to the present date he was
the Chief Technology Officer of iGive. As CTO, he is responsible
for all technology R&D as well as platform operations. Prior to
joining iGive.com, Mr.Schleicher was Director of Engineering of
Onebox Solutions, and before that Director of Research and
Development of Call Sciences which he joined in early 2001, when
Call Sciences purchased Vocal Link, a company Mr.
Schleicherco-founded in 1997. Prior to Vocal Link, he worked at
Quantra Corporation. Previous professional experience includes
Baxter Healthcare Inc. and Price Water house. Mr.Schleicher holds
an Engineering Degree in Computer Science from the University of
Illinois in Champaign/Urbana.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
iConsumer
has not yet paid or agreed to pay its officers or directors.
Currently, Mr. Grosshandler and Mr. Schleicher are compensated by
OSS and their services are provided to iConsumer under the License
Agreement. See “Interest of Management and Others in Certain
Transactions.”
In
the future the company will have to pay its officers, directors and
other employees, which will impact the company’s financial
condition, as discussed in “Management’s Discussion and
Analysis.” The company may choose to establish an equity
compensation plan for its management and other employees in the
future.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
SECURITYHOLDERS
The
following table sets out, as of December 31, 2016, the non-voting
securities of the company that are owned by executive officers and
directors, and other persons holding more than 10% of the
company’s voting securities, or having the right to acquire
those securities.
|
Title of
class
|
Name and address of beneficial owner
|
Amount and nature of beneficial ownership
|
Amount and nature of beneficial ownership acquirable
|
Percent of
class
|
|
Common Stock
|
Robert
N. Grosshandler
2724
Simpson Street
Evanston,
IL 60201
|
100,000,000 Direct ownership
|
N/A
|
100%
|
|
Series A Non-Voting
Preferred Stock
|
Robert
N. Grosshandler
|
39,000,000 Direct ownership; Mr.
Grosshandler disclaims beneficial ownership
of shares held by family members
|
N/A
|
37%
|
|
|
Sanford
D. Schleicher
2724
Simpson Street
Evanston,
IL 60201
|
12,000,000 Direct ownership; 4,000,000 Dehne
Trust #1 beneficial ownership; 4,000,000 Dehne
Trust #2 beneficial ownership
|
N/A
|
19%
|
INTEREST OF MANGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS
Software License and Services Agreement with Outsourced Site
Services
The
technology used by iConsumer to operate its website is licensed
from OSS, where it has been used for 18 years for the operations of
iGive, a business that caters to online shoppers who are interested
in helping non-profits. iConsumer receives services from OSS, which
include hosting, servers, support, internet connectivity, and
interconnections with retailers. OSS also provides marketing,
management, and accounting services. OSS also employs Robert
Grosshandler and Sanford Schleicher.
These
services are provided pursuant to an Amended and Restated Software
License and Services Agreement dated May 25, 2016, between OSS and
the company (the “License Agreement”). Under the
License Agreement, the company pays 20% of its gross revenue to
OSS. The License Agreement provides that in the event the company
wishes to assume responsibility for the support services provided
by OSS, it can do so upon at least six months’ notice. In
that event, the company will pay 5% of its gross revenues to
OSS.
Both
iGive and OSS are 100% owned by Robert Grosshandler.
SECURITIES BEING OFFERED
iConsumer’s
authorized capital stock consists of 150,000,000 shares of common
stock, $0.001 par value per share, and 300,000,000 shares of
preferred stock, $0.001 par value per share, 250,000,000 of which
preferred stock have been designated Series A Non-Voting Preferred
Stock. As of December 31, 2016 there were 100,000,000 shares of
iConsumer’s common stock outstanding, held by one stockholder
of record, and 105,741,275 shares of Series A Non-Voting Preferred
Stock outstanding, held by 1,676 stockholders of record. The
company’s board of directors is authorized, without
stockholder approval, to issue additional shares of capital
stock.
The
shares being offered to investors are Series A Non-Voting Preferred
Stock of iConsumer. The rights of holders in the Series A
Non-Voting Preferred Stock are different from the rights of the
holders of the company’s common stock.
The
following description summarizes the most important terms of the
company’s capital stock. This summary does not purport to be
complete and is qualified in its entirety by the provisions of the
company’s amended and restated certificate of incorporation
and amended and bylaws and the Certificate of Designations for the
Series A Non-Voting Preferred Stock, copies of which have been
filed with the SEC as Exhibits 2 and 3 to the Offering Statement of
which this Offering Circular is a part. For a complete description
of iConsumer’s capital stock, you should refer to the amended
and restated certificate of incorporation and bylaws, to the
Certificate of Designations and to the applicable provisions of
Delaware law.
Series A Non-Voting Preferred Stock
Dividend Rights
Series
A Preferred Stock will receive dividends, in preference to the
holders of common stock and any other capital stock, when and as
dividends may be declared from time to time by the board of
directors out of legally available funds. While any shares of
Series A Preferred Stock are outstanding, no dividends can be paid
or declared, and no distribution can be made, until all accrued and
unpaid dividends have been paid or declared and set
apart.
Voting Rights
The
Series A Preferred Stock have no voting rights except as required
under law.
Right to Receive Liquidation Distributions
In
the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the company’s affairs, a holder of Series A
Preferred Stock will be entitled to be paid, before any
distribution or payment may be made to any holders of Junior Stock:
(1) the liquidation preference equal to the amount paid per share
at the time of original issue (for example, in this offering); and
(2) the amount of any accrued and unpaid dividends, if any, prior
to such distribution or payment date. If the assets of the company
are insufficient to pay all holders of Series A Preferred Stock,
the amounts to be distributed will be reduced in proportion to the
amounts they would be entitled.
Investors
should note that since the prices to be paid for the preferred
stock will vary as described in “Plan of Distribution,”
the amounts to be received upon liquidation will also
vary.
Rights and Preferences
The
Series A Preferred Stock have no preemptive, conversion,
subscription or other rights, and there are no redemption or
sinking fund provisions applicable to the Series A Preferred Stock,
except as outlined below.
Additional Rights for first tranche of Series A Preferred Stock
sold
Pursuant
to the Subscription Agreement and Investor Rights Agreement that
was executed with respect to the initial sale of shares in this
Offering, early investors (the “Initial Tranche”) were
granted anti-dilution protection as follows: If, within two years
of the last closing of the sale of the Initial Tranche, the company
issues more than $250,000 of Class A Stock, as a part of this
Offering or otherwise, at a price per share less than that paid for
shares in the Initial Tranche, the company will issue additional
shares of Class A Preferred Stock to the Initial Tranche investors
such that they will hold the number of shares they would have
received if they had paid that lower price.
As
of January 15, 2017, the Initial Tranche is complete. Therefore,
investors buying shares after that point will not have the benefit
of the additional rights set out above. The Subscription Agreement
that will be signed as a condition to investing in this Offering
appears as Exhibit 4 to the Offering Statement of which this
Offering Circular forms a part.
Common Stock
Dividend Rights
Subject
to preferences that may be applicable to any then outstanding
preferred stock, holders of iConsumer’s common stock are
entitled to receive dividends, if any, as may be declared from time
to time by the board of directors out of legally available funds.
The company has never declared or paid cash dividends on any of its
capital stock and currently does not anticipate paying any cash
dividends after this offering or in the foreseeable
future.
Voting Rights
Each
holder of iConsumer’s common stock is entitled to ten votes
for each share on all matters submitted to a vote of the
stockholders, including the election of directors. The
company’s stockholders do not have cumulative voting rights
in the election of directors.
Right to Receive Liquidation Distributions
In
the event of iConsumer’s liquidation, dissolution or winding
up, holders of its common stock will be entitled to share ratably
in the net assets legally available for distribution to
stockholders after the payment of all of the company’s debts
and other liabilities and the satisfaction of any liquidation
preference granted to the holders of any then outstanding shares of
preferred stock.
Rights and Preferences
Holders
of iConsumer’s common stock have no preemptive, conversion,
subscription or other rights, and there are no redemption or
sinking fund provisions applicable to the company’s common
stock. The rights, preferences and privileges of the holders of the
company’s common stock are subject to and may be adversely
affected by, the rights of the holders of shares of any series of
the company’s Series A Non-Voting Preferred Stock and any
additional classes of preferred stock that the company may
designate in the future.
Transfer Agent and Registrar
The
company has appointed Direct Issuer as its transfer
agent.
iConsumer Corp.
A Delaware Corporation
Financial
Statements and Independent Auditor’s Report
December
31, 2015 and 2014
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iConsumer Corp.
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TABLE OF CONTENTS
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Page
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INDEPENDENT
AUDITOR’S REPORT
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F-3–F-4
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FINANCIAL
STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND
2014
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Balance Sheets
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F-5
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Statements of Operations
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F-6
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Statements of Changes in
Stockholders’Equity (Deficit)
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F-7
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Statements of Cash Flows
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F-8
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Notes to Financial
Statements
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F-9–F-15
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F-2
To
the Board of Directors of
iConsumer
Corp.
Evanston,
Illinois
Report on the Financial Statements
We
have audited the accompanying financial statements of iConsumer
Corp., which comprise the balance sheet as of December 31, 2015 and
the related statements of operations, changes in
stockholders’ equity (deficit), and cash flows for the year
then ended, and the related notes to the financial
statements.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United States; this includes the design,
implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our
responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free from material misstatement.
An
audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment,
including the assessment of the risk of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of
the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit
also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation
of the financial statements.
We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In
our opinion, the 2015 financial statements referred to above
present fairly, in all material respects, the financial position of
iConsumer Corp., as of December 31, 2015, and the results of its
operations and cash flows for the year then ended in accordance
with accounting principles generally accepted in the United
States.
Emphasis of Matter Regarding Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
4 to the financial statements, the Company has not generated
significant revenues or profits since inception, and has sustained
significant cumulative losses. Those conditions raise substantial
doubt about its ability to continue as a going concern.
Management’s plans regarding those matters are also described
in Note 4. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Our opinion
is not modified with respect to that matter.
Other Matter - Prior Period Financial Statements
The
financial statements of iConsumer Corp. as of December 31, 2014,
were audited by other auditors whose report dated August 27, 2015,
on those statements included an emphasis-of-matter paragraph that
described the conditions that raised substantial doubt about the
Company’s ability to continue as a going concern, discussed
in Note 4 to the financial statements.
/S/
Wipfli LLP
July
7, 2016
Minneapolis,
MN
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iConsumer
Corp.
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BALANCE
SHEETS
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Years
Ended December 31, 2015 and 2014
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2015
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2014
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Revenues:
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Commissions
from Merchants
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1,177
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0
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Royalties
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0
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250
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Total
Income
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1,177
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250
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Cost
of Goods Sold
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Member
Cash Back Expense
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937
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0
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Total
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937
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0
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Gross
Profit
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239
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250
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Operating
Expenses
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Accounting
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1,800
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0
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Bank
Service Charges
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63
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0
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Hosting
Fees
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0
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250
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Legal
Fees
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51,607
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915
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Marketing
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937
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0
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Royalties
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235
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0
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Total
Operating Expenses
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54,643
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1,165
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Net
Loss
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(54,403)
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(915)
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iConsumer
Corp.
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STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
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Years
Ended December 31, 2015 and 2014
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iConsumer
Corp.
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STATEMENTS
OF CASH FLOWS
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Years
Ended December 31, 2015 and 2014
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iConsumer
Corp.
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NOTES
TO THE FINANCIAL STATEMENTS
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Years
Ended December 31, 2015 and 2014
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NOTE 1: NATURE OF OPERATIONS
iConsumer
Corp. (the “Company”), is a corporation organized
December 16, 2010 under the laws of Delaware. The Company was
formed to provide money saving services to consumers through a
website that is designed to be searchable and discoverable by
Google. On June 19, 2015 it began “test the waters”
operations to determine product and service viability for a new
service aimed at providing consumers cash back rebates based upon
their shopping at participating retailers. As of December 31, 2015,
it had not generated significant revenue. In the years preceding
the commencement of its planned principal operations, the Company
actively provided the service of directing web traffic to
iGive.com, primarily aimed at Google and other search engines.
Additionally, the Company’s activities since inception have
consisted of formation activities and preparations to raise
additional capital as described in Note 6. The Company is dependent
upon additional capital resources for the continuation of its
planned principal operations and is subject to significant risks
and uncertainties; including failing to secure additional funding
to fully operationalize the Company’s planned
operations.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The
accounting and reporting policies of the Company conform to
accounting principles generally accepted in the United States of
America (GAAP) and Article 8 of Regulation S-X of the rules and
regulations of the Securities and Exchange Commission
(SEC).
The
Company has elected to adopt early application of Accounting
Standards Update No. 2014-10, Development Stage Entities (Topic
915): Elimination of Certain Financial Reporting Requirements; the
Company does not present or disclose inception-to-date information
and other remaining disclosure requirements of Topic
915.
The
Company adopted the calendar year as its basis of
reporting.
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
Cash Equivalents
Cash
equivalents can include time deposits, certificate of deposits, and
all highly liquid debt instruments with original maturities of
three months or less.
Accounts Receivable and Allowance for Doubtful
Accounts
Accounts
receivable are carried at their estimated collectible amounts.
Accounts receivable are periodically evaluated for collectability
based on past credit history with clients and other factors.
Provisions for losses on accounts receivable are determined on the
basis of loss experience, known and inherent risk in the account
balance and current economic conditions. There are no accounts
receivable or associated allowances for doubtful accounts
established as of December 31, 2015 or 2014.
Property and Equipment
The
Company has a policy to capitalize expenditures with useful lives
in excess of one year and costs exceeding $1,000. No property or
equipment has been recorded as of December 31, 2015 or
2014.
Fair Value of Financial Instruments
The
Company discloses fair value information about financial
instruments based upon certain market assumptions and pertinent
information available to management. There were no financial
instruments outstanding as of December 31, 2015 or
2014.
Concentrations of Credit Risks
The
Company’s financial instruments that are exposed to
concentrations of credit risk consist of its cash. The Company will
place its cash and cash equivalents with financial institutions of
high credit worthiness and has a policy to not carry a balance in
excess of FDIC insurance limits. The Company’s management
plans to assess the financial strength and credit worthiness of any
parties to which it extends funds, and as such, it believes that
any associated credit risk exposures are limited.
Revenue Recognition
The Company earns revenues through commissions,
royalties, and advertising on its website and intends to earn
revenues through agreements with vendors for web traffic and sales
referred through the iConsumer.com website. The Company recognizes
revenue in accordance with FASB ASC 605, Revenue
Recognition, only when the
price is fixed or determinable, persuasive evidence of an
arrangement exists, the services have been provided, and
collectability is assured. Insignificant revenues have been earned
or recognized for the year ended December 31, 2015 and
2014.
Offering Costs
The
Company complies with the requirements of FASB ASC 340-10-S99-1 and
SEC Staff Accounting Bulletin (SAB) Topic 5A - "Expenses of
Offering" with regards to offering costs. Prior to the completion
of an offering, offering costs will be capitalized as deferred
offering costs on the balance sheet. The deferred offering costs
will be charged to stockholder’s equity upon the completion
of an offering or to expense if the offering is not completed. The
Company anticipates significant offering costs in connection with
the Proposed Offering discussed in Note 6. Any offering costs
incurred prior to December 31, 2015 have been
expensed.
Income Taxes
The
Company accounts for income taxes with the recognition of estimated
income taxes payable or refundable on income tax returns for the
current period and for the estimated future tax effect attributable
to temporary differences and carryforwards. Measurement of deferred
income items is based on enacted tax laws including tax rates, with
the measurement of deferred income tax assets being reduced by
available tax benefits not expected to be realized in the immediate
future. At December 31, 2015 and 2014, the Company had deferred tax
assets related to net operating loss carryforwards (NOL). Due to
the uncertainty as to the Company’s ability to generate
sufficient taxable income in the future and utilize the NOL’s
before they expire, the Company has recorded a valuation allowance
to reduce the net deferred tax asset to zero. The effective tax
rate is different from the expected federal tax rate due to the
valuation allowance and state income taxes.
The
Company reviews tax positions taken to determine if it is more
likely than not that the position would be sustained upon
examination resulting in an uncertain tax position. The Company did
not have any material unrecognized tax benefit as of December 31,
2015 or 2014. The Company recognizes interest accrued and penalties
related to unrecognized tax benefits in tax expense. During the
years ended December 31, 2015 and 2014, the Company recognized no
interest and penalties.
The
Company is required to file U.S. federal tax returns. The U.S.
federal tax returns were not filed for the Company for the years
2010-2014, in violation of IRS regulations and federal statutes.
The Company filed the returns for each year 2010-2014 during July
2015. As each year incurred a net operating loss, no taxes were due
when the returns were filed. However, $100 late filing penalties
were assessed and paid for each year. The Company believes it is in
compliance after filing these returns. All tax periods since
inception remain open to examination by the taxing jurisdictions to
which the Company is subject. The Company has filed for an
extension to file U.S. federal tax returns for the year
2015.
Reliance on Related Party
The
Company currently has a software license and service agreement with
a related party (see Note 5) and has all of its expenses paid by
the related party. As a result, the Company’s results of
operations may not be indicative of the results that would have
occurred if it operated independently.
NOTE 3: STOCKHOLDERS’ EQUITY (DEFICIT)
As
of the issuance date of these financial statements, 100,000,000
shares of Common Stock and 100,000,000 shares of Preferred Stock
were issued and outstanding.
The
Articles of Incorporation were Amended and Restated effective July
6, 2015. Among the revised provisions, the Company authorized
150,000,000 shares of Common Stock, par value $0.001 per share and
reclassified "Class A Common Stock" to "Common Stock"; authorized
300,000,000 shares of Preferred Stock, par value $0.001 per share
and reclassified "Class B Common Stock" to "Preferred Stock";
amended the power to authorize the number of authorized shares to
be set by affirmative vote of the holders of at least a majority of
the voting power of the issued and outstanding shares of Common
Stock of the Company. The terms and preferences of these
reclassified shares were revised where Common Stock, among other
provisions, entitles holders to 10 votes for each share of Common
Stock, subordinate dividend rights to Preferred Stock, and certain
liquidation rights.
The
Company filed a Certificate of Designations, Preferences, and
Rights of Series A Non-Voting Preferred Stock of iConsumer Corp.
(under Section 151 of the Delaware General Corporation Law) on July
6, 2015, designating 250,000,000 shares of Preferred Stock
authorized under the Amended and Restated Certificate of
Incorporation filed July 6, 2015 as Series A Non-Voting Preferred
Stock ("Series A Preferred Stock"), par value $0.001. The Series A
Preferred Stock was granted certain rights and preferences
including: dividend preference on declared and unpaid dividends and
liquidation priority for the value paid for the Preferred Shares.
The Series A Preferred Stock holders are not entitled to vote on
any matters placed to a vote of the stockholders of the
Company.
The
Company entered into a recapitalization and exchange agreement
effective July 6, 2015 with Robert Grosshandler. This agreement
stipulates the terms of a tax-free reorganization pursuant to
Internal Revenue Code section 368(a), where Robert Grosshandler
transfers, assigns, delivers, and surrenders to the Company his
pre-recapitalization shares and the Company issues
post-recapitalization shares, among other pertinent terms. This
exchange retired 1,000,000 Class A Common shares
pre-recapitalization, and issued 100,000,000 shares of Common Stock
and 100,000,000 shares of Series A Non-Voting Preferred Stock, post
recapitalization.
NOTE 4: GOING CONCERN
The
accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company is a business that commenced principal operations in June,
2015, has not generated meaningful revenues or profits since
inception, and has sustained net losses of $54,403, and $915 for
the years ended December 31, 2015 and 2014, respectively. The
Company’s ability to continue as a going concern for the next
twelve months is dependent upon its ability to generate sufficient
cash flows from operations to meet its obligations, which it has
not been able to accomplish to date, and/or to obtain capital
financing from its majority stockholder and/or third parties,
including through the Proposed Offering described in Note 6. It
plans to incur significant costs in pursuit of its Proposed
Offering. No assurance can be given that the Company will be
successful in these efforts. These factors, among others, raise
substantial doubt about the ability of the Company to continue as a
going concern for a reasonable period of time. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going
concern.
NOTE 5: RELATED PARTIES
Prior
to June 19, 2015, including the years ended December 31, 2014 and
2013 and earlier, the Company was subject to a three-party oral
agreement with iGive.com Holdings LLC (“iGive”) and
Outsourced Site Services, LLC (“OSS”), both related
parties under common control with shared ownership and management
(referred to herein collectively as the “Related
Parties”). This agreement stipulated that iConsumer Corp.
maintain a website at iConsumer.com that directed traffic to
iGive.com (owned and operated by iGive). It maintained that website
in such a way as to maximize the traffic to iGive.com. In return,
the Related Parties covered all of the costs of maintaining the
iConsumer.com website. After launch of the full iConsumer website
on June 19, 2015, a site that promotes the iConsumer Corp. planned
business operations, this agreement ceased, and iConsumer Corp.
became responsible for its own costs, or enter into a formal
agreement with the either or both of the Related Parties or
others.
Effective
May 1, 2015, the Company entered into a software license and
services agreement (the “License Agreement”) with
Outsourced Site Services, LLC (“OSS”), a related party.
Among the terms of the License Agreement, the Company’s
operations will be run on technology licensed from OSS and OSS will
provide the Company with certain support services, as defined in
the License Agreement. For the use of these services and
technology, the Company agrees to pay OSS 20% of its gross revenue,
as defined in the License Agreement. The License Agreement provides
that in the event the company wishes to assume responsibility for
the support services provided by OSS, it can do so upon at least
six months’ notice. In that event, the company will pay 5% of
its gross revenues to OSS. Since OSS is under common control of
Robert Grosshandler, he will have the power to determine whether
the company will continue to be able to rely on the OSS license,
and the price it pays for the license. The License Agreement has a
term of 20 years. As a result of these agreements, the
Company’s results of operations may not be indicative of the
results that would have occurred if it operated
independently.
As
of December 31, 2015 and 2014 the Company owed $55,776 and $2,027,
respectively to the Related Parties for expenses paid on the
Company’s behalf since inception.
NOTE 6: PROPOSED OFFERING
Subsequent
to December 31, 2015, the Company began pursuing an offering
(“Proposed Offering”). The Proposed Offering calls for
the Company to offer for sale under Regulation A $2,000,000 of its
Class A Non-Voting Preferred Stock at a to be determined price
between $0.01 and $2.00 per share. Sales of these securities are
expected to commence during 2016. The Company expects to incur
costs of up to $75,000 related to the Proposed
Offering.
There
is presently no secondary market for Company’s stock and
therefore the Company cannot guarantee that its securities will
ever be tradeable on an exchange or have any other liquidity. This
offering is not yet finalized nor qualified by the Securities
Exchange Commission (SEC) and is subject to changes. These
financial statements should not be relied upon as a basis for
determining the terms of the Proposed Offering as this information
may not be current or accurate relative to the final terms of the
Proposed Offering.
NOTE 7: RECENT ACCOUNTING PRONOUNCEMENTS
In
June 2014, the FASB issued Accounting Standards Update (ASU)
2014-10 which eliminated the requirements for development stage
entities to (1) present inception-to-date information in the
statements of income, cash flows, and members’ equity, (2)
label the financial statements as those of a development stage
entity, (3) disclose a description of the development stage
activities in which the entity is engaged, and (4) disclose in the
first year in which the entity is no longer a development stage
entity that in prior years it had been in the development stage.
This ASU is effective for annual reporting periods beginning after
December 15, 2014, and interim periods beginning after December 15,
2015. Early application is permitted for any annual reporting
period or interim period for which the entity’s financial
statements have not yet been issued. Upon adoption, entities will
no longer present or disclose any information required by Topic
915. The Company has early adopted the new standard effective as of
December 31, 2015.
In August 2014, the FASB issued ASU 2014-15 on
“Presentation of Financial Statements Going Concern (Subtopic
205-40) – Disclosure of Uncertainties about an Entity’s
Ability to Continue as a Going Concern”. Currently, there is
no guidance in U.S. GAAP about management’s responsibility to
evaluate whether there is substantial doubt about an entity’s
ability to continue as a going concern or to provide related
footnote disclosures. The amendments in this update provide such
guidance. In doing so, the amendments are intended to reduce
diversity in the timing and content of footnote disclosures. The
amendments require management to assess an entity’s ability
to continue as a going concern by incorporating and expanding upon
certain principles that are currently in U.S. auditing standards.
Specifically, the amendments (1) provide a definition of the
term substantial
doubt, (2) require an
evaluation every reporting period including interim periods, (3)
provide principles for considering the mitigating effect of
management’s plans, (4) require certain disclosures when
substantial doubt is alleviated as a result of consideration of
management’s plans, (5) require an express statement and
other disclosures when substantial doubt is not alleviated, and (6)
require an assessment for a period of one year after the date that
the financial statements are issued (or available to be issued).
The amendments in this update are effective for public and
nonpublic entities for annual periods ending after December 15,
2016. Early adoption is permitted. The Company has not elected to
early adopt this pronouncement.
Management
does not believe that any recently issued, but not yet effective,
accounting standards could have a material effect on the
accompanying financial statements. As new accounting pronouncements
are issued, we will adopt those that are applicable under the
circumstances.
NOTE 8: GOVERNANCE
On
July 6, 2015 the Company revised and/or added to the Articles of
Incorporation. The Company also ratified Bylaws formalizing the
governance policies and procedures for the Company effective July
6, 2015.
On
July 6, 2015 by an Action by Joint Written Consent of Sole Director
and Sole Stockholder, the Company elected Robert Grosshandler to
serve as a member of the Board of Directors and as an Officer of
the Company in the capacity of Chief Executive Officer, President,
and Secretary. It also set the number of directors of the Company
at one, established an Audit Committee of the Company naming Robert
Grosshandler as the sole member of such, set the fiscal year as the
calendar year, and other actions.
NOTE 9: EQUITY REWARD MARKETING PROGRAM - PROSPECTIVE DILUTION AND
OTHER EFFECTS
The
Company, in order to attract members (customers), is offering
customers and others the opportunity to earn equity in the Company
as a reward or additional reward for certain activities. This
equity may be earned in exchange for, amongst other activities,
becoming a customer, recruiting other customers, and utilizing the
Company’s services to earn cash back on purchases at
participating retailers.
Through
its proposed offering (see Note 6), the Company anticipates that
the equity earned will be Preferred Class A. The Company will not
receive cash for any such equity earned. The Company is valuing
this equity at $.09 per share. This valuation is the expected per
share price to be received by the Company if its proposed offering
is successful. Equity distributed under this program will be
dilutive to existing shareholders. If this marketing program is
successful, the Company anticipates that significant dilution may
result.
There
are still significant hurdles to overcome to make this marketing
program commercially reasonable and enable it to stay compliant
with appropriate regulations, including but not limited to, state
Blue Sky laws.
The
Company has not yet distributed any equity under this marketing
program. If the Company is unable to overcome these hurdles, and
thus not be able to use its equity as part of the marketing
program, it may have to find substitute compensation of equivalent
value.
The
Company recognizes the cost of this program as a marketing expense.
It has accrued $937 as of December 31, 2015 to reflect this
expense.
NOTE 10: SUBSEQUENT EVENTS
In
January, 2016 the Company’s operations began to generate
significant revenue and membership activities when compared to
prior years.
In
March, 2016, the Company filed a SEC 1-A for its planned Regulation
A offering.
In
April, 2016 the Company received oral comments from the SEC
regarding its offering. The Company anticipates amending its filing
to reflect those comments on or before July 8, 2016.
The
Company has evaluated subsequent events through July 7, 2016, the
date the financial statements were available to be issued. Based on
the evaluation, no additional material events were identified which
require adjustment or disclosure.
iConsumer
Corp.
A
Delaware Corporation
Unaudited Financial
Statements
June
30, 2016
iConsumer
Corp.
TABLE
OF CONTENTS
|
|
Page
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|
UNUAUDITED
FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE
30, 2016 AND JUNE 30, 2015
|
|
|
|
|
|
Balance
Sheets
|
F-18
|
|
Statements of
Operations
|
F-19
|
|
Statements of
Changes in Stockholder’s Equity
|
F-20
|
|
Statements of Cash
Flows
|
F-21
|
|
Notes
to Financial Statements
|
F-22-F-28
|
iConsumer
Corp.
BALANCE
SHEET
June
30, 2016 and December 31, 2015
|
|
6/30/2016
Unaudited
|
12/31/2015
Audited
|
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Checking
|
0.00
|
37.00
|
|
Total
Checking/Savings
|
0.00
|
37.00
|
|
Other
Current Assets
|
|
|
|
Due
from Outsourced Site Services
|
109,829.00
|
0.00
|
|
Deferred
Offering Costs
|
685.50
|
|
|
Miscellaneous
Receivables
|
24.75
|
|
|
Total
Other Current Assets
|
110,539.25
|
0.00
|
|
TOTAL ASSETS
|
110,539.25
|
37.00
|
|
LIABILITIES & EQUITY (DEFICIT)
|
|
|
|
Liabilities
|
|
|
|
Current
Liabilities
|
|
|
|
Checks
Written in Excess of Cash
|
82,042.06
|
0.00
|
|
Member
Cash Back Payable
|
289,905.75
|
937.34
|
|
Preferred
Stock Distributable
|
230,471.41
|
937.34
|
|
Total
Current Liabilities
|
602,419.22
|
1,874.68
|
|
Non-Current
Liabilities
|
|
|
|
Due
to Related Parties
|
0.00
|
55,776.24
|
|
Total
Non-Current Liabilities
|
0.00
|
55,776.24
|
|
Total
Liabilities
|
602,419.22
|
57,650.92
|
|
Equity
|
|
|
|
Paid
in Capital
|
-200,000.00
|
200,000.00
|
|
Retained
Earnings (Deficit)
|
-57,613.92
|
-3,210.80
|
|
Stockholder's
Equity (Deficit)
|
|
|
|
Class
A Common Stock, 1,000,000 authorized, $0.001 par, converted to
Common Stock as of July 6, 2015
|
0.00
|
0.00
|
|
Class
B Common Stock, 1,000,000 authorized, $0.001 par, converted to
Preferred Stock as of July 6, 2015
|
0.00
|
0.00
|
|
Common
Stock 150,000,000 authorized, $0.001 par, 100,000,000 issued and
outstanding at December 31, 2015
|
100,000.00
|
-100,000.00
|
|
Series
A Non-Voting Preferred Stock 250,000,000 authorized, $0.001 par,
100,000,000 issued and outstanding at December 31,
2015
|
100,000.00
|
-100,000.00
|
|
Net
Loss
|
-434,266.05
|
-54,403.12
|
|
Total
Equity (Deficit)
|
-491,879.97
|
-57,613.92
|
|
TOTAL LIABILITIES & EQUITY (DEFICIT)
|
110,539.25
|
37.00
|
iConsumer
Corp.
STATEMENT OF
OPERATIONS
For six
month periods ended June 30, 2016 and June 30, 2015
|
|
6/30/16
Unaudited
|
6/30/15
Audited
|
|
Revenues:
|
|
|
|
Commissions from Merchants
|
328,477.90
|
0.00
|
|
Royalties
|
0.00
|
0.00
|
|
Total Income
|
328,477.90
|
0.00
|
|
Cost of Goods Sold
|
|
|
|
Member Cash Back Expense
|
280,692.32
|
0.00
|
|
Total COGS
|
280,692.32
|
0.00
|
|
Gross Profit
|
47,785.58
|
0.00
|
|
Operating Expenses
|
|
|
|
Accounting
|
0.00
|
0.00
|
|
Bank Service Charges
|
353.00
|
0.00
|
|
Hosting Fees
|
0.00
|
0.00
|
|
Legal Fees
|
7,697.13
|
8,763.75
|
|
Marketing
|
407,126.88
|
0.00
|
|
Membership Expenses
|
1,179.04
|
0.00
|
|
OSS Service Fee
|
65,695.58
|
0.00
|
|
Total Operating Expenses
|
482,051.63
|
8,763.75
|
|
Net Loss
|
-434,266.05
|
-8,763.75
|
iConsumer
Corp.
STATEMENT OF
CHANGES IN STOCKHOLDERS EQUITY
For the
years ended December 31, 2015, December 31, 2014, and six months
ended June 30, 2016
iConsumer
Corp.
STATEMENT OF CASH
FLOWS
For six
month period ended June 30, 2016 and June 30, 2015
|
|
6/30/2016
Unaudited
|
6/30/2015
Audited
|
|
OPERATING ACTIVITIES
|
|
|
|
Net Loss
|
-434,266
|
-8,764
|
|
Adjustments to reconcile Net Loss
|
|
|
|
to net cash provided by operations:
|
|
|
|
Deferred Offering Costs
|
-685
|
|
|
Other Receivables
|
-25
|
|
|
Checks Written in Excess of Cash
|
82,042
|
-1,184
|
|
Decrease in Due to Related Party
|
-165,605
|
9,947
|
|
Member Cash Back Payable
|
288,968
|
0
|
|
Preferrred Stock Distributable
|
229,534
|
0
|
|
Net cash provided by Operating Activities
|
-37
|
0
|
|
FINANCING ACTIVITIES
|
|
|
|
Paid in Capital
|
0
|
0
|
|
Stockholder's Equity:Class A Common Stock
|
0
|
0
|
|
Stockholder's Equity:Class B Common Stock
|
0
|
0
|
|
Stockholder's Equity:Common Stock
|
0
|
0
|
|
Stockholder's Equity:Preferred Stock
|
0
|
0
|
|
Net cash provided by Financing Activities
|
-0
|
0
|
|
Net cash increase for period
|
-37
|
0
|
|
Cash at end of period
|
0
|
0
|
iConsumer
Corp.
NOTES
TO THE FINANCIAL STATEMENTS
For the
year ending December 31, 2015 and six month period ended June 30,
2016
NOTE
1: NATURE OF OPERATIONS
iConsumer Corp.
(the “Company”), is a corporation organized December
16, 2010 under the laws of Delaware. The Company was formed to
provide money saving services to consumers through a web site that
is designed to be searchable and discoverable by Google. On June
19, 2015 it began “test the waters” operations to
determine product and service viability for a new service aimed at
providing consumers cash back rebates based upon their shopping at
participating retailers. As of December 31, 2015, it had not
generated significant revenue. In 2016 however, the Company has
seen a significant change in revenues compared to 2015. In the
years preceding the commencement of its planned principal
operations, the Company actively provided the service of directing
web traffic to iGive.com, primarily aimed at Google and other
search engines. Additionally, the Company’s activities since
inception have consisted of formation activities and preparations
to raise additional capital as described in Note 6. The Company is
dependent upon additional capital resources for the continuation of
its planned principal operations and is subject to significant
risks and uncertainties; including failing to secure additional
funding to fully operationalize the Company’s planned
operations.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The
accounting and reporting policies of the Company conform to
accounting principles generally accepted in the United States of
America (GAAP) and Article 8 of Regulation S-X of the rules and
regulations of the Securities and Exchange Commission
(SEC).
The
Company has elected to adopt early application of Accounting
Standards Update No. 2014-10, Development Stage Entities (Topic
915): Elimination of Certain Financial Reporting Requirements; the
Company does not present or disclose inception-to-date information
and other remaining disclosure requirements of Topic
915.
The
Company adopted the calendar year as its basis of
reporting.
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
Cash Equivalents
For the
purpose of the statement of cash flows, cash equivalents include
time deposits, certificate of deposits, and all highly liquid debt
instruments with original maturities of three months or
less.
Accounts Receivable and Allowance for Doubtful
Accounts
Accounts
receivable are carried at their estimated collectible amounts.
Accounts receivable are periodically evaluated for collectability
based on past credit history with clients and other factors.
Provisions for losses on accounts receivable are determined on the
basis of loss experience, known and inherent risk in the account
balance and current economic conditions. There are no
accounts receivable or associated allowances for doubtful accounts
established as of December 31, 2015 or June 30, 2016.
Property and Equipment
The
Company has a policy to capitalize expenditures with useful lives
in excess of one year and costs exceeding $1,000. No property or
equipment have been recorded as of
June 30, 2016.
Fair Value of Financial Instruments
The
Company discloses fair value information about financial
instruments based upon certain market assumptions and pertinent
information available to management. There were no financial
instruments outstanding as of June 30,
2016.
Concentrations of Credit Risks
The
Company’s financial instruments that are exposed to
concentrations of credit risk consist of its cash. The Company will
place its cash and cash equivalents with financial institutions of
high credit worthiness and has a policy to not carry a balance in
excess of FDIC insurance limits. The Company’s management
plans to assess the financial strength and credit worthiness of any
parties to which it extends funds, and as such, it believes that
any associated credit risk exposures are limited.
Revenue Recognition
The Company earns revenues through commissions,
royalties, and advertising on its website and earns revenues
through agreements with vendors for web traffic and sales referred
through the iConsumer.com website. The Company recognizes revenue
in accordance with FASB ASC 605, Revenue
Recognition, only when the
price is fixed or determinable, persuasive evidence of an
arrangement exists, the services have been provided, and
collectability is assured. The launch of the
company’s website has resulted in a significant increase in
revenues for six month period ended June 30, 2016 when compared to
2015.
Offering Costs
The
Company complies with the requirements of FASB ASC 340-10-S99-1 and
SEC Staff Accounting Bulletin (SAB) Topic 5A - "Expenses of
Offering" with regards to offering costs. Prior to the completion
of an offering, offering costs will be capitalized as deferred
offering costs on the balance sheet. The deferred offering costs
will be charged to stockholder’s equity upon the completion
of an offering or to expense if the offering is not completed. The
Company anticipates significant offering costs in connection with
the Offering discussed in Note 6. Insignificant offering costs were
incurred through June 30, 2016.
Income Taxes
The
Company accounts for income taxes with the recognition of estimated
income taxes payable or refundable on income tax returns for the
current period and for the estimated future tax effect attributable
to temporary differences and carryforwards. Measurement
of deferred income items is based on enacted tax laws including tax
rates, with the measurement of deferred income tax assets being
reduced by available tax benefits not expected to be realized in
the immediate future. At December 31, 2015, and June 30, 2016, the
Company had deferred tax assets of approximately $54,614, and
$491,880, respectively, related to net operating loss carryforwards
(NOL). Due to the uncertainty as to the Company’s ability to
generate sufficient taxable income in the future and utilize the
NOL’s before they expire, the Company has recorded a
valuation allowance to reduce the net deferred tax asset to
zero.
The
Company reviews tax positions taken to determine if it is more
likely than not that the position would be sustained upon
examination resulting in an uncertain tax position. The Company did
not have any material unrecognized tax benefit as of December 31,
2015. The Company recognizes interest accrued and penalties related
to unrecognized tax benefits in tax expense. During the year ended
December 31, 2015, and the six month period ending June 30, 2016
the Company recognized no interest and penalties.
The
Company files U.S. federal tax returns. The U.S. federal tax
returns were not filed for the Company for the years 2010-2014, in
violation of IRS regulations and federal statutes. The Company
filed the returns for each year 2010-2014 during July 2015 and
subsequently filed the return for 2015. As each year incurred a net
operating loss, no taxes were due when the returns were filed.
However, $100 late filing penalties were assessed and paid for each
year. The Company believes it is in compliance after filing these
returns. All tax periods since inception remain open to examination
by the taxing jurisdictions to which the Company is
subject.
NOTE
3: STOCKHOLDER’S EQUITY (DEFICIT)
As of
the issuance date of these financial statements, 100,000,000 shares
of Common Stock and 100,000,000 shares of Preferred Stock were
issued and outstanding.
The
Articles of Incorporation were Amended and Restated effective July
6, 2015. Among the revised provisions, the Company authorized
150,000,000 shares of Common Stock, par value $0.001 per share and
reclassified "Class A Common Stock" to "Common Stock"; authorized
300,000,000 shares of Preferred Stock, par value $0.001 per share
and reclassified "Class B Common Stock" to "Preferred Stock";
amended the power to authorize the number of authorized shares to
by affirmative vote of the holders of at least a majority of the
voting power of the issued and outstanding shares of Common Stock
of the Company. The terms and preferences of these reclassified
shares were revised where Common Stock, among other provisions,
entitles holders to ten votes for each share of Common Stock,
subordinate dividend rights to Preferred Stock, and certain
liquidation rights.
The
Company filed a Certificate of Designations, Preferences, and
Rights of Series A Non-Voting Preferred Stock of iConsumer Corp.
(under Section 151 of the Delaware General Corporation Law) on July
6, 2015, designating 250,000,000 shares of Preferred Stock
authorized under the Amended and Restated Certificate of
Incorporation filed July 6, 2015 as Series A Non-Voting Preferred
Stock ("Series A Preferred Stock"), par value $0.001. The Series A
Preferred Stock was granted certain rights and preferences
including: dividend preference and liquidation priority with
respect to unpaid dividends. The Series A Preferred Stock holders
are not entitled to vote on any matters placed to a vote of the
stockholders of the Company.
The
Company entered into a recapitalization and exchange agreement
effective July 6, 2015 with Robert Grosshandler. This agreement
stipulates the terms of a tax-free reorganization pursuant to
Internal Revenue Code section 368(a), where Robert Grosshandler
transfers, assigns, delivers, and surrenders to the Company his
pre-recapitalization shares and the Company issues
post-recapitalization shares, among other pertinent terms. This
exchange retires 1,000,000 Class A Common shares
pre-recapitalization and issues 100,000,000 shares of Common Stock
and 100,000,000 shares of Series A Non-Voting Preferred Stock post
recapitalization.
NOTE
4: GOING CONCERN
The
accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company is a business that has commenced principal
operations in June, 2015, has not generated meaningful revenues or
profits since inception, and has sustained net losses of $54,403,
$915 and $375 for the years ended December 31, 2015, December 31,
2014 and 2013, respectively. The Company’s ability to
continue as a going concern for the next twelve months is dependent
upon its ability to generate sufficient cash flows from operations
to meet its obligations, which it has not been able to accomplish
to date, and/or to obtain additional capital financing from its
stockholder and/or third parties, including through the Offering
described in Note 6. It plans to incur significant costs in pursuit
of its Offering. No assurance can be given that the Company will be
successful in these efforts. These factors, among others, raise
substantial doubt about the ability of the Company to continue as a
going concern for a reasonable period of time. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going
concern.
NOTE
5: RELATED PARTIES
Prior
to June 19, 2015, including the years ended December 31, 2014 and
2013 and earlier, the Company was subject to a three-party oral
agreement with iGive.com Holdings LLC (“iGive”) and
Outsourced Site Services, LLC (“OSS”), both related
parties under common control with shared ownership and management
(referred to herein collectively as the “Related
Parties”). This agreement stipulated that iConsumer Corp.
maintain a website at iConsumer.com that directs traffic to
iGive.com (owned and operated by iGive). It shall maintain that
website in such a way as to maximize the traffic to iGive.com. In
return, the Related Parties shall cover all of the costs of
maintaining the iConsumer.com website. After launch of the full
iConsumer web site on June 19, 2015, a site that promotes the
iConsumer Corp. planned business operations, this agreement ceased,
and iConsumer. Corp. became responsible for its own costs, or
entering into a formal agreement with the either or both of the
Related Parties or others.
Effective May 1,
2015, the Company entered into a software license and services
agreement (the “License Agreement”) with Outsourced
Site Services, LLC (“OSS”), a related party. Among the
terms of the License Agreement, the Company’s operations will
be run on technology licensed from OSS and OSS will provide the
Company with certain support services, as defined in the License
Agreement. For the use of these services and technology, the
Company agrees to pay OSS 20% of its gross revenue, as defined in
the License Agreement. The License Agreement provides that in the
event the company wishes to assume responsibility for the support
services provided by OSS, it can do so upon at least six
months’ notice. In that event, the company will pay 5% of its
gross revenues to OSS. Since OSS is under common control of Robert
Grosshandler, he will have the power to determine whether the
company will continue to be able to rely on the OSS license, and
the price it pays for the license. The License Agreement has a term
of 20 years. As a result of these agreements the Company results of
operations may not be indicative of the results that would have
occurred it it had operated independently.
As of
June 30th, 2016 the Company is owed $109,829 from the Related
Parties for revenues collected net of any expenses paid on the
Company's behalf since inception.
NOTE 6: OFFERING
Subsequent to December 31, 2015, the Company began pursuing an
offering (“Offering”). The Offering calls for the
Company to offer for sale under Regulation A $2,000,000 of its
Class A Non-Voting Preferred Stock at a price of $.045 per share.
Sales of these securities commenced on September 29, 2016, upon
qualification by the SEC. The offering allows for multiple
closings. The first closing occurred in December, 2016.
The Offering is expected to continue throughout 2017. The
Company expects to incur costs of approximately $150,000 related to
the Offering.
The Company expects to amend the Offering early in 2017. It
intends to raise the price per share at that time. Once
amended, the Company will cease to accept investments in the
Offering until the Offering is qualified again by the
SEC.
There is presently no secondary market for Company’s stock
and therefore the Company cannot guarantee that its securities will
ever be tradeable on an exchange or market or have any other
liquidity. This offering was qualified by the Securities
Exchange Commission (SEC) on September 29, 2016. These
financial statements should not be relied upon as a basis for
determining the terms of the Offering as this information may not
be current or accurate relative to the final terms of the
Offering.
The Company has begun the process of having its stock listed on the
OTC QB market. While there is no guarantee that this will
occur, the Company believes it will be listed in the first quarter
of 2017.
NOTE
7: RECENT ACCOUNTING PRONOUNCEMENTS
In
June 2014, the FASB issued Accounting Standards Update (ASU)
2014-10 which eliminated the requirements for development
stage entities to (1) present inception-to-date information in the
statements of income, cash flows, and members’ equity, (2)
label the financial statements as those of a development stage
entity, (3) disclose a description of the development stage
activities in which the entity is engaged, and (4) disclose in the
first year in which the entity is no longer a development stage
entity that in prior years it had been in the development stage.
This ASU is effective for annual reporting periods beginning after
December 15, 2014, and interim periods beginning after December 15,
2015. Early application was permitted for any annual reporting
period or interim period for which the entity’s financial
statements had not yet been issued. Upon adoption, entities no
longer present or disclose any information required by Topic 915.
The Company has early adopted the new standard effective as of the
inception date.
In August 2014, the FASB issued ASU 2014-15 on
“Presentation of Financial Statements Going Concern (Subtopic
205-40) – Disclosure of Uncertainties about an Entity’s
Ability to Continue as a Going Concern”. Currently, there is
no guidance in U.S. GAAP about management’s responsibility to
evaluate whether there is substantial doubt about an entity’s
ability to continue as a going concern or to provide related
footnote disclosures. The amendments in this update provide such
guidance. In doing so, the amendments are intended to reduce
diversity in the timing and content of footnote disclosures. The
amendments require management to assess an entity’s ability
to continue as a going concern by incorporating and expanding upon
certain principles that are currently in U.S. auditing standards.
Specifically, the amendments (1) provide a definition of the
term substantial
doubt, (2) require an
evaluation every reporting period including interim periods, (3)
provide principles for considering the mitigating effect of
management’s plans, (4) require certain disclosures when
substantial doubt is alleviated as a result of consideration of
management’s plans, (5) require an express statement and
other disclosures when substantial doubt is not alleviated, and (6)
require an assessment for a period of one year after the date that
the financial statements are issued (or available to be issued).
The amendments in this update are effective for public and
nonpublic entities for annual periods ending after December 15,
2016. Early adoption is permitted. The Company has not
elected to early adopt this pronouncement.
Management does not
believe that any recently issued, but not yet effective, accounting
standards could have a material effect on the accompanying
financial statements. As new accounting pronouncements are issued,
we will adopt those that are applicable under the
circumstances.
NOTE
8: SUBSEQUENT EVENTS
On September 29, 2016 the SEC qualified the Company’s
Offering. Subsequent to December 1, 2016, the Company did its
first closing under the Offering.
The
Company has evaluated subsequent events through December 27, 2016,
the date the financial statements were available to be issued.
Based on the evaluation, no additional material events were
identified which require adjustment or disclosure.
NOTE
9: GOVERNANCE
On July
6, 2015 the Company revised and/or added to the Articles of
Incorporation. The Company also ratified Bylaws formalizing the
governance policies and procedures for the Company effective July
6, 2015.
On July
6, 2015 by an Action by Joint Written Consent of Sole Director and
Sole Stockholder, the Company elected Robert Grosshandler to serve
as a member of the Board of Directors and as an Officer of the
Company in the capacity of Chief Executive Officer, President, and
Secretary. It also set the number of
directors of the Company at one, established an Audit Committee of
the Company naming Robert Grosshandler as the sole member of such,
set the fiscal year as the calendar year, and other
actions.
NOTE 10: EQUITY REWARD MARKETING PROGRAM - PROSPECTIVE DILUTION AND
OTHER EFFECTS
The Company, in order to attract members (customers), is offering
customers and others the opportunity to earn equity in the Company
as a reward or additional reward for certain activities. This
equity may be earned in exchange for, amongst other activities,
becoming a customer, recruiting other customers, and utilizing the
Company’s services to earn cash back on purchases at
participating retailers.
Through its offering (see Note 6), the equity earned will be
Preferred Class A. The Company will not receive cash for any
such equity earned. The Company valued this equity at $.045
per share. This valuation is the
per share price ($.045) received in the Offering.
Equity distributed under this program
will be dilutive to existing shareholders. If this marketing
program is successful, the Company anticipates that significant
dilution may result.
There are still significant hurdles to overcome to make this
marketing program commercially reasonable and enable it to stay
compliant with appropriate regulations, including but not limited
to, state Blue Sky laws.
As of June 30, 2016 the Company had not yet distributed any equity
under this marketing program. In December, 2016 the Company
distributed equity under this program to approximately 1,600
customers, who thus became shareholders.
The Company recognizes the cost of this program as a marketing
expense. It has accrued $230,471 as of June 30, 2016 to
reflect this expense.
PART III
INDEX TO EXHIBITS
|
2.1
|
Amended Certificate of Incorporation*
|
|
2.2
|
Bylaws*
|
|
3.1
|
Certificate of Designations*
|
|
Form of Subscription Agreement
|
|
|
6.1
|
Amended and Restated Software Licenses and Services Agreement with
Outsourced Site Services, LLC dated May 25, 2016*
|
| 6.2 | 2016 Equity Incentive Plan |
|
7
|
Recapitalization and Exchange Agreement dated July 6,
2015*
|
|
Form of Escrow Agreement
|
|
|
Auditors’ Consent
|
|
|
12
|
Opinion of KHLK LLP*
|
|
13
|
“Testing the Waters” materials*
|
*
Previously filed
SIGNATURES
Pursuant
to the requirements of Regulation A, the issuer certifies that it
has reasonable grounds to believe that it meets all of the
requirements for filing on Form 1-A and has duly caused this
Offering Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago, State of
Illinois, on January 18, 2017.
iConsumer
Corp.
|
By
|
/s/ Robert N. Grosshandler
|
|
|
|
|
|
Robert N. Grosshandler, Chief Executive Officer of iConsumer
Corp.
|
This
Offering Statement has been signed by the following persons in the
capacities and on the dates indicated.
|
|
/s/ Robert N. Grosshandler
|
|
|
|
|
|
Robert N. Grosshandler, Chief Executive Officer, Chief Financial
Officer, Chief Accounting Officer and Sole Director
|
|
|
Date: January 18, 2017
|
29
