PART II AND III 2 tv495653_partiiandiii.htm PART II AND III

 

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 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.

 

PRELIMINARY OFFERING CIRCULAR DATED JUNE 1, 2018

 

iConsumer Corp.

 

 

73 Greentree Drive, #558

Dover, DE 19904

(888) 546-7980

 

100,000,000 shares of

Series A Non-Voting Preferred Stock

SEE “SECURITIES BEING OFFERED” AT PAGE 31

 

   Price to Public   Underwriting
discount and
commissions1
   Proceeds
to issuer2
 
Per share  $0.15    0   $0.15 
Total Maximum  $15,000,000    0   $15,000,000 

 

(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.”

 

Prior to December 1, 2017, there was no public market for our Series A Non-Voting Preferred Stock. Our Series A Non-Voting Preferred Stock began being quoted on the OTCQB Venture Market operated by OTC Markets Group Inc. (“OTCQB”) under the symbol “RWRDP” on December 1, 2017. The Depositary Trust Company made RWRDP DTC-eligible and the first trades happened in March, 2018.

 

The company is offering a maximum of 100,000,000 shares of Series A Non-Voting Preferred Stock on a “best efforts” basis (the “Offering”). There is no minimum offering amount. The Offering will continue until the earlier of (1) the date when all shares have been sold and (2) 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 4.

 

Sales of these securities will commence on approximately _____________ XX, 2018.

 

The company is following the “Offering Circular” format of disclosure under Regulation A.

 

 

 

 

TABLE OF CONTENTS

 

Letter to Prospective Shareholders 3
   
Risk Factors 4
   
Dilution 12
   
Plan of Distribution 13
   
Use of Proceeds 21
   
Future Development of a Reward Point System 22
   
The Company’s Business 24
   
The Company’s Property 25
   
Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
   
Directors, Executive Officers and Significant Employees 29
   
Compensation of Directors and Officers 30
   
Security Ownership of Management and Certain Security Holders 31
   
Interest of Management and Others in Certain Transactions 31
   
Securities Being Offered 31
   
Rescission Offer 34
   
Financial Statements F-1

 

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.

 

  2 

 

 

LETTER TO PROSPECTIVE SHAREHOLDERS

 

May 23, 2018

 

Millions of people want to learn about and experience the stock and cryptocurrency markets. Especially in the context of the world of start ups. They’ve seen the unicorns and the crypto whales and they want in. While extremely curious, they’re scared. Unless it’s free, they feel that there’s too much risk for even a small investment. So we made learning about, earning, and owning a publicly quoted equity and Bitcoin essentially free.

 

We created a classic two-sided market. Just like Google, where consumers search for free, and advertisers and retailers pay the bills, at iConsumer, members get rewarded with RWRDP, our OTC quoted stock, plus Bitcoin. All that’s required is shopping at our network of 1,800 worldwide retailers. That’s about as free as it gets. And those retailers, advertisers, and others interested in equity and crypto adoption pay us. Whether their interest is education, speculation, accumulation, the blockchain, or simply pride of ownership, our members are becoming actively involved in the fabric of our economy. Which is good for all of us. And especially good for investors in RWRDP.

 

Our history really starts with the pricing of our stock (RWRDP) in February and its first trade in March 2018. At that point, members could Google our ticker symbol and see the market price. Everything else we’d done was prelude. Making it legal to have 1,000,000 shareholders, getting our stock quoted on the OTCQB, getting market makers, and getting our ticker symbol were all necessary, but insufficient. It was being traded on a market that made the difference.

 

During the prelude, while waiting for all of the final regulatory approvals, we tested and experimented. We gained over 50,000 member/shareholders using a particular focus on social media. Our learning paid off. Consumers who joined and shopped in the first quarter of 2018 have already generated more cash than it cost to acquire them. And we estimate that they’ll generate $50 in free cash in their first year of membership. Our intention to offer certain members the opportunity to reverse their transactions made between February 14, 2018 and May 23, 2018 as part of a rescission offer does not affect this analysis. Even if all 1,661 affected customers elect to accept the rescission offer, our cash cost to acquire, and their forecasted cash generation in their first year of membership, are not impacted.

 

Which is one reason we’re raising money in this offering. Our first round got us to this point. We’re very lightly traded and still early-stage. Now it’s time to scale our marketing. We estimate we need about 20,000 net new customers, just like the ones who joined in the first quarter, to become comfortably cash flow positive. And while we were able to attract those customers in the first quarter for less than $10 in cash each, we’re expecting our acquisition costs to rise as we scale, so we’re estimating $50 per customer in acquisition costs. Not coincidentally, marketing should help RWRDP’s liquidity, too.

 

Our first goal is to be cash flow positive, but we don’t plan to stop there. Our potential markets are large, our current membership is small (only 51,000 members) in comparison. Whether our potential market is defined as online shoppers who are stock curious, or crypto curious, or start up curious we believe, it’s tens of millions of people. We base this on the fact that other rewards programs that we compete with have large customer bases. Rakuten alone has tens of millions of customers in the United States and elsewhere. Our potential market also includes people who have chosen to carry rewards cards from credit card issuers, whether those rewards are miles, points, or cashback. American Express numbers its membership rewards program in the tens of millions. Chase Rewards likewise. We’re primarily focused on millennials but being curious truly has no demographic. Whether they’re in North America or elsewhere. The ability to trade our stock or value having Bitcoin isn’t limited to just one continent, or the young, or the old.

 

The boom in the ICO (initial coin offering) /cryptocurrency world is creating new potential sources of revenue for us every day by creating companies that want to reach shoppers who are curious, own equity, and have a crypto wallet or account. Right now, we fill our members’ crypto wallets with Bitcoin, which costs us money to acquire and fulfill. It certainly works to help them learn, but we have a better way in mind. And that brings us to the second reason we’re raising money in this offering.

 

We’ll use a portion of the money we raise to continue to develop our own blockchain-based reward points system. We like to think of them as frequent flyer miles on steroids. We don’t intend them to be a cryptocurrency, nor do we see them as the basis for raising money in an ICO. Because completion of this point system requires significant additional funding, which we don’t have yet, as well as significant time to develop and because the points system will undergo regulatory scrutiny so that we’re completely securities and other regulation compliant, we can’t forecast when we’ll complete this project. Even with all that uncertainty, we’re very excited about creating a modern reward system.

 

Thanks for helping us Change the Faces of Wall Street.

 

Robert N. Grosshandler 

Sanford D. Schleicher

Melinda Moore

Kimberly Logan

Co-Founders

 

  3 

 

 

RISK FACTORS 

 

The Securities and Exchange Commission (the “Commission”) 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.

 

Risks Related to the Company and its Business

 

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 a first closing on its initial offering, which it did in December 2016. Throughout the balance of 2016, and until January 2017, its focus had been on preparing a marketing campaign, not member acquisition or revenue growth. Its preferred equity was first traded on the OTCQB market in March 2018. 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 small compared to competitors, having begun post-testing operations in February 2017, 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 the control of the company. There are no contractual requirements binding the retailer or advertiser to continue a relationship. Most of these retailers are primarily focused on the U.S. market.

 

The company is depending on the incentive of ownership in the company and Bitcoin 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 fewer unique selling propositions 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 using the price per share specified in the offering statement in effect as of the date that consumer makes a purchase with a merchant via the company's website. The company also relies on the incentive of being involved in the cryptocurrency world to attract customers. If that incentive does not work, the company is less likely to succeed.

 

  4 

 

 

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 is recording the cost of the incentive compensation at the last public price paid for its stock in its qualified offerings. If the market price of the company as quoted on a market (e.g. OTCQB) is different from that price, and if there is sufficient liquidity in that market, the company will need to use the market price to ascertain the value of the stock earned by members. If there is no price quoted publicly or in a prior offering, the company will need to use other valuation methodologies.

 

The company is challenged in raising capital.

 

Until the company is cash flow positive, it requires outside financing to meet its obligations, and to fund its growth. Raising such outside financing is extremely hard to do, and there is no certainty that the company will succeed in raising sufficient financing.

 

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 of Financial Condition and Results of Operations”. Changes in the license fee will impact the company’s expenses and profitability. 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 the current stage 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 four individuals, Robert Grosshandler, Melinda Moore, Kimberly Logan, 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 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 or blockchain-based reward points) 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.

 

  5 

 

 

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 and increase costs.

 

Our accountant has included a “going concern” note in its audit report.

 

We may not have enough funds to sustain the business until it becomes profitable. Even if we raise funds in this offering, we may not accurately anticipate how quickly we may use the funds and if these funds are sufficient to bring the business to profitability. Our ability to remain in business is reliant on either generating sufficient cash flows from operations, raising additional capital, or likely a combination of the two.

 

Rebate oriented customers are demanding and aggressive. 

 

Companies that offer rebates on customer purchases attract customers who enjoy pushing the limits in order to maximize their rebates and stock compensation. This aggressive buying behavior can turn into fraudulent behavior against iConsumer or its partners. The company believes that it is the first established company to offer rebates in the form of Bitcoin. It is possible that customers drawn to this offer will be more or less aggressive than cash back customers. 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.

  

The transition to providing rebates in the form of Bitcoin may fail.

 

The company’s more than 51,000 members may find getting Bitcoin instead of cash unattractive and stop doing business with us. New prospective customers may find getting Bitcoin as a rebate an unattractive proposition, and not join. Customers may spend more or less than their historical averages, due to the transition to Bitcoin. The cost to market to potential customers may be uneconomical. There are no historical precedents to guide the company’s forecasting, making it more likely that our forecasts will be inaccurate.

 

Using Bitcoin as compensation creates speculative risk to the company.

 

The company is required to purchase Bitcoin at prevailing market rates in order to satisfy its need to fulfill Bitcoin to customers.  As the markets for Bitcoin are new, thinly capitalized, and unregulated, the company is not able to foresee all of the risks the need to purchase Bitcoin might entail.  At a minimum, this need to participate in the cryptocurrency markets exposes the company to the extreme volatility in the market price of Bitcoin, plus the potential inability to purchase sufficient Bitcoin at any price.  While the company intends to use commercially reasonable means to mitigate those risks (including, but not limited to, engaging in hedging operations), it may lack the expertise, capital, or other elements necessary to successfully purchase Bitcoin to fulfill its obligations to customers.

 

Using Bitcoin as compensation creates speculative risk to the member.

 

The price of Bitcoin in the market may drop radically between the time the award to the member is calculated, and the time the member is able to transfer the Bitcoin from iConsumer into his or her account or wallet. The time between the award and the ability to transfer may be more than 75 days. The member bears that speculative risk.

 

The value of Bitcoin earned by a member may decrease between the date it is earned and the date at which it is transferred.

 

The price of Bitcoin in the market may drop radically between the time the award to the member is calculated, and the time the member is able to request a transfer of the Bitcoin from iConsumer into his or her account or wallet. The time between the award and the ability to transfer may be more than 75 days. The company anticipates transferring Bitcoin immediately upon request. However, there may be a delay between the request and the transfer. The member bears the risk of fluctuation between the time of the award and the time of the ultimate transfer to the member.

 

Accepting Bitcoin or Ether as payment for the company’s securities creates speculative risk to the company.

 

The price of Bitcoin or Ether in the market may drop radically between the time the prospective investor tenders and the time the company accepts the tender. The company must create processes and use hedging mechanisms to protect itself in this situation, and it may not do so successfully.

 

  6 

 

 

The ability of a member to return goods creates risk to the company.

 

A member could use the company's rewards program to speculate in Bitcoin to the detriment of the company. For example, a member could purchase goods via the iConsumer portal. At the time of purchase, the member would know how much Bitcoin he or she would be entitled to. Prior to the period permissible for returns, the member could track the price of Bitcoin relative to the dollar and if the dollar value of Bitcoin drops significantly, the member could return the goods purchased and unwind the transaction leaving the company vulnerable to the drop in price of Bitcoin if the company does not effectively hedge its Bitcoin exposure.

 

The company has no management with international experience.

 

The company may need to expand its marketing, investment efforts, and operations beyond North America. Current management has no experience in this area. It may need to hire employees, or retain contractors and advisors, with applicable experience. There is no assurance that such employees, contractors, or other resources, will be available and/or affordable at the point the company seeks such assistance.

 

Research and development for a blockchain-based reward points system have costs, timelines, regulatory hurdles, and outcomes that are uncertain.

 

The company is endeavoring to build a blockchain-based reward point system. To date, the company or its providers have expended approximately $50,000 to research and develop a reward points plan and to retain advisors with subject matter expertise. It has spent approximately $75,000 to develop and to deploy the technology and processes to reward, utilize, distribute, and track blockchain-based reward points, beginning with Bitcoin. It has not yet created a redemption method for the points, nor created the actual points themselves. The company currently plans to create an ERC-20 based point system, based on the Ethereum network. This choice is subject to change, either before the creation of the point reward system, or after. There are numerous issues associated with choosing the blockchain network. Among other risks, blockchain networks are in a high state of flux, have scaling issues, may have increased regulatory exposure, and adoption issues.

 

The company has not yet written the smart contracts governing these points. Because it has not completed this development, audited the smart contracts, nor tested it with users, there is substantial risk that it may not complete the project, that it may be unable to design an attractive redemption method, that it may complete the project but the point system does not work, or that it may complete the project but customers are uninterested. There is the risk that the company may not raise sufficient funds to complete the project. Because of these uncertainties, the company is unable to forecast delivery of blockchain-based reward points system in the foreseeable future. The commercialization cost of a blockchain-based rewards system has several components. We estimate the development of the ERC-20 token (or similar) itself in its simplest form to cost between $50,000 and $100,000. The cost of testing the smart contract will vary depending on the final complexity of the token. We are estimating $25,000 - $100,000 for that phase. The deployment of our own token to users is fundamentally a clone of what has been built for Bitcoin and RWRDP. We expect that cost to be less than $25,000. As a result, we are estimating the total cost for commercializing our token to range from $100,000 - $225,000.

 

Because the point system is intended to be analogous to frequent flyer miles or credit card points, which the Commission has not previously characterized as securities, and the company does not intend to utilize these points as a fundraising vehicle, the company believes that, when completed, these points may not be deemed to be securities. However, there is substantial risk that our counsel or the Commission may deem such points to be securities, in which case they would be securities tokens. If so, there is the risk of the additional cost of compliance, reduced market acceptance, and the other risks associated with securities. If the company or the Commission determines that this as yet undelivered reward point system is a security, they would only be able to trade on markets or exchanges that are not yet up and running. If they are not a security, the company does not intend to seek a listing on a cryptocurrency exchange. All of these choices present risks of completion and liquidity for the company and its investors.

 

The estimates used to provide forecasts may not scale with additional marketing expenditures and could prove inaccurate.

 

As outlined in the letter to shareholders, the company is forecasting cash flow break even status when it acquires 20,000 more shoppers who behave like the shoppers acquired in the first quarter of 2018. Those estimates are based on behaviors observed over a short period of time and may only be achieved if the assumptions they are based on are correct. There are many reasons why the assumptions could be inaccurate. That behavior may not be indicative of future performance. If the new customers behave differently than the customers acquired during the first quarter, it may take longer for the company to reach cash flow break even. It is possible that the company does not raise enough money in this offering to fund its continued operations.

 

  7 

 

 

The company used the following unaudited data (as of April 21, 2018) to estimate the number of new shoppers required to reach cash flow break even status:

 

Shoppers Acquired 1st Quarter   273 
Total Net Cash Generated by New Shoppers 1st Quarter  after Bitcoin Rebate  $2,837 
Cash Cost of Acquisition  $1,365 
Net Cash Generated Per New Shopper in 1st Quarter  $5.39 
Net Cash Generated by Existing Shoppers 1st Quarter after Bitcoin Rebate  $17,085 
Average Number of Days before Shopper Covered Acquisition Cost   35 
      
Estimated Annual Net Cash Generated by New Shopper  $50 
Estimated Number of Net New Shoppers   23,000 
Estimated Cost to Acquire Net New Shopper  $45 
Estimated Total Cost of Acquiring New Shoppers to Reach Cash Flow Break Even  $1,000,000 

 

The company used the following assumptions in making its forecasts. The first quarter is a “slow” quarter. The company will require approximately $1,000,000 in cash annually (net of the cash required for member acquisition) to operate once it acquires 20,000 net additional shoppers. Net cash assumes that all revenues are collected. We assume we can acquire new members rapidly. Investors should take the assumptions into consideration when reading the estimates and consider whether they think they are reasonable.

 

Customers who earned shares under the company’s Stock Award program may have rescission rights that could require us to reacquire the shares for an aggregate repurchase price of up to $42,000. 

 

Under Commission rules, an issuer that is offering securities on a continuous basis under Rule 251 of Regulation A promulgated under the Securities Act of 1933, as amended (the “Securities Act”) must amend its offering statement annually to update the financial information in the offering circular and to reflect any other changes to its disclosure. The company failed to amend its offering statement that was re-qualified by the SEC on February 13, 2017 on a timely basis. As a result, that offering statement was no longer available for the company to make stock awards to members who made purchases from February 14, 2018 until May 23, 2018. We permitted members to earn stock awards until May 23, 2018. Stock awards earned during that period may not have been exempt from the registration or qualification requirements under federal securities laws, may have been awarded in violation of federal securities laws and may be subject to rescission. In order to address this issue, we intend to make a separate rescission offer concurrent with this offering to all customers who earned stock awards from February 14, 2018 until May 23, 2018. We will be offering to repurchase the shares of Series A Non-Voting Preferred Stock from those customers.

 

If the rescission offer is accepted, we could be required to make aggregate payments to those customers of up to $42,000, which includes statutory interest. This exposure is calculated by reference to the acquisition price of the Series A Non-Voting Preferred Stock, plus statutory interest. Federal securities laws do not provide that a rescission offer will terminate a purchaser’s right to rescind a sale of stock that was not registered as required or was not otherwise exempt from such registration requirements. If any or all of the offerees reject the rescission offer, we may continue to be liable under federal and state securities laws for up to an amount equal to the value of those shares plus any statutory interest since February 13, 2018, which we may be required to pay. See “Rescission Offer.”

 

  8 

 

 

Risks Related to the Company's Securities

 

There is no current liquid market for the preferred stock. We may not continue to satisfy the requirements for quotation on the OTCQB market and, even if we do, an active market for the preferred stock may not develop.

 

Prior to December 1, 2017, there was no formal marketplace for the resale of the company’s preferred stock. Our preferred stock is quoted on the OTCQB over-the-counter market operated by OTC Markets Group Inc. under the symbol “RWRDP”. Even though our stock is quoted, that does not mean that there is or will be a liquid market for our equity. If we fail to continue to meet the requirements for quotation on OTCQB, the shares may be quoted on other tiers of the over-the-counter market to the extent any demand exists. Whether or not we’re quoted on a market, or listed on an exchange, 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 liquid market for the preferred stock, it may be impossible for shareholders to be able to value their stock, reducing or eliminating the value of the stock as an incentive. Even if we continue to satisfy the requirements of the OTCQB, it is not a stock exchange. As a result, there may be significantly less trading volume and analyst coverage of, and significantly less investor interest in, our preferred stock than there would be if the shares were listed on a stock exchange, which may lead to lower trading prices for our preferred stock.

 

If we are successful in continuing to be quoted on a market, we will be considered a “penny stock”.

 

Among other consequences, this will make it harder, potentially impossible, for a liquid market in our securities to develop. Without a liquid market, it is harder, potentially impossible, for a shareholder to find a buyer for his, hers, or its securities at an acceptable price. For example, many institutional investors will not invest in the “penny stocks”. Many brokerage firms do not trade in penny stocks, or trade in stock quoted on the OTC markets.

 

If and when our quoted stock price goes down, customers / shareholders may react negatively.

 

Many of the company’s shareholders are first time investors in a “public” company. Their reaction to a fluctuating stock quote is unknown. For example, they may choose to stop being customers or they may choose to air their grievances on social media platforms.

  

Alternative forms of investment and reward points may become popular.

 

Competitors, and potential competitors to the company, are rumored to be announcing cryptocurrencies that allow them to raise capital or compete in ways that the company may not be able to replicate. This increases the number of probable competitors to the company. For example, we are aware that the parent company of eBates, Rakuten, has announced that Rakuten points will be blockchain-based. The BAT token (basicattentiontoken.org), associated with the Brave browser, may also directly compete with us. Another token that may compete is LOYYAL. The increasing popularity of this fundraising mechanism is making qualified resources able to assist with the process hard to find, and if available, very expensive. There is no assurance that the company will be able to compete with these well-funded competitors.

 

Risks Related to Bitcoin

 

The fundamental value of Bitcoin is sensitive to subjective perception.

 

The value of Bitcoin can be based on its ease of use, the energy used to mine it, what it can be used to purchase, or its revolutionary technology, but there is no underlying value or institution supporting its value. This results in price volatility, which encourages speculative behavior. Speculative subscribers may hold Bitcoin instead of spending it, which makes the currency illiquid. Furthermore, any particular cryptocurrency may become worthless, which could result in an adverse effect on the company and members who receive Bitcoin.

 

A disruption of the Internet or the Bitcoin network could impair the value and the ability to transfer Bitcoin.

 

A significant disruption in Internet connectivity could disrupt the Bitcoin network, until the disruption is resolved, and could have an adverse effect on the value of Bitcoin. It is possible that such an attack could adversely affect the value of Bitcoin.

 

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The price of Bitcoin and Ether assets are extremely volatile. Fluctuations in the price of Bitcoin could materially and adversely affect the company and the value of members’ rebates and rewards.

 

The prices of blockchain assets are significant uncertainties for the company and members. The price of Bitcoin and other cryptocurrencies such as Ether, Ripple, and Litecoin are subject to dramatic fluctuations. The company uses the Gemini digital asset exchange to set the price at which it awards Bitcoin. For example, the price of Bitcoin on the Gemini exchange on December 24, 2017 at 4 pm Eastern Standard Time (“EST”) was $13,586.76. The company purchased a futures contract on January 12, 2018. At that date, the futures contract reflected a market price of approximately $9,000.00. The 4 pm EST price of Bitcoin on March 5, 2018 on the Gemini exchange was $11,570.00. To further illustrate the volatility of Bitcoin and Ether, we have set forth in the table below the US dollar prices quoted at 4pm EST on the Gemini exchange since September 1, 2017.

 

Date  Price of Bitcoin   Price of Ether 
September 1, 2017  $4,855.44   $391.50 
September 15, 2017  $3,690.00   $257.97 
October 1, 2017  $4,298.25     
October 15, 2017  $5,506.37   $329.00 
November 1, 2017  $6,570.00   $297.50 
November 15, 2017  $7,260.00     
December 1, 2017  $10,717.48     
December 15, 2017  $17,715.85   $688.90 
January 1, 2018  $13,411.49     
January 15, 2018  $13,700.00   $1,287.28 
February 1, 2018  $9,099.99   $1,012.24 
February 15, 2018  $10,081.89   $927.13 
April 30, 2018  $9,307.30   $676.37 

 

The company is exposed to these fluctuations until such time as it pays a member in Bitcoin or accepts a subscriber's subscription. As described in “Plan of Distribution,” the company anticipates holding an investor’s payment in its original form for about a week. If an investor chooses to pay in a cryptocurrency, the company bears the exchange rate risk between the date the cryptocurrency is tendered and the date the subscription agreement is countersigned by the company and cryptocurrency is exchanged for US dollars. The longer it takes to complete the subscription diligence process, including collecting all information from an investor and performing anti-money laundering and OFAC checks, the longer the company is exposed to the fluctuations in the value of the cryptocurrency used by an investor to pay for his or her subscription.

  

In addition to exchange rate risk, which is solely borne by the company, there is valuation risk. If the company does not accept a subscriber's subscription, and returns the cryptocurrency tendered by the subscriber, that cryptocurrency may have lost value between the time it was tendered and the time it was returned. The potential investor bears that risk. For example, on Day 1, a potential subscriber tenders one BTC. On Day 1, one BTC has a market value of $8,000. On Day 7, prior to completion of the diligence process, the company rejects the subscription and returns the one BTC to the potential subscriber. If on Day 7 one BTC is valued at $7,000, the potential investor bears the fluctuation risk of that valuation change.

 

While the company intends to continue to use commercially reasonable means to mitigate its exposure to such fluctuations, several factors may affect price, including, but not limited to:

 

Global blockchain asset supply;

 

Global blockchain asset demand, which can be influenced by the growth of retailers’ and commercial businesses’ acceptance of blockchain assets like cryptocurrencies as payment for goods and services, the security of online blockchain asset exchanges and digital wallets that hold blockchain assets, the perception that the use and holding of blockchain assets is safe and secure, and the regulatory restrictions on their use;

 

Changes in the software, software requirements or hardware requirements underlying a blockchain network;

 

Changes in the rights, obligations, incentives, or rewards for the various participants in a blockchain network;

 

Currency exchange rates, including the rates at which Bitcoin and other cryptocurrencies such as Ether, which the company accepts as payment for subscriptions in this offering, may be exchanged for fiat currencies;

 

Fiat currency withdrawal and deposit policies of blockchain asset exchanges and liquidity on such exchanges;

 

Interruptions in service from or failures of major blockchain asset exchanges;

 

Investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in blockchain assets;

 

Monetary policies of governments, trade restrictions, currency devaluations and revaluations;

 

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Regulatory measures, if any, that affect the use of blockchain assets;

 

The maintenance and development of the open-source software protocol of the Bitcoin or other cryptocurrency networks;

 

Global or regional political, economic or financial events and situations;

 

Expectations among blockchain participants that the value of blockchain assets will soon change; and

 

A decrease in the price of blockchain assets that may have a material adverse effect on the company’s financial condition and operating results.

 

If someone gains access to a member’s login credentials to an iConsumer account, the account holder may lose the value of their account.

 

If someone gains access to or learns of a member’s login credentials or private keys, that person may be able to dispose of the member’s account and the member’s Bitcoin, and they may lose the entirety of their holdings.

 

Most holders of cryptocurrencies can only gain access to them by use of a private key. The loss of access to private keys may result in the permanent loss of access to an account and the value of the cryptocurrencies therein.

 

Bitcoin is stored in a digital wallet on the blockchain and is controllable only by the individual who controls the private key. If the private key is lost or destroyed an investor may be unable to access the Bitcoin held in the digital wallet, which may result in permanent loss of funds. In addition, if the private key becomes known to a third party, it may result in misappropriation and therefore permanent loss of funds. Internet errors related to cyber malfunction of the wallet where the Bitcoin is held could also result in its loss.

 

While securities accounts at U.S. brokerage firms are often insured by the Securities Investor Protection Corporation (SIPC) and bank accounts at U.S. banks are often insured by the Federal Deposit Insurance Corporation (FDIC), Bitcoin held in a digital wallet currently does not have similar protections.

 

Unlike bank accounts, credit unions or accounts at other financial institutions that provide certain safety guarantees, such as insurance, to depositors, coins and tokens held in digital wallets on a blockchain are currently uninsured. In the event of loss or loss of utility value there is no public insurer or private insurance to offer recourse to the injured holder.

 

Cryptocurrency markets are subject to market manipulations and schemes that may decrease the value of Bitcoin.

 

There is a risk of market manipulation, such as the spreading of false and misleading information about Bitcoin to affect its price. Rumors about Bitcoin may be spread in a variety of ways, including on websites, press releases, email spam, posts on social media, online bulletin boards, and chat rooms. The false or misleading rumors may be negative and could result in a decrease in the value of Bitcoin.

 

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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 compares the price that new investors are paying for their shares with the effective cash price paid by existing shareholders. Investors in this offering will pay $.15 per share. The table 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 $(535,417) or $(0.0026) per share as of December 31, 2017. 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 Commission requires. The table then gives effect to the sale of shares assuming we issue A) a low-range number of shares, B) a mid-range number of shares and C) the maximum number of shares in this offering.

 

   Low-Range
Raise
   Mid-Range
Raise
   Maximum
Raise
 
Price per Share  $0.15   $0.15   $0.15 
Shares Issued   1,000,000    10,000,000    100,000,000 
Capital Raised  $150,000   $1,500,000   $15,000,000 
Less: Offering Costs  $(26,500)  $(40,000)  $(150,000)
Net Offering Proceeds  $123,500   $1,460,000   $14,850,000 
Net Tangible Book Value (12/31/17)  $(535,417)  $(535,417)  $(535,417)
Increase to Net Tangible Value  $123,500   $1,460,000   $14,850,000 
                
Net Tangible Book Value Post-Financing  $(411,917)  $924,583   $14,314,583 
                
Shares Issued and Outstanding (12/31/2017)   207,282,913    207,282,913    207,282,913 
No-fee Shares Earned   14,136,729    14,136,729    14,136,729 
Post-Financing Shares Issued and/or Earned and Outstanding   222,419,642    231,419,642    307,282,913 
                
Net tangible book value (deficit) per share prior to offering  $(0.0024)  $(0.0024)  $(0.0024)
Increase/(Decrease) per share attributable to new investors  $0.0006   $0.0064   $0.0469 
Net tangible book value (deficit) per share after offering  $(0.0019)  $0.0040   $0.0445 
Dilution per share to new investors  $0.1519   $0.1460   $0.1055 

 

The table reflects past issuances to customers on a no-fee basis under the prior 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.

 

No-fee issuances are those shares issued and transferred to customers as consideration for the customer making purchases from network retailers using the iConsumer platform. No cash is received from the customer as part of the consideration. iConsumer is under no obligation to issue shares unless it has an offering statement qualified by the Commission at the time a customer makes a purchase. iConsumer has not, and will not, issue no-fee shares unless it has a qualified offering statement. We refer to these no-fee issuances as iConsumer’s “Stock Award” program. The offering statement remained qualified until February 13, 2018. Under Commission rules, an issuer that is offering securities on a continuous basis under Rule 251 of Regulation A must amend its offering statement annually to update the financial information in the offering circular and to reflect any other changes to its disclosure. The company failed to amend its offering statement on a timely basis. See “Rescission Offer.”

 

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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 a 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.

 

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):

 

In June 2018 Jane invests $20,000 for shares that represent 2% of a company valued at $1 million.

 

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 only 1.3% of the company but her stake (at least on paper) is worth $200,000.

 

In June 2019 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.

 

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

 

The Offering Statement filed with the Commission covers the offer and sale of preferred shares to:

 

New investors in the company who will pay cash for their investments; and

 

Members of the company (people who use the company’s website) who will be awarded “no-fee 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 Commission 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 May 1, 2018 the company had transferred 3,654,132 shares to the transfer agent to reflect the earnings of 2,454 members.  The company has not issued any shares (no-fee or otherwise) subsequent to May 11, 2017.

 

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 $0.15, which may be paid in cash, Bitcoin or Ether.

  

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When the company accepts Bitcoin or Ether as payment, it will use the exchange rate as of 4 pm EST, as posted on the Gemini Exchange, on the date the company accepts the investor’s subscription and such payment is received, to determine the exchange rate from Bitcoin or Ether, as the case may be, into US dollars. The company will post that information on our web page supporting such transactions. The payment will be accepted into an account or a crypto wallet. If into an account, such account will be hosted by an exchange such as Gemini, Coinbase, or Poloniex. If into a wallet, the wallet will be hosted on computers controlled by iConsumer. Due to security concerns, the company is not revealing the specific vendors it is using for the technology used in its crypto wallets.

 

The company will hold the investor’s Bitcoin or Ether, as the case may be, until the company’s anti-money laundering and OFAC checks on the investor are complete. If the investor fails these checks or does not complete the subscription process, the Bitcoin or Ether tendered by the investor will be returned to the originating account or wallet. If the investor passes these checks and completes the subscription process, the company will exchange the Bitcoin or Ether it has received for US dollars, on or about the date such investment is accepted. It typically takes less than a week for the company to process a subscription. As a result, the company anticipates holding an investor’s payment in its original form for about a week.

 

Alternatively, if a large number of investors tender Bitcoin or Ether, the company may determine that the exchange rate risk (the difference between the value of Bitcoin or Ether between the time of tender and the time of acceptance) is meaningful. In that instance, it may choose to convert the tendered Bitcoin or Ether to dollars that will be held in a segregated bank account on the company’s behalf and use the futures market to hedge the risk in the case that an investor’s subscription is not accepted, or that an investor cancels their investment prior to acceptance.

 

The company anticipates using Gemini, Coinbase, or Poloniex to exchange Bitcoin and Ether, but may choose other exchanges if, in its sole discretion, it would be advantageous to the company to do so. The company bears the exchange rate risk between the date the Bitcoin or Ether is tendered and the date the investment is accepted and Bitcoin or Ether is exchanged for US dollars. While the company endeavors to process subscriptions, including completing due diligence, in one week, it may hold an investor's funds for an indefinite period of time since the subscription and due diligence process may require obtaining additional information from an investor. In no event will the company hold an investor’s funds for more than 45 days. Until an investment is accepted, an investor may request the return of his or her investment via email through the FundAmerica platform. In that event, the Bitcoin or Ether will be transferred back to the originating account or wallet.

 

The company anticipates that all costs of the transaction, including Bitcoin or Ether exchange fees, will be borne by the company where practicable. Similar to the cost of wiring a cash payment, certain exchange fees may be borne by the investor, and not be payable or reimbursed by the company.

 

For example, an investor on Day 1 tenders enough Bitcoin to purchase $15,000 in shares. At the price of $.15 per share, that is 100,000 shares. The price of one Bitcoin at that moment, according to the Gemini Exchange, is $15,000. So, the investor transfers one BTC. If possible, the cost of that transfer will be borne by the company. If not practicable or possible (for instance, but not limited to, if exchange fees are too high or cryptocurrency exchanges cease to operate), the company will inform the investor that such fees are to be borne by the investor. At that juncture, the investor has the option to cancel his or her subscription.

Between the time an investor tenders Bitcoin or Ether and the time the company accepts the subscription by countersigning the subscription agreement, either party may cancel the investment, for a period of up to 45 days. This means that if the investor cancels the subscription and the price of Bitcoin or Ether has gone up, such cancellation will be to the detriment of the company, assuming it has not adequately hedged the risk. Similarly, if the company cancels the investment, and the price of Bitcoin or Ether has gone down, such cancellation would be to the detriment of the investor.

 

On Day 7, after anti-money laundering and OFAC checks are complete, the company accepts the subscription. On Day 7, the price of one BTC is $10,000. The company will issue 100,000 shares to the investor. In this example, the company will have hedged its Bitcoin exposure by purchasing a futures contract on the CBOE or CME to reduce its risk. In the event that the company does not purchase a futures contract, it would receive lower net proceeds from the investment.

 

The minimum investment in cash is $100. The minimum investment made via Bitcoin or Ether is $1,000.
 

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 and supporting materials on an online investment platform.

 

In the event the company makes arrangements with a broker-dealer to sell its shares, it will file a supplement to this Offering Circular.

 

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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 qualified by the Commission, the company will accept tenders of funds to purchase the preferred shares. The company may close on investments on a “rolling” or “continuous” basis (so not all investors will receive their shares on the same date). Each time the company accepts funds (either transferred from the Escrow Agent or directly from the investors who tendered Bitcoin or Ether) is defined as a “Closing." Funds tendered in cash by potential investors will be held by the Escrow Agent and will be transferred to the company upon Closing. Funds tendered in Bitcoin or Ether will be held by the company, in the manner outlined above. The escrow agreement can be found in Exhibit 8 to the Offering Statement of which this Offering Circular is a part. FundAmerica and the Escrow Agent are performing AML and OFAC due diligence on investors. All cash funds are held in escrow pending satisfactory due diligence. Funds tendered in Bitcoin or Ether are held by the company in a segregated bank account pending satisfactory due diligence. The company will accept a subscription (i.e., hold a Closing) within 30 calendar days after due diligence is successfully completed. Given the timing of completion of diligence, it is possible that the company could conduct a Closing every weekday, which would be administratively burdensome. In order to reduce the number of Closings, the company may wait until it has completed due diligence on several investments before submitting a disbursement request to the Escrow Agent.

 

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, as well support from OSS. 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 or to receive “no-fee” shares in the Stock Award program. The subscription agreement includes a representation by the investor (including members receiving no-fee shares) 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 previously paid Fund America, Inc., a technology and escrow service provider, an escrow fee of $500. Additionally, the company will pay Fund America $7.50 per transaction processed for investments over $250. Direct Transfer, LLC, an affiliate of Issuer Direct Corp., serves 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 a new cash shareholder who invests $1,000 or more, and $1.50 for each new no-fee shareholder, upon transfer and issuance of their shares. 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 Fund America and Issuer Direct Corp. for the aforementioned services would be $125,000 if it achieved the maximum offering proceeds.

 

The company may also engage additional broker-dealers or processing agents to perform administrative functions, who may have different financial arrangements and costs.

 

Upon acceptance of an investment, the FundAmerica platform automatically generates and sends an email with the details of the transaction to the investor. Investments made with Bitcoin or Ether will also utilize the FundAmerica platform for AML and OFAC functions for potential investors who tender their funds in Bitcoin or Ether. In the event that the company does not accept an investment in whole or in part, it will notify an investor via email through the FundAmerica platform.

 

The company anticipates that the share register as maintained by the transfer agents will reflect the issuance and transfer of shares to investors within two weeks after the company accepts and closes on an investment.

 

The company is absorbing all fees connected to cash, Bitcoin or Ether investments charged by FundAmerica, Issuer Direct, or cryptocurrency exchanges, where practicable.

 

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The Incentive Program

 

The primary business of iConsumer is helping its members understand and participate in the stock and cryptocurrency markets. To facilitate that, consumers are incented to utilize the services of iConsumer to earn rebates and save money via coupons and “deals” whenever they shop at participating retailers. The retailers pay iConsumer for this service, and iConsumer shares those payments with its customers as a rebate.

 

The incentive is delivered in two ways. Consumers receive a portion in the equity of iConsumer – RWRDP – and a portion in Bitcoin. At some point in the future, if the company successfully builds a blockchain-based reward points system, Bitcoin may be supplemented or replaced by the company’s own point system. The company will only issue shares (“no-fee shares”) to members after the Offering Statement is qualified by the Commission, such Offering Statement remains qualified, and upon each member's execution of a subscription agreement, as well as their compliance with other requirements as set out in the company’s terms of service. The rebate percentage (typically the rebate is a percentage of the purchase amount) is displayed to the user on iConsumer’s site, in its apps, or as a banner on the retailer’s site prior to the user making a purchase.

 

 

The rebate percentage varies from retailer to retailer and is set by iConsumer. iConsumer may vary the rebate percentage frequently.

 

The rebates that are to be delivered as equity are calculated as a percentage of the purchase price, if possible. The price used for this calculation is the price of the stock as set forth in the offering statement that is qualified as of the date of purchase. That price is displayed in the footer of most pages of the iConsumer website. iConsumer may vary the number of shares earned per purchase at its sole discretion.

 

The rebates that are to be delivered as Bitcoin are typically calculated as a percentage of the purchase price. The price of Bitcoin at 4 pm EST price on the Gemini Exchange on the date of purchase is used to calculate the exchange rate between the currency of the transaction and Bitcoin. For transactions that aren’t reversed (typically due to returns), the company offers the customer the ability to request a transfer of the earned Bitcoin approximately 75 days after the transaction date.

 

The consumer thus knows the percentages (or fixed “special rate”) of the rebates to be received, prior to making a purchase.

 

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The company purchases futures contracts to cover those future needs and to protect from cryptocurrency volatility, in addition to purchasing Bitcoin. The company currently holds less than one month’s anticipated demand for Bitcoin in a wallet or in an account on an exchange. As its redemption experience grows, it may hold more or less Bitcoin in a crypto wallet on in an account on an exchange.

 

The security of the exchange-based account is a feature of the exchange. Where the Bitcoin is held in iConsumer’s wallet, that wallet is kept on a computer that is not publicly accessible, or in cold storage in a hardware wallet like a Nano. The wallet technology is provided by a third party. The state of wallet technology is rapidly changing, and we expect to change wallet providers as technology improves. For security reasons, we are not disclosing the vendors of the products and services we employ to transact in and store cryptocurrencies.

 

The company has been using Bitcoin for rewards since December 23, 2017. In January 2018, the company purchased a 90-day futures contract for slightly more than the amount of Bitcoin that it expected it would owe to members through April 30, 2018. On March 5, 2018, the company acquired .12841849 BTC on an exchange, net of fees, and transferred that into a wallet. In April 2018 the company acquired an additional .23 BTC. That amount of Bitcoin represents the maximum potential demand for Bitcoin from members through the end of April 2018. As of April 20, 2018 15 members had requested that their accrued Bitcoin earnings be transferred to a crypto wallet or account at an exchange. The company successfully made those transfers. Should members not request a transfer, the company will securely retain possession of that BTC, and it will reduce the requirement for future purchases. In April, upon the expiration of the futures contract, the company purchased another futures contract. The company believes it currently holds either Bitcoin or a futures contract for Bitcoin, sufficient to meet anticipated redemption needs through May 30, 2018.

 

Until such time as a customer requests, and the company completes, a transfer of Bitcoin to the customer’s wallet or exchange account, ownership of the Bitcoin does not pass to the customer. The company does not allocate a specific purchase of Bitcoin to a specific customer. The company’s Bitcoin is an asset of the company and may be used for any purpose it deems appropriate.

 

The company intends to keep Bitcoin purchases at a minimum to reduce security concerns. It will continue to use futures contracts to protect against upward price movements of Bitcoin.

 

In February 2018 the company introduced a Bitcoin-based incentive for members to refer new members. The incentive has two components. First, a fixed amount of Bitcoin is awarded upon the shopping activity of the recruited member. Second, the referring member earns Bitcoin equal to 5% of the referred member’s earned Bitcoin from shopping, for as long as the referring and referred members remains active on the iConsumer platform (by making purchases through iConsumer’s platform). Like all incentives the company offers, these terms may be changed or withdrawn at any time, in the company’s sole discretion, prospectively.

 

 

  17 

 

 

An example from a retailer’s site.

 

 

The consumer is able to see a ledger recapping purchase amounts, Bitcoin rebate, and stock earned amounts.

 

  18 

 

 

 

Current examples of both of these incentives after qualification of the Offering Statement (incentives change frequently) are as follows:

 

Jody learns about iConsumer from her friend George. When Jody becomes an iConsumer member and makes her first purchase from a participating retailer, iConsumer awards her 100 shares of equity, subject to the existence of a qualified offering statement for the shares. When she makes her first purchase from a participating retailer (in any amount), iConsumer rewards George with $5 in Bitcoin.

 

Jody makes a $100 purchase at jet.com via iConsumer because she knows she’ll accrue $2 in Bitcoin and 22.22 iConsumer shares (assuming a qualified offering statement is on file with the Commission).

 

After approximately 75 days have passed (to allow for returns), Jody may instruct iConsumer to transfer her Bitcoin to a cryptocurrency wallet or exchange account. Upon her request, the execution of the appropriate subscription agreement, confirmation that Jody has complied with iConsumer’s terms and conditions, and assuming a qualified offering statement is on file with the Commission, her accrued shares will be issued and transferred to the transfer agent’s books in about a month.

 

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From time to time the company may offer or withdraw additional incentives for George to recruit Jody. As of April 20, 2018, the recruitment incentive is called "5% for life." When George recruits Jody, and Jody makes a qualifying purchase, George earns $5 in Bitcoin. The amount of Bitcoin that represents is calculated as of the date Jody makes her first purchase. Subsequently, whenever Jody makes a qualifying purchase that earns Jody Bitcoin, George is credited in Bitcoin with 5% of the amount of Bitcoin Jody is awarded. George is able to request the transfer of the Bitcoin so earned when Jody is able to request the transfer (as outlined above) of her Bitcoin earnings. Under the current program, George does not earn a reward or payment of any type for members referred by Jody.

 

Upon George’s request, his accrued shares will be issued, assuming a qualified offering statement is on file with the Commission.

 

On December 29, 2016, iConsumer issued and transferred shares to over 1,600 shareholders due to their shopping and referral activity.

 

In April 2017, iConsumer issued and transferred 1,199,428 shares to 1,640 shareholders due to their shopping and referral activity.

 

As of April 20, 2018, iConsumer had transferred Bitcoin to 15 members.

 

Offering Circular Supplements and Post-Qualification Amendments

 

The company undertakes to file, during any period in which offers or sales are being made,

 

1)Any supplement required pursuant to Rule 253(g) under the Securities Act; and
2)A post-qualification amendment to the Offering Statemen to reflect in the offering circular any facts or events arising after the qualification date of the Offering statement (or the most recent post-qualification amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Offering Statement.

 

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USE OF PROCEEDS

 

Assuming the Maximum Offering amount is raised, the net proceeds of this offering to the issuer, after expenses of the offering (payment to Fund America, Issuer Direct Corp. LLC, professional fees and other expenses) will be approximately $14,850,000. 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.

 

There is no minimum offering amount.

 

If iConsumer receives the maximum proceeds in this offering, it plans to use the net proceeds as follows:

 

·Marketing expenses (primarily new member acquisition) in the amount of approximately $10,000,000.
·Research, development, and appropriate regulatory approval for blockchain-based reward points in the amount of approximately $425,000 for commercialization and $500,000 for regulatory approvals.
·Marketing expenses of approximately $2,075,000 for promotion of blockchain-based rewards points.

 

Approximately $1,850,000, or 12.5% 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 when it has cash to do so.

 

The development of blockchain-based rewards points may require the company to raise additional capital to complete the effort. There is no assurance that the company will be able to raise additional capital or that the reward points system will be completed in the foreseeable future.

 

The company reserves the right to change the above use of proceeds if management believes it is in the best interests of the company.

 

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FUTURE DEVELOPMENT OF A REWARD POINT SYSTEM 

 

The following information is a preliminary description of the company’s planned reward point system, and is likely to change as we develop it. As stated elsewhere in this offering circular, the company may not have the funds to complete the system described in the foreseeable future.

 

Reward Point Design

 

Consumer adoption of crypto wallets has value to many of the participants in the blockchain ecosystem. Crypto wallets are notoriously challenging for ordinary people to use. Using a crypto wallet requires the purchase of crypto assets like Bitcoin or Ether.

 

Consumers are familiar with frequent flyer miles and point systems.

 

The overall design is intended to mimic the familiar frequent flyer reward systems but be built on a blockchain network that allows reward points to be held in and transferred between crypto wallets.

 

Such a system will enable iConsumer members to learn about and experience blockchain-based tokens held in a crypto wallet, without the fear and trepidation the risk of financial loss engenders, and with little or no cost to iConsumer. Additionally, the company believes that immediate user gratification is paramount. A consumer should be able to transfer his or her reward token into a personal wallet with little or no waiting period.

 

The company believes that these goals require iConsumer to create a token that has no perceived value when initially issued or when subsequently transferred by holders of the token.

 

Point Value

 

It is the intention of the company to not assign a monetary value to the points.

 

Awarding Points

 

The company will award points in conjunction with the activities of a member. For instance, as a reward for shopping or referring others.

 

Transfer of Points by the Member

 

To fully experience and overcome the complexities of crypto wallets, the points would be transferable by the holder to compatible crypto wallets. The design of the system is intended to accommodate such transfer without significant cost to iConsumer or to the member.

 

Transfer of Points by iConsumer

 

iConsumer will transfer points into the member’s crypto wallet upon demand, with no waiting period. The design of the system is intended to accommodate such transfer without cost to iConsumer or to the member.

 

Sale of Points by iConsumer

 

The company does not intend to sell reward points, nor to use them to raise funds.

 

Redemption Opportunity

 

At some future time, it may be possible for the company to offer a redemption mechanism. It has not built or designed such a mechanism and does not foresee having such a mechanism available in the foreseeable future.

 

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Regulatory Considerations

 

Frequent flyer miles and other similar systems are not currently subject to a specific regulatory regime. The IRS considers such awards to be income to the recipient when the underlying purchase is made by a third party, and as a rebate when the purchase is made by the recipient. It is possible that various regulatory authorities may take a different posture with blockchain-based reward systems. We intend to adhere to whatever U.S. regulations cover our reward points, including issuing them as “security tokens” if necessary. Should that be necessary, it may make blockchain-based reward points uneconomic to issue.

 

Technical Details

 

The initial specification for iConsumer’s reward point system assumes an ERC-20 compliant token on the Ethereum network. It is possible that such a choice does not support the goal of low cost transfers. The company is exploring other platforms, such as NEO and Stellar, that may provide a greater degree of design freedom, transaction speed, and low cost.

 

Current Status

 

The company began investigating blockchain-based rewards points in September 2017. It created a draft design document in October 2017 It engaged three advisors or advisory firms during the fourth quarter of 2017. Mr. Grosshandler has spent approximately 50% of his time on this research. Ms. Moore has spent approximately 25% of her time on the reward point system. Mr. Shleicher has spent approximately 10% of his time on this project.

 

Research involves, among other things, education and awareness about the blockchain space, competitive issues, regulatory issues, and technical issues. Because of the very new state of the industry, this involves attending many conferences, lectures, and seminars.

 

Additionally, the company’s legal counsel has been involved in the securities issues surrounding the creation of blockchain token systems. We have consulted with them extensively on this area.

 

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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 2016, the company had negligible revenues. In 2016, the company began offering consumers the opportunity to learn about the stock market by becoming shareholders in a publicly quoted company. They receive rebates from shopping in the form of equity (Series A Non-Voting Preferred shares) in the company, in addition to other forms of incentives, including cash rebates, and, beginning in December 2017, Bitcoin.

 

In order to have a platform that could comply with U.S. securities regulations, the company filed an offering statement with the Commission under Regulation A. That offering statement was first qualified in September 2016 and the company began an offering under Regulation A.  As of December 31, 2016, it had closed on investments from 19 individuals, representing $147,525 of invested capital.  It also had committed, but unreceived investments of $7,000. This offering was a continuous offering and remained open as of December 31, 2016.

 

In February 2017 the company raised the price per share in the offering from $.045 to $.09. The company’s offering statement was requalified by the Commission on February 13, 2017. Under Commission rules, an issuer that is offering securities on a continuous basis under Rule 251 of Regulation A must amend its offering statement annually to update the financial information in the offering circular and to reflect any other changes to its disclosure. The company failed to amend its offering statement on a timely basis. As of December 31, 2017, it had closed on cash investments in that offering from 188 individuals, representing $174,866 of invested capital since the inception of the offering. From May 2017 until February 13, 2018, the company did not issue any shares under the offering statement.

 

As of December 31, 2016, the company had 12,804 members. As of December 31, 2017, the company had 49,989 members.

 

The company applied to FINRA to obtain a ticker symbol in January 2017 so that the company’s Series A Non-Voting Preferred shares could be traded on a market. In December 2017 FINRA issued the ompany the ticker symbol RWRDP. In March 2018 the first trading of RWRDP occurred on the OTCQB market.

 

Principal Products and Services

 

The company provides its members the opportunity to experience the ownership of two assets that members find challenging, without cost to the member: ownership in a company quoted on the over-the-counter market (iConsumer) and ownership of Bitcoin. The company generates revenue by providing an online shopping portal where the company’s members can shop at over 1,800 participating retailers worldwide. The retailers pay the company commissions and advertising fees in exchange for members’ shopping. In turn, the company rebates a portion of its revenues to its members in the form of equity, cash back, and Bitcoin. In 2016 and 2017, revenue from advertising was negligible. 

 

The company launched its online shopping services to the general public on June 19, 2015. From that date until December 23, 2017, it offered rebates in the form of its equity and cash. On December 23, 2017, the company transitioned from offering cash rebates to offering Bitcoin rebates.

 

Market

 

The company’s target market encompasses all online shoppers, with the initial target being those shoppers located in the United States. With the transition from cash rebates to Bitcoin rebates, the company expanded its potential market worldwide. While the company has no direct competitors, the company’s indirect competitors include companies that offer cash back or frequent flyer miles or points as incentives for their shopping behavior. Those indirect 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.

 

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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 its offering under Regulation A.

  

Competition

 

The company’s indirect competitors include eBates, Shopathome, RetailMeNot, MyPoints, CouponCabin, Brads Deals, swagbucks, and Mainstreetshares. iConsumer offers the same ability to save money shopping by offering coupons but differentiates itself by additionally offering its members the ability to earn ownership in the company through the acquisition of shares, as well as Bitcoin rebates. 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, an affiliated company, iConsumer represents over 1,800 retailers, providing Bitcoin and equity 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 begun to make expenditures on research and development for a blockchain-based reward point system.

 

Employees

 

The company has no directly paid employees. Its management and operations are 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 as expenses in the company’s financial statements. The value of these assets is not reflected in the financial statements.

  

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in this Offering Circular. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Unless otherwise indicated, latest results discussed below are as of December 31, 2017.

 

The company is in an early stage of development. Operations prior to January 2016 produced minimal revenues.

 

The company earns revenues through offering advertising on its website, its member-focused emails, alerts and notifications in its apps, and primarily through agreements with vendors for web traffic and sales referred through the iConsumer.com website and apps (commission revenue). 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. Revenues from advertising were negligible in 2016 and 2017.

 

Beginning in June 2015, the company began to earn commission revenue by directing customers to participating retailers. Measurable revenue from operations began in January 2016. The company’s revenues varied significantly each month during 2016 as it refined its marketing and promotional offers.

 

In August 2016 the company engaged a full-service marketing agency to prepare a launch of the brand in anticipation of qualification of the offering statement for its initial Regulation A offering before the start of the Christmas holiday shopping season. Deliverables from this engagement included new branding, site redesign, and marketing collateral.

 

Starting in the third quarter of 2016 and continuing throughout 2017, the company launched improved generations of its mobile apps for Apple IOS and Android. It also launched updated versions of the iConsumer Button for Chrome, Safari, Firefox, Internet Explorer, and Microsoft Edge. Regular releases of the apps and the Button have occurred since that time. These technologies are provided under the license agreement with OSS, outlined more fully below.

 

In September 2016 the company’s Regulation A offering, described below under “Liquidity and Capital Resources,” was first qualified by the Commission. It began issuing and transferring shares of its Series A Non-Voting Preferred Stock to its customers and selling equity for cash.

 

During the first quarter of 2017, the company increased the offering price of the Series A Non-Voting Preferred Stock to $.09 per share. The company officially announced that it was leaving its “beta testing” phase in February and commenced full operating mode. The company began advertising heavily to build its membership base, and its base of potential cash investors.

 

During the second quarter of 2017, the company continued to advertise heavily. By the end of the period, the company had grown from approximately 13,000 members at the beginning of February 2017, to over 40,000 members.

 

The company filed a Form 1-Z to notify the closing of the Regulation A offering in May 2017, to comply with the instructions of FINRA, in order to commence the process of applying for quotation of its Series A Non-Voting Preferred Stock on the OTCQB market. That 1-Z filing was later withdrawn. At the time of the filing, the company had approximately 2,600 shareholders and had raised approximately $162,000 from cash investors.

 

The company launched an offering of convertible debt under Rule 506(c) of Regulation D promulgated under the Securities Act in September 2017. As of December 31, 2017, the company had raised $154,721 in that offering. See “—Liquidity and Capital Resources.” 

 

  26 

 

 

The company completed its testing of widely varying member incentives in January 2017. The primary factors affecting gross income (revenue) are the number of users of the company’s services (members), the amount each member spends, and the commission rates paid by participating retailers. By adjusting the percentage of the gross income and/or equity shared with the member in the form of rebates, the company can affect the amount of gross income earned. Generally, the higher the percentage shared with the member, the more likely a member will make a transaction that generates revenue.

 

On December 23, 2017, the company transitioned from providing rebates in the form of cash to providing rebates in the form of Bitcoin. This transition introduced potential cash flow issues, as the company seeks to reduce the speculative risk (similar to foreign currency risk) associated with Bitcoin by acquiring sufficient Bitcoin (or hedging the risk in the futures markets) at the time it's earned by a member as a result of a purchase. This purchase typically occurs prior to the company being paid for its services. Should the company's cash reserves be insufficient to acquire or hedge its Bitcoin requirements, the company is exposed to substantial speculative risk.

  

In order to support quotation on the OTCQB market, on January 12, 2018 the company amended the liquidation preference for the Series A Non-Voting Preferred Stock by consent of the holders of a majority of the Common Stock and Series A Non-Voting Preferred Stock. The amendment reaffirmed that shareholders of record as of January 12, 2018 had a liquidation preference equal to the Original Issue Price of their shares and that subsequent holders of the stock will not have a liquidation preference. Additionally, the amended language eliminated the liquidation preference for shareholders who acquire their shares subsequent to January 12, 2018.

 

Gross margin is gross income less the direct costs of that income (i.e. rebates). Rebates have cash and non-cash components. The non-cash component reflects the estimated fair value, as reflected in the most current offering circular qualified with the Commission, of the preferred stock to be transferred to the member as the earned rebate. The company focuses on the cash component of its gross margin as the best indicator of results.

 

The amount spent per member 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 technology used by iConsumer to operate its website is licensed from OSS, where it has been used for 19 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 and compensates Robert Grosshandler, Melinda Moore, Kimberly Logan, and Sanford Schleicher, all of whom are key to the company’s successful operation.

 

These services are provided pursuant to the License Agreement. The provisions of the License Agreement with OSS will significantly affect the company’s financial results. Under the License Agreement, the company currently 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, which would likely change the company’s gross margins and profitability. 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, and the current results of operations may not be indicative of what they would be if the company provided for its own support services.  

 

Both iGive and OSS are 100% owned by Robert Grosshandler.

 

Results of Operations

 

Revenues for the year ended December 31, 2017 were $416,435, a decrease from revenues of $480,216 in the same period in 2016, reflecting the effects of reducing the cash back incentive paid as a percentage of sales. Reducing the percentage reduces the incentive for users to shop. Revenues were primarily composed of commissions from merchants.

 

A portion of the company’s expenses were in the form of preferred stock, a non-cash item. The stock was valued at $0.045 per share for stock earned through February 11, 2017, and $.09 per share thereafter. The value reflects the price paid by third party purchasers in the Regulation A offering.

 

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A portion of the company’s expenses were in the form of Bitcoin, a cryptocurrency. Bitcoin is valued as of the day the expense is incurred, based upon the closing price for that day on the Gemini Bitcoin Exchange.

 

The company’s cost of revenues for 2017 amounted to $666,526, compared to $620,469 in 2016. Cost of revenues for 2017 included $315,210 in preferred stock, up from $237,129 in 2016, and $1,391 in Bitcoin.

 

Operating expenses increased to $879,660 for 2017, from $540,893 in 2016. The primary components of operating expenses were as follows:

·Marketing expense increased to $652,300 from $412,372, reflecting the company’s increased operations. The member stock awards included as a marketing expense – a non-cash item (primarily rewards for joining and referring other shoppers) — were $450,492, up from $315,806 in 2016. The Advertising and Promotion expense was $201,808, up from $96,566 in 2016. Marketing expense did not include expenses related to the company’s offering under Regulation A. Expenses related to the offering were capitalized to prepaid expenses and will be charged against shareholders’ equity when the offering is closed.
·Fees to OSS were $83,287 in 2017, a decrease from fees of $95,835 in 2016. This reflected the reduction in gross income. This affiliated company (owned by Mr. Grosshandler) provides most of the services needed to operate iConsumer. More specifically, the overheads of creating member-oriented marketing campaigns and the overhead of managing the network of 1,800 retailers are borne by OSS. Additionally, all of the costs of developing and operating the technology are the responsibility of OSS. In accordance with the agreement with OSS, the expense 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.
·Legal fees for 2017 were $43,227, compared to $18,059 in 2016, primarily as a result of the increased regulatory burden as a result of a full year of being a Regulation A filer and the need to alter the liquidation preference in the company’s Certifications of Designations for its Series A Non-Voting Preferred Stock.
·Accounting fees were $29,174 in 2017, compared to $6,500 in 2016.

 

As a result of the foregoing factors, the company recorded a net loss of $1,129,751 in 2017, compared to a net loss of $681,147 in 2016.

 

Liquidity and Capital Resources

 

As of the date of this Offering Circular, iConsumer has a low level of liquid assets. To date, the company has been completely dependent on the proceeds from an offering of equities under Regulation A, support from affiliated companies and private placements of convertible debt securities to execute its plan of operations. In September 2016, the company commenced its offering under Regulation A. It offered up to $2,000,000 of its Series A Non-Voting Preferred Stock at a price of $.045 per share, subsequently raised to $.09 per share. The company received $20,341 in cash from the sale of its preferred securities in the Regulation A offering in 2017, including $7,000 in cash that was a receivable at the end of 2016, and a net of $135,889 cash from the sale of its preferred securities in 2016 (after $11,636 in offering costs). In September 2017, the company commenced a private placement under Rule 506(c) of Regulation D of up to $2,000,000 aggregate principal amount of 8% Convertible Promissory Notes due 2020, convertible into shares of its Series A Non-Voting Preferred Stock, at the holder’s option, at a price of $.075 per share. As of December 31, 2017, the company had raised net proceeds of $154,721 under that offering. The company has no debt, other than the Convertible Promissory Notes, 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. The Company will be completely dependent on the net proceeds from this offering, upon the qualification of the Offering Statement of which this Offering Circular forms a part, the convertible note offering and support from affiliated companies.

 

Trend Information

 

The company is reliant on the economic trends affecting online shopping in the United States. With the addition of Bitcoin-based rebates, the company is increasingly subject to worldwide economic trends affecting online shopping. The migration of retail shopping from physical locations to the internet continues and is expected to continue into the foreseeable future. The company believes that this trend is positively affecting its growth.

 

Amazon continues to enjoy a significant share of that online retail growth. The company has a relationship with Amazon, but the revenues from that relationship are negligible. Should the company succeed in increasing the share of its revenues from Amazon, the company would have increased customer concentration risk.

 

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Retailers that rely primarily on physical locations are under significant economic pressure. Many of them are going through or will go through bankruptcy proceedings. The company has relationships with some of those retailers. The company will be negatively affected to a greater or lesser degree by retailer defaults. Mitigating that trend is the fact that their customers are migrating to companies with which the company already does business.

 

The credit risk associated with retailer bankruptcies is mitigated in two ways. First, the company’s service providers monitor those risks and seek deposits and advance payments from retailers they deem risky. Second, the company does not owe rebates to its members unless the revenues those rebates are calculated upon are received.

 

The company utilizes online advertising to attract new members. Online advertising continues to grow as a percentage of the advertising market. The cost of the company’s advertising is subject to change, both up and down, depending on the state of the advertising market.

 

The addition of Bitcoin-based rebates subjects the company to advertising risks. Many advertising outlets do not allow advertisements promoting Bitcoin or other cryptocurrencies. This will limit the company’s advertising options and may result in higher advertising costs.

 

Consumers’ internet use, and especially mobile internet use, continues to grow. The company believes this increase can result in more member growth. Navigating the transition from desktop to mobile internet use presents challenges for the company. The company utilizes technology partners that continue to invest heavily in platforms that are intended to make the company’s offerings attractive to existing members and prospective members who use the internet from mobile devices.

 

The cost and difficulty of hiring or retaining qualified employees continues to increase. While the company does not have any direct employees, it is dependent on its service partners’ abilities to attract and retain employees. The company believes that its ability to operate virtually will help to mitigate the increased employee challenge.

 

The company’s ability to raise money is affected by the stock market, and in particular, the acceptance of companies using Regulation A as amended under the 2012 JOBS Act.

  

The alternative markets (e.g. OTC) continue to revise their standards for quotation. Those revisions may make it harder or more expensive for the company to obtain or maintain a market for its securities.

 

The competition has begun to utilize alternative advertising mechanisms. Last holiday shopping season, Retailmenot (whose acquisition was announced in the first quarter of 2017) advertised in retail malls. eBates appeared to utilize TV advertising to a greater extent than observed in prior years.

 

The adoption of new mobile wireless technologies such as 4G and soon, 5G, continue to make mobile usage of the company’s offerings more likely.

  

Alternative blockchain-based competitors are beginning to appear in non-U.S. markets. The company expects blockchain-based competitors, including eBates, to enter the U.S. market at some point.

 

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

 

The company’s officers and directors are as follows. All are occupied full-time on the company’s business, but with the exception of Melinda Moore, are employed by an affiliate of the company as described in “The Company’s Business – Employees.” As of June 1, 2018, Melinda Moore provides services to the affiliate as an independent contractor. 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   62   Indefinitely from December 2010
Sanford David Schleicher   Chief Technology Officer   50   Indefinitely from April 2015
Melinda Moore   Chief Marketing Officer   48   Indefinitely from May 2016
Director            
Robert Grosshandler       62   Since December 2010

 

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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 and OSS. 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. Schleicher co-founded in 1997. Prior to Vocal Link, he worked at Quantra Corporation. Previous professional experience includes Baxter Healthcare Inc. and Price Waterhouse. Mr. Schleicher holds an Engineering Degree in Computer Science from the University of Illinois in Champaign/Urbana.

 

Melinda Moore, Chief Marketing Officer

 

Ms. Moore is Chief Marketing Officer, which position she has held since May 2016 and in that capacity she oversees the creation and deployment of iConsumer’s efforts to attract and retain customers and investors.  She is a social entrepreneur, a seasoned digital marketer and a frequent speaker at leading technology conferences. With over 15 years as a start-up leader (two exits) and Fortune 500 experience, Melinda combines her passion and experience in health & sustainability, female empowerment, tech & digital media. Her work has been widely recognized by Digital LA (Top 50 Digital Women in 2015), the Green Business Bureau and the National Association of Women Business Owners’ Hall of Fame. 

 

Her marketing campaigns have been featured by global brands including Ford, LIVESTRONG, Netflix, Obama for America, Orbitz, Sony, USA Networks, and YouTube. She has forged strategic partnerships with leading business, media, and entertainment figures including Jimmy Fallon, Laird Hamilton, Dr. OZ, Dr. Phil, Ryan Seacrest and Yao Ming.  After co-founding and selling the successful e-commerce site LovingEco to John Paul Dejoria in 2012, she co-founded Tuesday nights, a hosted invite-only networking organization of female executives and entrepreneurs.  Melinda graduated from UCLA with a BA in psychology. She recently wrote the book How to Raise Money: The Ultimate Guide to Crowdfunding which is currently available on Amazon.

 

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 and results of operations, as discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The company may choose to establish an equity compensation plan for its management and other employees in the future.

 

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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

 

The following table sets out, as of December 31, 2017, the 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
2724 Simpson Street  
Evanston, IL 60201
  39,000,000 direct ownership;
Mr. Grosshandler disclaims beneficial ownership of shares held by family members
  N/A   36.4%
Series A Non-Voting Preferred Stock  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   18.6%

 

INTEREST OF MANAGEMENT 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 in one form or another since 1997 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, 2017 there were 100,000,000 shares of iConsumer’s common stock outstanding, held by one stockholder of record, and 107,282,913 shares of Series A Non-Voting Preferred Stock outstanding, held by 2,607 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.

 

  31 

 

 

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, bylaws and the Certificate of Designations for the Series A Non-Voting Preferred Stock, copies of which have been filed with the Commission as Exhibits 2.1, 2.2 and 3.1 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 Non-Voting 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 Non-Voting 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 Non-Voting Preferred Stock have no voting rights except as required under law.

 

Right to Receive Liquidation Distributions

 

In the event of iConsumer’s liquidation, dissolution or winding up, holders of its Series A Non-Voting Preferred Stock issued in this offering 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. Shares of Series A Non-Voting Preferred Stock issued prior to January 12, 2018 have a liquidation preference equal to the original issue price of such shares if, at the time of liquidation, those shares are still held by the shareholder of record as of January 12, 2018. Any holders of shares earned through the reward program who were recorded on the company's share register as of that date are considered holders of record, which includes members who earned and were issued shares prior to January 12, 2018. Any shares transferred by a shareholder who held shares as of that date will no longer have a liquidation preference.

 

Rights and Preferences

 

The Series A Non-Voting Preferred Stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to the Series A Non-Voting Preferred Stock.

 

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.

 

  32 

 

 

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 Issuer Direct as its transfer agent.

 

  33 

 

 

RESCISSION OFFER 

 

Under Commission rules, an issuer that is offering securities on a continuous basis under Rule 251 of Regulation A must amend its offering statement annually to update the financial information in the offering circular and to reflect any other changes to its disclosure. The company failed to amend its offering statement (Commission File No. 24-10480) that was re-qualified by the Commission on February 13, 2017 on a timely basis. As a result, that offering statement was no longer available for the company to make Stock Awards to members who made purchases after February 13, 2018 and through May 23, 2018. We permitted members to earn Stock Awards from February 14, 2018 until May 23, 2018. Stock Awards earned during that period may not have been exempt from the registration or qualification requirements under federal securities laws, may have been awarded in violation of federal securities laws and may be subject to rescission. In order to address this issue, we intend to make a separate rescission offer concurrent with this offering to all customers who have earned Stock Awards from February 14, 2018 until May 23, 2018 and will file an offering statement with the Commission shortly after the qualification of the offering statement of which this Offering Circular is a part. We will be offering to repurchase the shares of Series A Non-Voting Preferred Stock from those customers. As of the date of this Offering Circular, we will be making that rescission offer to 1,661 persons who have made purchases during that period. Until the date that the offering statement for this offering is qualified, customers completing purchases through iConsumer will not continue to earn stock awards. If our rescission offer is accepted by all offerees, we could be required to make an aggregate payment to the holders of these shares of up to approximately $42,000, which includes statutory interest. 

 

As of the date of this Offering Circular, the rescission offer will cover an aggregate of approximately 420,587 shares of Series A Non-Voting Preferred Stock earned by 1,661 members.

 

We intend to make the rescission offer to the members who earned these shares as soon as the offering statement covering the rescission offer is qualified by the Commission. The rescission offer will be kept open for at least 20 business days after the date on which the offering statement for the rescission offer is qualified. 

 

The company will be offering to rescind the entire reward earned by members who made purchases through iConsumer, including the Bitcoin earned by the member. Members will not be able to only rescind the stock award. For a member eligible to participate in the rescission offer to accept the rescission offer, we must first establish the member’s eligibility for issuance of shares under the Stock Award program. That means the member:

 

·must execute a subscription agreement., and
·needs to have complied with our terms and conditions.

 

We will be conducting AML and OFAC due diligence on members. As a participant in the rescission offer, members will also be required to complete and sign the electronic election form that will be sent to those who qualify for the rescission offer. If they accept the rescission offer, then they must accept the rescission offer with respect to all of the shares they earned from February 13, 2018 thorough May 23, 2018.

 

If they complete those steps, we will repurchase the shares they earned that are subject to the rescission offer at the price of $0.09 per share (the price in effect since February 13, 2018), plus interest at the current statutory rate per year, from February 13, 2018 through the date the rescission offer expires. The terms and expiration date of the rescission offer will be set forth in the offering statement with respect to the offer.

 

  34 

 

 

If all members covered by the rescission offer elect to accept our rescission offer, we estimate that we would be required to make an aggregate payment of approximately $42,000 to these holders. We believe this amount represents our aggregate exposure under federal securities laws. We expect to use a portion of the net proceeds from the private placement of convertible promissory notes to fund the costs of the rescission offer (See “Management Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources).

 

Neither we nor our officers and directors make any recommendations with respect to the rescission offer. Members covered by the rescission offer are urged to read the rescission offer offering statement carefully and to make an independent evaluation with respect to its terms when it is available.

 

Our making the rescission offer may not terminate a purchaser’s right to rescind a sale of securities that was not registered or qualified under the Securities Act or applicable state securities laws and was not otherwise exempt from registration or qualification. If a court were to impose a greater remedy, our exposure as a result of the rescission offer could be higher.

 

  35 

 

 

 

FINANCIAL STATEMENTS

 

 

 

 

 

iCONSUMER CORP.

 

 

 

FINANCIAL STATEMENTS

 

 

 

AS OF AND FOR THE YEARS ENDED

 

 

 

DECEMBER 31, 2017 AND DECEMBER 31, 2016

 

 

 

 

 

 

 

F-1

 

 

INDEPENDENT AUDITORS’ REPORT

 

To the Board of Directors

iConsumer Corp.

Evanston, Illinois

 

Report on the Financial Statements

 

We have audited the accompanying financial statements of iConsumer Corp., which comprise the balance sheets as of December 31, 2017 and 2016, and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years 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 for 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 audits. We conducted our audits 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 financial statements referred to above present fairly, in all material respects, the financial position of iConsumer Corp., as of December 31, 2017 and 2016, and the results of its operations and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States.

 

F-2

 

 

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 net losses of $1,129,751 and $681,147 for the years ended December 31, 2017 and 2016, respectively. Those conditions raise substantial doubt about its ability to continue as a going concern. Management’s evaluation of the events and conditions and 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.

 

/s/ Wipfli LLP

 

Wipfli LLP

 

April 25, 2018

Minneapolis, MN

 

F-3

 

 

iConsumer Corp.

BALANCE SHEETS

December 31, 2017 and December 31, 2016      

 

   2017   2016 
ASSETS          
Current Assets          
Accounts Receivable   16,323    0 
Due from Escrow Agents   2,544    53,025 
Investor Funds Receivable   0    7,000 
Prepaid Expenses   13,167    0 
Total Current Assets   32,034    60,025 
TOTAL ASSETS   32,034    60,025 
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)          
Liabilities          
Current Liabilities          
Accounts Payable   10,498    5,541 
Checks Written in Excess of Cash   43,595    20,469 
Member Bitcoin Payable   1,391    0 
Member Cash Back Payable   178,824    153,713 
Total Current Liabilities   234,307    179,723 
Non-Current Liabilities          
Convertible Notes  Payable, Net   107,793    0 
Due to Related Parties   225,351    102,212 
Total Non-Current Liabilities   333,144    102,212 
Total Liabilities   567,451    281,935 
Stockholders' Equity (Deficit)          
Paid in Capital   1,125,811    310,953 
Retained Earnings (Deficit)   -1,868,511    -738,760 
Common Stock  150,000,000 authorized, $0.001 par, 100,000,000 issued and outstanding at December 31, 2017 & 2016   100,000    100,000 
Series A Non-Voting Preferred Stock 250,000,000 authorized, $0.001 par, 107,282,913 and 105,896,831 issued & outstanding at December 31, 2017 & 2016   107,283    105,897 
Total Stockholders' Equity (Deficit)   -535,417    -221,910 
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)   32,034    60,025 

 

 

See Accompanying Notes to Financial Statements.

 

F-4

 

 

iConsumer Corp.

STATEMENTS OF OPERATIONS

For Years Ended December 31, 2017 and December 31, 2016

               

 

   2017   2016 
Revenues:    
Commissions from Merchants   410,941    479,176 
Miscellaneous Income   5,495    1,040 
Total Income   416,435    480,216 
Cost of Revenue          
Member Bitcoin Back Rebate   1,391    0 
Member Cash Back Rebate   349,925    383,341 
Member Stock Back Rebate   315,210    237,129 
Total Cost of Revenue   666,526    620,469 
Gross Profit (Loss)   -250,090    -140,254 
Operating Expenses          
Accounting   29,174    6,500 
Bank Service Charges   924    3,565 
Interest Expense   9,877    0 
Legal Fees   43,227    18,059 
Marketing          
Member Stock Awards   450,492    315,806 
Advertising & Promotion   201,808    96,566 
Membership Expenses   3,223    4,562 
Miscellaneous Expenses   193    0 
OSS Service Fee   83,287    95,835 
Other Professional Fees   27,000    0 
Stock Issuance Fees   30,455    0 
Total Operating Expenses   879,660    540,893 
Net Loss   -1,129,751    -681,147 

 

 

See Accompanying Notes to Financial Statements.

 

F-5

 

 

iConsumer Corp.

STATEMENTS OF CASH FLOWS

For Years Ended December 31, 2017 and December 31, 2016

               

 

   2017   2016 
OPERATING ACTIVITIES          
Net Loss   -1,129,751    -681,147 
Adjustments to reconcile Net Loss          
to net cash provided by operations:          
Shares Earned by Members   765,702    373,024 
Non-Cash Interest Expense   6,156      
Changes in Operating Assets & Liabilities          
Receivables   -16,323    0 
Accounts Payable   4,956    5,541 
Prepaid Expenses   -13,167    0 
Member Cash Back Payable   25,111    152,776 
Member Bitcoin Back Payable   1,391    0 
Net cash provided by Operating Activities   -355,925    -149,806 
FINANCING ACTIVITIES          
Proceeds from Issuance of Convertible Notes Payable   154,721    0 
Decrease in Receivable from Escrow Agency   50,481      
Investor Funds Receivable   7,000    -53,025 
Checks Written in Excess of Cash   23,126    20,469 
Increase in Due to Related Party   123,140    46,435 
Payment of Deferred Financing Costs   -22,884      
Proceeds from Issuance of Preferred Stock   20,341    135,889 
Net cash provided by Financing Activities   355,925    149,768 
Net cash increase (decrease) for period   0    -37 
Cash at beginning of period   0    37 
Cash at end of period   0    0 

 

 

See Accompanying Notes to Financial Statements.

 

F-6

 

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

For Years Ended December 31, 2017 and December 31, 2016

 

                   Additional         
   Common Stock   Preferred Stock   Paid-In       Total 
   Number of   Amount   Number of   Amount   Capital   Accumulated   Stockholder's 
   Shares   Par .001   Shares   Par .001   (Deficit)   Deficit   Equity (Deficit) 
                             
Balance at December 31, 2015 (Audited)   100,000,000   $100,000    100,000,000   $100,000   $(200,000)  $(57,614)  $(57,614)
Stock Distributed to Investors             3,433,889   $3,434   $139,455        $142,889 
Stock Distributed to Members             2,462,942   $2,463   $(2,463)       $- 
Stock Earned by Members                      $373,961        $373,961 
Net Loss                           $(681,147)  $(681,147)
Balance at December 31, 2016 (Audited)   100,000,000   $100,000    105,896,831   $105,897   $310,953   $(738,761)  $(221,910)
Stock Distributed to Investors             192,682   $193   $20,149        $20,341 
Stock Distributed to Members             1,193,401   $1,193   $(1,193)       $- 
Stock Earned by Members                      $765,702        $765,702 
Recognition of Beneficial Conversion Feature Related to Convertible Notes                      $30,200        $30,200 
Net Loss                           $(1,129,751)  $(1,129,751)
Balance at December 31, 2017 (Audited)   100,000,000   $100,000    107,282,913   $107,283   $1,125,811   $(1,868,511)  $(535,417)

 

 

See Accompanying Notes to Financial Statements.

F-7

 

iConsumer Corp.

NOTES TO THE FINANCIAL STATEMENTS

For the Years Ended December 31, 2017 and 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 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.

 

Measurable revenue from operations began in January 2016. The Company’s revenues varied significantly each month during 2016 as it refined its marketing and promotional offers. In the years preceding the commencement of its principal operations, the Company actively provided the service of directing web traffic to iGive.com, primarily aimed at Google and other search engines.

 

Through June 19th, 2015, the Company’s activities consisted of formation activities and preparations to raise additional capital as described in Note 6.  These activities continued through 2015. In 2016, the Company’s offering statement was qualified by the SEC under Regulation A promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and the Company became fully operational.  

 

The Company’s Regulation A offering statement was re-qualified by the SEC in February 2017, reflecting the change of the stock price from $.045 per share to $.09 per share. To comply with FINRA’s instructions, the Company filed a Form 1-Z to notify the closing the Regulation A offering in May 2017. FINRA required this in order for the Company to commence the process of applying for quotation of its Series A Non-Voting Preferred Stock on the OTCQB market. That 1-Z filing was later withdrawn. Under SEC rules, an issuer that is offering securities on a continuous basis under Rule 251 of Regulation A must amend its offering statement annually to update the financial information in the offering circular and to reflect any other changes to its disclosure. The Company failed to amend its offering statement (SEC File No. 24-10480) that was re-qualified by the SEC on February 13, 2017 on a timely basis. From May 2017 until February 13, 2018, the Company did not issue any shares under the offering statement.

 

The Company received a ticker symbol from FINRA in December 2017. The Company made application to The Depository Trust Corporation (DTC) in January to facilitate the electronic transfer of its stock. The first trade of RWRDP occurred in March 2018. The Company’s stock is highly illiquid, and likely to remain so for the foreseeable future.

 

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 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.

 

F-8

 

 

Cash Equivalents

 

Cash equivalents can include time deposits, Bitcoin, 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 allowances for doubtful accounts established as of December 31, 2017 or December 31, 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 has been recorded as of December 31, 2017 or December 31, 2016.

 

Concentrations of Credit Risks

 

The Company’s financial instruments that are exposed to concentrations of credit risk consist of its cash and counter-party risk associated with the hedging of Bitcoin using futures. The Company will place its cash and cash equivalents other than Bitcoin 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 or with whom it has deposits, and as such, it believes that any associated credit risk exposures are limited. The Company utilizes the Chicago Board Options Exchange and the Chicago Mercantile Exchange to hedge Bitcoin exposure. Those exchanges manage counter-party risk as part of their futures contracts.

 

Concentration of Customer Risk

 

The Company is exposed to concentration of customer risk. In 2017, it had two customers (retailers) that represented over 50% of its revenues. These retailers offer goods or services that are easily resold by members. These retailers may choose to prohibit the resale of their goods or services. The Company has no control over that decision. Should these retailers choose to prohibit those sales, the Company would be significantly negatively impacted.

 

Concentration of Customer Credit Risk

 

The Company is exposed to concentration of customer credit risk. In 2017, it had two customers (retailers) that represented over 50% of its revenues. Should those retailers not pay the Company, the Company would be significantly negatively impacted. The impact of non-payment would be mitigated as the Company is not obligated to provide rebates to customers if the Company does not get paid.

 

Concentration of Member (User) Risk

 

The Company is exposed to concentration of member risk. It had one member whose purchases generated approximately 16% of the Company’s revenues. It had five members who generated approximately 36% of the Company’s revenues. Should those members stop shopping at stores via iConsumer, the Company would be significantly negatively impacted.

 

F-9

 

 

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.  Significant revenues began being recognized beginning in the year ended December 31, 2016 and have continued through December 31, 2017.

 

Beginning with financial statements issued after January 1, 2018, the Company will need to recognize revenue in accordance with FASB ASC 606. The Company has not finalized its analysis but currently believes that the adoption of the new accounting rules will not have a material impact on its financial statements. As a public business entity as defined by FASB, we are required to disclose revenue disaggregated according to the timing of transfer of goods or services. We are required to provide qualitative information about how economic factors affect our revenue and cash flows. We will need to disclose certain details about contracts, including performance obligations. We will need to disclose judgments made in evaluating revenue.

 

ASC 606 – Revenue Disaggregation, Performance Obligations, and Significant Judgments

 

The Company primarily receives revenue from 1,800 U.S.-based online retailers in exchange for the Company assisting those retailers in making sales to the retailers’ customers and prospective customers located primarily in the United States. Generally, the retailer has agreed to pay the Company a commission when an iConsumer member (a user) makes a purchase at the retailer. If the retailer has agreed to pay the Company for advertising services, the retailer will owe the Company money once the user has been shown the retailer’s advertisement. The Company is responsible for advertising the availability of the retailers’ offerings and facilitating the navigation of the user to the retailers. The retailer is solely responsible for executing sales to its customers. The retailer is responsible for reporting that purchase or other commissionable activity, and the pertinent details of that purchase, including transaction price and commission amount, to the Company, almost exclusively after the retailer has shipped goods or provided the service. The Company recognizes that revenue on the date the purchase was made, or the advertisement was shown. Payment is generally due and received within 90 days after the transaction occurs. If a user returns the goods or service, the retailer has the right to reverse the transaction. The Company believes there is no significant disaggregation possible by industry, geography, or timing. A downturn or upturn in the economy will generally affect all customers equally. User returns, if they occur, are generally recognized in the same accounting period as they were originally recognized. The Company closes its books approximately 45 days after the period end, which allows it to capture those returns. In the Company’s judgment, there is no material time-based obligation or variable consideration remaining after the close of its books and subsequent financial statement reports.

 

Cost of Revenue

 

For 2016, the Company’s targeted cash back was 80% of revenue. As part of its marketing efforts, the Company frequently varied from that target. The difference from that target was recorded and presented as a marketing expense. During 2017, the Company did not frequently vary from its target of 80% cash back. The Company has adjusted its recognition of cash rebates retroactively to reflect 100% of cash back awards as cost of revenues. The Company adjusted its recognition of stock back rebates to reflect 100% of the value of those rebates earned directly as the result of a purchase to be Cost of Revenue.

 

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 are capitalized as deferred offering costs on the balance sheet. The deferred offering costs are charged to stockholder’s equity upon the completion of the offering. The Company ceased making sales under its offering statement discussed in Note 6. It anticipates engaging in another equity offering in 2018.

 

F-10

 

 

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 that are expected to be effective when the benefits from the deferred tax assets are realized. At December 31, 2017, and December 31, 2016, the Company had deferred tax assets of approximately $392,000 and $300,000 respectively, related to net operating loss carryforwards (NOL). At December 31, 2017 the Company has not reflected any change in the deferred tax assets from prior periods. 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, 2017 or December 31, 2016. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2017 and December 31, 2016 the Company recognized no interest or 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 of the years 2010-2014 during July 2015. The Company also filed its 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, other than 2015. The Company believes it is in compliance after filing these returns. The Company has filed its 2016 tax 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 2017.

 

Stock Distributable to Members

 

In January of 2017 the Company began to estimate and recognize the difference between the shares earned by and due to members that likely will be issued and transferred in the current year and shares earned that will likely be issued and transferred in a future period. Beginning in June of 2017 the Company clarified to members that a member may be charged a fee for such issuance and transfer. As of December 31, 2017, no member has been charged a fee.

 

As of May 11, 2017, the Company ceased issuing and transferring shares, because it filed a Form 1-Z to notify the closing of its offering, as required by FINRA, so that FINRA would issue the Company a ticker symbol. The Company subsequently withdrew the Form 1-Z. The offering statement remained qualified until February 13, 2018. Under SEC rules, an issuer that is offering securities on a continuous basis under Rule 251 of Regulation A must amend its offering statement annually to update the financial information in the offering circular and to reflect any other changes to its disclosure. The Company failed to amend its offering statement on a timely basis. The Company has begun offering members who earned stock awards prior to February 13, 2018 the opportunity to have their shares issued and transferred. No shares have been issued or transferred since May 2017. The Company is awaiting the qualification of a new offering statement by the SEC that will allow it to offer, issue, and transfer shares for activity subsequent to February 13, 2018.

 

Stock awards made since February 13, 2018 may not have been exempt from the registration or qualification requirements under federal securities laws, may have been awarded in violation of federal securities laws and may be subject to rescission. In order to address this issue, the Company intends to conduct a rescission offer to all customers who have earned stock awards since that date. The Company believes that any such rescission will not have a material effect on 2018 results.

 

Reliance on Related Party

 

The Company currently has a software license and service agreement with a related party (see Note 5) and has the majority of its ordinary expenses paid by the related party under the terms of that agreement. As a result, the Company’s results of operations may not be indicative of the results that would have occurred if it operated independently.

 

F-11

 

 

Other Matter

 

As described in Note 11, the Company has reclassified its member preferred stock back distributable liability to paid in capital in excess of par to properly reflect equity accounting for such transactions.

 

NOTE 3: STOCKHOLDERS’ EQUITY (DEFICIT)

 

As of the issuance date of these financial statements, 100,000,000 shares of Common Stock and 107,282,913 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 stipulated the terms of a tax-free reorganization pursuant to Internal Revenue Code section 368(a), where Robert Grosshandler transferred, assigned, delivered, and surrendered 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.

 

In preparation for the trading of its preferred stock on a market under the ticker symbol RWRDP, the Company concluded that certain provisions of the liquidation preference granted under the Certificate of Designations, Preferences, and Rights dated July 6, 2015 were unworkable, as the original issue price was not trackable through subsequent holders of the stock. On January 12, 2018 the Company amended the liquidation preference for the Series A Non Voting Preferred Stock by consent of the holders of a majority of the Common and Series A Non Voting Preferred Stock. The amendment reaffirmed that shareholders of record as of January 12, 2018 had a liquidation preference equal to the Original Issue Price of their shares and that subsequent holders of the stock will not have a liquidation preference.

  

Additionally, the amended language eliminated the liquidation preference for shareholders who acquire their shares subsequent to January 12, 2018.

 

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 and began to generate meaningful revenue in 2016. It has sustained net losses of $1,129,751 and $681,147 for the years ended December 31, 2017 and December 31, 2016, 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 Offerings described in Note 6. It plans to incur significant costs in pursuit of its Offerings. 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.

 

F-12

 

 

NOTE 5: RELATED PARTIES

 

Prior to June 19, 2015, 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 entering into a formal agreement with 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. In accordance with the terms of the License Agreement, the Company’s operations are being run on technology licensed from OSS and OSS is providing the Company with certain support services, as defined in the License Agreement. The fee charged by OSS covers a wide range of services, the majority of which are traditionally reflected in costs of operation. The fee covers executive management, administration, accounting, internal technology support, customer support, product development, general marketing, and communications (marketing and non marketing). A hard to quantify amount covers the care and feeding of retailers and intermediate network / technology providers, retailer recruitment, and similar activities. The fee does not cover legal fees incurred for such activities as SEC filings and other regulatory compliance. The Company has no employees.

 

For the use of these services and technology, the Company has agreed 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 the 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, 2017 the Company owed $225,351 to the Related Parties for expenses paid on the Company's behalf since inception, compared to $102,212 owed as of December 31, 2016.

 

NOTE 6:  OFFERINGS

 

Subsequent to December 31, 2015, the Company began pursuing an offering (“Offering”).  The Offering called for the Company to offer for sale under Regulation A, $2,000,000 of its Series A Non-Voting Preferred Stock at a price of $.045 per share. Sales of these securities commenced on September 29, 2016, upon qualification of the Company’s offering statement by the SEC.  The offering was a continuous offering. It allowed for multiple closings.  The first closing occurred in December 2016, with net proceeds of $147,525, representing the investments of 19 individuals.  As of December 31, 2016, the Company had unfunded commitments for $7,000 which were paid in January 2017. The Company’s offering statement was amended, and on February 13, 2017 it was requalified by the SEC, to adjust the subscription agreement, and change the price per share from $.045 to $.09. The Company continued to sell shares for cash in the Offering through May 11, 2017.  The Company incurred costs of $15,751.

 

F-13

 

 

In order to seek quotation of the Series A Non Voting Preferred stock on the OTCQB market, FINRA rules required the Company to cease issuing shares in the Offering in order to receive the FINRA approvals necessary to facilitate quotation of its stock. It ceased issuing shares under the offering statement on May 11, 2017.

 

FINRA issued the Company Series A Non Voting Preferred stock the ticker symbol RWRDP in December 2017. The OTC markets subsequently began quoting RWRDP on the OTCQB market. In February, the Depositary Trust Corporation made RWRDP DTC eligible, which allowed electronic quotation and trading. In March 2018 the first shares of RWRDP were traded on the OTCQB market.

 

In January 2018 the Company filed an offering statement under Regulation A with the SEC (“Follow On Offering”). The Company proposes to offer for sale in the Follow On Offering $15,000,000 of its Series A Non-Voting Preferred Stock at a price of $0.15 per share and is currently in the process of the responding to the comments that it has received on that offering statement from the SEC.

 

Under SEC rules, an issuer that is offering securities on a continuous basis under Rule 251 of Regulation A must amend its offering statement annually to update the financial information in the offering circular and to reflect any other changes to its disclosure. The Company failed to amend its offering statement on a timely basis. As a result, that offering statement was no longer available for the Company to make stock awards to members who made purchases after February 13, 2018. Stock award activities (see Note 10) subsequent to February 13, 2018 may not have been exempt from the registration or qualification requirements under federal securities laws and may be subject to rescission. The Company continues to believe that it has the right under the Stock Award program and its Terms of Service not to make awards under that program when there is no qualified offering statement in effect, and that any award of shares that may have been recorded on a ledger was subject to those Terms. However, in light of the fact that it is in the interests of the Company to have a larger number of shareholders, the Company has decided that it will treat shares relating to purchases after February 13, 2018 as being earned (subject to compliance with conditions such as the execution of a subscription agreement) and to offer a right of rescission to the holders of all such shares. In order to address this issue, the Company intends to conduct a rescission offer to all customers who have earned stock awards since that date. Any such rescission is not expected to have a material effect on the Company.

 

The Company’s Series A Non Voting Preferred stock is quoted on the OTCQB market under the ticker symbol RWRDP. There is very little liquidity for RWRDP. The Company cannot guarantee that its securities will ever be tradeable on an exchange or have any substantial liquidity.  These financial statements should not be relied upon as a basis for determining the terms of an offering as this information may not be current or accurate relative to the final terms of the offering.

 

The Company began pursuing a private placement of $2,000,0000 of convertible debt in June 2017. The Company had received $154,721 of the private placement as of December 31, 2017 and an additional $2,000 as of April 24, 2018. The debt has a term of three years, accrues interest for the first year at 8%, and requires interest only payments in years two and three of 8%. The debt is convertible into Series A Preferred Non Voting stock at a price of $.075 per share at the option of the holder. This offering utilizes Regulation D 506(c) and is open to accredited investors only.

 

NOTE 7: RECENT ACCOUNTING PRONOUNCEMENTS

 

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

 

The Company has evaluated subsequent events through April 25, 2018 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.

 

F-14

 

 

NOTE 9: GOVERNANCE

 

On July 6, 2015 the Company revised 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 offerings (see Note 6), the equity earned is Series A Preferred Stock.  The Company will not receive cash for any such equity earned.  The Company valued this equity at $.045 per share through February 13, 2017. This valuation is the per share price ($.045) received in the Offering. Subsequent to February 13, 2017, the Company valued this equity at $.09 per share. This valuation is the per share price ($.09) received in the amended Offering beginning February 13, 2017. The valuation will be adjusted from time to time to reflect the price in the then current 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 December 31, 2017 the Company had issued and transferred 3,656,343 shares of Preferred Stock equity under this marketing program to approximately 2,600 customers, who thus became shareholders. The Company recognized a portion of the cost of this program as a marketing expense and the balance as a cost of revenues.  It has recognized a total of $765,702 in 2017 to reflect this expense.

  

As of December 31, 2017, approximately 49,000 members were due 12,973,641 additional shares under this program, but the Company had not yet issued and transferred these shares to its members. Until issued and transferred, the member may forfeit these shares for a variety of reasons, which include, but are not limited to, purchase returns and account inactivity. The Company will issue and transfer these shares upon receiving an executed subscription agreement and appropriate shareholder identification.

 

NOTE 11: MEMBER PREFERRED STOCK BACK TRANSACTIONS

 

The Company originally accounted for preferred stock payable to customers for becoming a member, purchases made or referring new members, as a liability. Subsequent to issuance of the 2016 financial statements, it was determined that equity accounting is the appropriate accounting treatment for these transactions. As a result, all liabilities related to the preferred stock payable have been reclassified as equity for 2016. There were no changes to the Company’s statements of operations or cash flows. The following changes have been made to the balance sheet as of December 31, 2016:

 

   As Previously Reported  As Restated
Member preferred stock back distributable  263,129  -0-
Total current liabilities  442,853  179,723
Total liabilities  545,064  281,935
Paid in capital in excess of par  247,824  510,953
Total equity (deficit)  (485,039)  (221,910)

 

F-15

 

 

PART III

 

INDEX TO EXHIBITS

 

2.1   Amended and Restated Certificate of Incorporation (1)
2.2   First Amendment to Amended and Restated Certificate of Incorporation **
2.3   Bylaws (2)
3.1   Certificate of Designations (3)
4   Form of Subscription Agreement**
6.1   Amended and Restated Software Licenses and Services Agreement with Outsourced Site Services, LLC dated May 25, 2016 (4)
6.2   2016 Equity Incentive Plan (5)
6.3   Form of Broker-Dealer Services Agreement with FundAmerica Securities LLC (6)
7   Recapitalization and Exchange Agreement dated July 6, 2015 (7)
8   Form of Escrow Agreement (8)
11   Auditors’ Consent
12   Opinion of CrowdCheck Law LLP**

 

(1) Filed as an exhibit to the iConsumer Corp. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10480) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1652350/000164460015000006/exhibit2-1.htm

(2) Filed as an exhibit to the iConsumer Corp. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10480) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1652350/000164460015000006/iconsumercorp-bylaws.htm

(3) Filed as an exhibit to the iConsumer Corp. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10480) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1652350/000164460015000006/exhibit3-1.htm

(4) Filed as an exhibit to the iConsumer Corp. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10480) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1652350/000164460016000165/osslic.htm

(5) Filed as an exhibit to the iConsumer Corp. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10480) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1652350/000165495417000348/icon_ex6.htm

(6) Filed as an exhibit to the iConsumer Corp. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10480) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1652350/000164460016000165/bdserv.htm

(7) Filed as an exhibit to the iConsumer Corp. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10480) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1652350/000164460015000006/recapagreement.htm

(8) Filed as an exhibit to the iConsumer Corp. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10480) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1652350/000165495417000348/icon_ex8.htm

   

** Previously filed

 

 III-1 

 

 

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 June 1, 2018.

 

iConsumer Corp.

 

By /s/ Robert N. Grosshandler  

 

  Robert N. Grosshandler, principal 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, principal executive officer, principal financial officer, principal accounting officer and Sole Director

 

Date:June 1, 2018

 

 III-2