LivingSocial—-rescuer of Nationals Metro, recipient of $32.5 million in tax breaks from the D.C. government—-took a tough blow yesterday when Amazon, an investor in the deals giant, announced $169 million in losses on its equity in the company in the last quarter.

Did D.C. throw good money after bad? Since LivingSocial isn’t publicly traded, its financials aren’t publicly available, but Amazon’s loss wouldn’t seem bode well for the company.

But according to a memo LivingSocial CEO Tim O’Shaughnessy sent to the company’s staff, obtained by City Desk and reported earlier by the Washington Business Journal, LivingSocial’s in a great position.

“LivingSocial is gaining control over our own destiny,” O’Shaughnessy writes. According to the memo, LivingSocial made $124 million in revenue while spending $193 million in operations. The company suffered an overall net loss of $566 million.

O’Shaughnessy blames the massive loss on a $496 mark-down on revaluations of companies LivingSocial had purchased. Which would seem to be a pretty big problem nonetheless, but apparently doesn’t affect the company day-to-day.

“We ended the last month of the quarter with more money in the bank than we had at the beginning of the month, marking an important milestone on our path to profitability and long-term success,” O’Shaughnessy writes.

O’Shaughnessy’s full memo:

Hey all –

This afternoon, our investor and partner announced its quarterly earnings. Because our financials for the quarter had a material impact on its results, Amazon included some information about our numbers in its announcement, and current estimates on some of our financials will be included in a filing that comes out tomorrow as well. This is similar to past quarters.

From those announcements, you’re likely to see news articles saying that we hurt Amazon’s earnings and lost a ton of money. That doesn’t tell the full story, so I wanted to share some more info on our third-quarter results with you, so you — and the customers you serve — can better understand what they mean.

First, here’s what you can glean from Amazon’s filings: We had roughly $124 million in revenue last quarter, our operating expense was approximately $193 million, and we had an operating loss of around $565 million and an overall net loss of about $566 million for the quarter.

Sounds like a lot of losses, right? Or maybe you wonder how our losses could be higher than our operating expenses? Well, what the numbers don’t fully explain is that more than 95% of our estimated losses in the quarter involved non-cash items, in particular an estimated charge of around $496 million related to the write down of “goodwill” in acquisitions we made last year and another $45 million or so related to stock compensation and other items.

In layman’s terms, we took a charge of around $496 million because we had to revalue some of the companies we acquired last year. As you know, the market has also dropped over that same time for similar public tech companies. Those changes in valuation showed up as an “impairment” in our financial statements, but they do not affect the day-in, day-out operations of the business.

When you look at our financial position, the story is very different. For the third quarter of 2012, our global revenue nearly doubled on a year-over-year basis. More important, for the first time since 2009, we had positive operating cash flow for our company on a global basis in the month of September. In other words, we ended the last month of the quarter with more money in the bank than we had at the beginning of the month, marking an important milestone on our path to profitability and long-term success.

The September numbers from Yipit also show strong competitive trends. From August to September, we gained a whopping six points of North American market share against Groupon, as our share jumped from 21% to 24% while theirs fell from 56% in August to 53% in September. While those numbers included our world-record-setting Starbucks deal, they also showed strong growth without it.

In the big picture, all of these trends mean that LivingSocial is gaining control over our own destiny, an enviable position for any start-up and one that allows us to aggressively execute against our vision to build the leading platform for local commerce worldwide.

I know each of you is working hard and making strong moves every day to help us reach our goals. Thanks for all your efforts.