UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended August 31, 2011
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from  __________ to __________
	Commission File Number: 333-143901

 

SupportSave Solutions, Inc.

(Exact name of Registrant as specified in its charter)

 

Nevada	98-0534639
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

801 W. Big Beaver, Suite 650 Troy, Michigan

(Address of principal executive offices)

 

248-430-4300

(Registrant’s telephone number)

_______________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days

[ ] Yes [X] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[ ] Large accelerated filer Accelerated filer	[ ] Non-accelerated filer
[X] Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes   [X] No

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 19,153,741 common shares as of August 31, 2011.

 

 

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	5
Item 4:	Controls and Procedures	6
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	6
Item 1A:	Risk Factors	8
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3:	Defaults Upon Senior Securities	8
Item 4:	(Removed and Reserved)	8
Item 5:	Other Information	8
Item 6:	Exhibits	8

 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.     Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:
F-1	Consolidated Balance Sheets as of August 31, 2011 and May 31, 2010 (unaudited);
F-2	Consolidated Statements of Operations for the three months ended August 31, 2011 and 2010 (unaudited);
F-3	Consolidated Statements of Cash Flows for the three months ended August 31, 2011 and August 31, 2010 (unaudited);
F-4	Notes to Consolidated Financial Statements

  

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended August 31, 2011 are not necessarily indicative of the results that can be expected for the full year.

 

 

SUPPORTSAVE SOLUTIONS, INC.

(A NEVADA CORPORATION) 

CONSOLIDATED BALANCE SHEETS

AS OF AUGUST 31, 2011 AND MAY 31, 2011 (UNAUDITED)

 

		August 31, 2011				May 31, 2011
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	187,887			$	275,716
Investment in marketable securities			400				900
Accounts receivable - trade			374,911				390,424
Note receivable - related party			100,000				100,000
Accrued interest receivable			9,851				8,186
TOTAL CURRENT ASSETS			673,049				775,226
PROPERTY AND EQUIPMENT, NET			730,659				738,336
OTHER ASSETS
Security deposits			65,596				64,208
Deferred tax asset			408,000				485,000
TOTAL OTHER ASSETS			473,596				549,208
TOTAL ASSETS		$	1,877,304			$	2,062,770
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade		$	72,787			$	57,574
Accrued expenses			134,313				55,865
Accounts payable - settlements			114,742				131,550
Treasury stock payable			300,000				700,000
Deferred income taxes			97,000				97,000
Loan payable - officer			800				800
TOTAL CURRENT LIABILITIES			719,642				1,042,789
STOCKHOLDERS' EQUITY
Common stock, $.00001 par value, 100,000,000 shares authorized, 19,153,741 and 26,232,280 shares issued and outstanding at August 31, 2011 and May 31, 2011, respectively			191				262
Preferred stock, $.00001 par value, 100,000,000 shares authorized, 0 shares issued and outstanding			-0-				-0-
Additional paid-in-capital			2,230,119				2,875,916
Treasury stock			(357,161	)			(1,003,029	)
Cumulative translation adjustment			(87,007	)			(83,175	)
Unrealized gain (loss) on investments			(19,613	)			(19,113	)
Retained earnings (deficit)			(608,867	)			(750,880	)
TOTAL STOCKHOLDERS' EQUITY			1,157,662				1,019,981
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	1,877,304			$	2,062,770

 

 

The accompanying notes are an integral part of the financial statements

 

 

SUPPORTSAVE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED AUGUST 31, 2011 AND 2010 (UNAUDITED)

  

		Three Months Ended				Three Months Ended
		August 31, 2011				August 31, 2010
REVENUE
Sales		$	911,171			$	572,587
Less returns and allowances			(2,651	)			(5,934	)
TOTAL REVENUE			908,520				566,653
EXPENSES
Wages and benefits			407,895				680,948
Rent			67,595				27,034
Advertising			16,434				20,539
Telephone, internet and utilities			45,979				25,250
Commissions			14,550				16,910
Settlements expense			4,500				-0-
Legal and accounting			6,737				8,381
Depreciation			17,798				14,480
Selling, general and administrative			109,717				44,799
TOTAL EXPENSES			691,205				838,343
OPERATING INCOME (LOSS)			217,315				(271,690	)
OTHER INCOME (EXPENSE)
Interest income			1,698				5,806
TOTAL OTHER INCOME (EXPENSE)			1,698				5,806
NET INCOME (LOSS) BEFORE PROVISION FOR FEDERAL INCOME TAX (BENEFIT)			219,013				(265,884	)
PROVISION FOR FEDERAL INCOME TAX (BENEFIT)			77,000				(93,000	)
NET INCOME (LOSS)		$	142,013			$	(172,884	)
NET INCOME (LOSS) PER SHARE:
BASIC AND DILUTED		$	0.01			$	(0.01	)
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC AND DILUTED			19,769,266				14,728,558

 

The accompanying notes are an integral part of the financial statements.

 

 

 SUPPORTSAVE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED AUGUST 31, 2011 AND 2010 (UNAUDITED)

 

 

		Three Months Ended				Three Months Ended
		August 31, 2011				August 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) for the period		$	142,013			$	(172,884	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation			17,798				14,480
Stock based compensation expense			-0-				(225,111	)
Changes in assets and liabilities:
Accounts receivable - trade			15,513				21,977
Accounts receivable - other			-0-				15,441
Accrued interest receivable			(1,665	)			(1,665	)
Deferred tax asset			77,000				-0-
Accounts payable - trade			15,213				(1,070	)
Accounts payable - settlements			(16,808	)			-0-
Accrued expenses			78,448				(56,136	)
Deferred revenue			-0-				6,797
Accrued federal income tax			-0-				(93,000	)
TOTAL ADJUSTMENTS			185,499				131,934
NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES			327,512				(40,949	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(10,120	)			(166,563	)
Security deposit			(1,389	)			(2,188	)
Increase in note receivable - related party			-0-				(50,000	)
NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES			(11,509	)			(218,751	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on treasury stock			(400,000	)			-0-
NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES			(400,000	)			-0-
Currency exchange rate effect on cash			(3,832	)			(6,192	)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS			(87,829	)			(265,892	)
CASH AND CASH EQUIVALENTS - BEGINNING			275,716				1,588,056
CASH AND CASH EQUIVALENTS - ENDING		$	187,887			$	1,322,164
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest		$	-0-			$	-0-
Cash paid for income taxes		$	-0-			$	-0-

 

The accompanying notes are an integral part of the financial statements

 

SUPPORTSAVE SOLUTIONS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

 

NOTE 1: NATURE OF BUSINESS

 

SupportSave Solutions, Inc. was incorporated in Nevada on May 2, 2007, and provides offshore business process outsourcing, or BPO, services from an outsourcing center through its wholly-owned subsidiary of the same name, which was incorporated in the Philippines on October 17, 2006 and operates in the Philippines. Both the parent and its subsidiary are hereinafter referred to as "the Company".

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. We believe that the disclosures are adequate to make the financial information presented not misleading. These condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended May 31, 2011. All adjustments were of a normal recurring nature unless otherwise disclosed. In the opinion of management, all adjustments necessary for a fair statement of the results of operations for the interim period have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year.

 

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company uses the accrual basis of accounting and has adopted a May 31 fiscal year end.

 

Principles of Consolidation 

The consolidated financial statements of the Company include the accounts of the parent company and its wholly-owned Philippines subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Cash and Cash Equivalents

SupportSave considers all highly liquid investments with maturities of 3 months or less to be cash equivalents.

 

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided by straight-line and accelerated methods, over the estimated useful lives of the assets, ranging from 39 years for leasehold improvements and 5 to 7 years for furniture and equipment. Normal expenditures for repairs and maintenance are charged to operations as incurred.

 

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

 

Advertising Costs

The Company follows the policy of expensing advertising costs as they are incurred. Advertising expenses for the three months ended August 31, 2011 and 2010 were $16,434 and $20,539, respectively.

 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

SUPPORTSAVE SOLUTIONS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Income Taxes

The Company uses an asset and liability approach to financial accounting and reporting for income taxes. The difference between the financial statements and tax bases of assets and liabilities is determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the periods in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce the deferred tax assets to the amount that will more likely than not be realized. Income tax expense is the current tax payable or refundable for the period, plus or minus the net change in the deferred tax assets and liabilities.

 

Foreign Currency Translation

The functional currency of the Company is the United States Dollar. The financial statements of the Company’s Philippine operations are translated to U.S. dollars using the period exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transaction occurs. Net gains and losses resulting from foreign exchange translations are included in the statements of operations and changes in stockholders’ equity as other comprehensive income (loss).

 

Currency Hedging Transactions

The Company's operating expenses consist primarily of salaries, payroll taxes and employee benefit costs paid to the professionals that the Company employs in the Philippines. Since employee related costs are paid in the local currency, the Company is exposed to the risk of foreign currency fluctuations. In an effort to try to minimize the downside risk of fluctuating currency rates, the Company has entered into foreign exchange forward contracts from time to time. Any gains or losses from the settled and outstanding forward contracts are recorded as other income/expense in the statement of operations.

 

Impairment of Long-Lived Assets

The Company reviews its major assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an asset is considered impaired, then impairment will be recognized in an amount determined by the excess of the carrying amount of the asset over its fair value.

 

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, investments in marketable securities, accounts receivable – trade and other, notes receivable, interest receivable, accounts payable, accrued expenses, loan payable – officer and deferred revenue. The carrying amounts of financial instruments are considered by management to be their estimated fair values due to their short-term maturities. Securities that are publicly traded are valued at their fair market value based as of the balance sheet date presented.

 

Basic Income Per Share

Basic income per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of August 31, 2011.

SUPPORTSAVE SOLUTIONS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Treasury Stock

Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. Gains and losses on the subsequent reissuance of shares are credited or charged to additional paid in capital using the average-cost method.

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with SFAS No. 123 and 123 (R) (ASC 718). To date, the Company has not adopted a stock option plan and has not granted any stock options. The Company did not issue any shares of common stock to employees during the three months ended August 31, 2011 and 2010, respectively.

 

Recent Accounting Pronouncements

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

 

NOTE 3: PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following as of August 31, 2011 and May 31, 2011:

 

		August 31, 2011				May 31, 2011
Office furniture and equipment		$	282,694			$	272,574
Software			13,699				13,699
Leasehold improvements			636,937				636,937
Sub-total			933,330				923,210
Less: Accumulated depreciation			(202,671	)			(184,874	)
Total Property and Equipment		$	730,659			$	738,336

 

Depreciation expense was $17,798 and $14,480 for the three months ended August 31, 2011 and 2010, respectively.

 

NOTE 4: NOTE RECEIVABLE

 

On May 11, 2009, the Company sold its office building for $260,000 on a note receivable. The Company received $50,000 down and the remainder is payable in 23 monthly interest only installments of $1,225 beginning June 11, 2009, with a balloon payment of the remaining principal and all accrued interest due on May 11, 2011. The note bears interest at 7% per annum and is secured by the real property. On January 28, 2011, the Company settled the note receivable for $100,000. The Company has written off the remaining $110,000 balance as bad debt at May 31, 2011.

 

NOTE 5: NOTE RECEIVABLE – RELATED PARTY

 

During the year ended May 31, 2010, the Company loaned $50,000 to a related party to fund an investment in a film project. The loan was due on June 14, 2011 and at that time a total balloon payment of $55,000 was due that will satisfy the principal and accrued interest. On June 2, 2010, the Company loaned an additional $50,000 to the related party and amended the terms of the initial loan. The total note receivable of $100,000 plus 6.66 % interest will be due on January 1, 2012. Interest expense related to these loans was $1,665 and $1,665 for the three months ended August 31, 2011 and 2010, respectively.

SUPPORTSAVE SOLUTIONS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

 

NOTE 6: MARKETABLE SECURITIES

 

Marketable securities are shown on the balance sheet. The first-in, first-out (FIFO) method is used to determine the cost of each security at the time of sale. We consider our investment portfolio and marketable equity investments available-for-sale. Accordingly, these investments are recorded at fair market value. As of August 31, 2011, an unrealized loss of $19,613 has been recorded. Cost and market value of equitable securities at August 31, 2011 and May 31, 2011 are as follows:

 

		Cost				Gross Unrealized Loss				Market Value
Equities/Options, August 31, 2011		$	20,013			$	(19,613	)		$	400
Equities/Options, May 31, 2011		$	20,013			$	(19,113	)		$	900

 

NOTE 7: ACCRUED EXPENSES

 

Accrued expenses consisted of the following as of August 31, 2011 and May 31, 2011:

 

		August 31, 2011				May 31, 2011
Accrued wages and taxes		$	0			$	33,954
Accrued professional fees			0				21,911
Accrued miscellaneous			134,313				0
Total Accrued expenses		$	134,313			$	55,865

 

NOTE 8: COMMON STOCK

 

The Company has 100,000,000 shares of $0.00001 par value common stock authorized.

 

On January 1, 2010, the Company sold 875,000 shares of its common stock in a private offering at $0.60 per share for total cash of $525,000. 275,387 of those shares came from the treasury.

 

The Company purchased back 20,500 shares for a total cost of $9,017 during year ended May 31, 2010 and returned them to treasury.

 

On April 12, 2011, the Company sold 3,000,000 shares of its common stock in a private offering at $0.05 per share for a total cash value of $150,000. The Company collected $94,700 and recorded the balance of $55,300 as a stock subscription receivable. The Company determined the balance of $55,300 to be uncollectable at May 31, 2011 and wrote off the balance against additional paid-in capital.

 

On May 26, 2011, the Company sold 650,000 shares of its common stock in a private offering at $0.10 per share for a total cash value of $65,000.

 

The Company issued shares at various times to employees for services rendered. During the years ended May 31, 2011 and 2010, 1,682,499 and 373,333 shares were issued to employees for total value of $758,246 and $280,000, respectively. The shares were valued at the market price on the grant date.

SUPPORTSAVE SOLUTIONS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

 

NOTE 8: COMMON STOCK (CONTINUED)

 

In April and May 2011, the Company issued 6,396,250 anti-dilution shares of common stock to two officers under the terms of their employment agreements. The share issuances were recorded at par value.

 

During the year ended May 31, 2011, the Company entered into two agreements to purchase back stock into treasury.

 

The Company agreed to purchase back 833,333 shares of common stock for a total cost of $500,000 in accordance with a settlement agreement with a shareholder. The Company paid $200,000 and recorded the remaining $300,000 as a payable as of May 31, 2011, which remains payable at August 31, 2011.

 

The Company also agreed to purchase back 6,835,425 shares of common stock for a total cost of $500,000 in accordance with a settlement agreement with a departing officer of the Company. The Company paid $100,000 and recorded the remaining $400,000 as a payable as of May 31, 2011. The remaining $400,000 payable was paid during the three months ending August 31, 2011.

 

NOTE 9: OPERATING LEASE

 

The Company operates out of a leased facility in Cebu, Philippines. The lease began on December 1, 2007, and is for 5 years at the current rate of approximately $1,900 per month. On August 15, 2010, the Company signed a lease in Los Angeles for approximately $1,200 per month for a term of twelve months. On May 18, 2011, the Company board voted to close the Los Angeles facility effective that day. Also on May 18, 2011, the Company moved its corporate address to an office in Troy, Michigan by a shareholder who is providing the office space free of charge.

 

In March 2010, the Company signed a new lease for a facility in Cebu, Philippines. The lease begins on July 30, 2010, and is for 5 years at the rate of approximately $10,650 per month plus utilities. The lease contains a rent-free fit-out period from March 30 to July 29, 2010. The lease also contains an option for additional 5 years upon mutual agreement of the parties.

 

Minimum annual rents for all leases for the next five years are as follows:

 

Period Through:		Amount:
August 31, 2012		$	135,298
2013			142,422
2014			149,763
2015			143,619
Total		$	571,102

 

NOTE 10: MAJOR CUSTOMERS

 

Sales to two customers accounted for 27% and 13% of net sales in the three months ended August 31, 2011 and sales to one customer accounted for 38% of net sales in the three months ended August 31, 2010, respectively.

SUPPORTSAVE SOLUTIONS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

 

NOTE 11: INCOME TAXES

 

The provision for Federal income tax consists of the following for the three months ended August 31, 2011 and 2010:

 

		2011				2010
Federal income tax expense (benefit) attributable to:
Current operations		$	77,000			$	(93,000	)
Less: valuation allowance			0				0
Net provision (benefit) for Federal income taxes		$	77,000			$	(93,000	)

 

The cumulative tax effect at the expected rate of 35% of significant items comprising our net deferred tax asset is as follows:

 

		August 31, 2011				May 31, 2011
Deferred tax asset attributable to:
Net operating loss carryover		$	408,000			$	485,000
Less: valuation allowance			0				0
Net deferred tax asset (liability)		$	408,000			$	485,000

 

NOTE 12: SUBSEQUENT EVENTS

 

On June 27, 2011, Mr. Joseph Duryea, our former President, filed a complaint (“the Complaint”) against us in the United States District Court for the District of Nevada (Case No. 2:11-cv-01054-GMN CWH) alleging breach of contract, breach of the covenant of good faith and fair dealing, tortious breach of contract, and fraud (“the Litigation”) in relation to an employment agreement (“the Employment Agreement”) we entered into with him on January 15, 2010.

 

On September 15, 2011, we entered into a settlement agreement (“the Settlement Agreement”) with Mr. Duryea to resolve the above Litigation. Under the terms of the Settlement Agreement, we agreed to pay Mr. Duryea a total of $85,000 (“the Settlement Funds”). Of this total amount, we agreed to pay $45,000 upon execution of the Settlement Agreement and the remaining $40,000 shall be paid in four equal installments, payable on or before October 15, 2011, November 15, 2011, December 15, 2011 and January 15, 2012.

 

Further under the Settlement Agreement, we agreed as follows:

 

- We agreed that any failure on our part to make timely installment payments will make the entire remaining balance of the Settlement Funds immediately due and payable and we consented to the immediate entry of judgment against us for the amount of the remaining balance of the Settlement Funds, subject to pre-judgment interest from the date of the filing of the Complaint forward.

 

- We agreed to make our best effort to correct SEC filings and any other sites to record that Mr. Duryea in fact resigned from his former position with us as President, as opposed to the Company’s previous allegation that he had been “terminated.”

SUPPORTSAVE SOLUTIONS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

 

NOTE 12: SUBSEQUENT EVENTS (CONTINUED)

 

The Settlement Agreement provides for a mutual release of claims and a non-disparagement clause. Upon payment of the Settlement Funds, the Litigation will be dismissed. The parties acknowledged, however, that Mr. Duryea’s additional stock rights, as described in his Employment Agreement, as a stockholder of our company will remain intact.

 

On October 4, 2011, the Company announced the execution of a stock buyback program, subject to market conditions, with purchases to be made out of ongoing positive cash flow from operations.

 

Under the program, the Company may acquire approximately 3,000,000 shares at prices of up to $0.10 per share over the next 90 days. The timing and exact number of shares purchased will be at the Company's discretion. The buyback of shares may occur in open market, negotiated or block transactions.

 

The Company does not intend to repurchase any shares from its management team or other insiders. This stock buyback program does not obligate the Company to acquire any specific number of shares and may be suspended or discontinued at any time.

 

Management has evaluated subsequent events through October 7, 2011, the date on which the financial statements were issued, and has determined it does not have any other material subsequent events to disclose.

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

 

Overview

We provide offshore business process outsourcing, or “BPO,” services which we deliver primarily to U.S.-based clients from our facilities in the Philippines. BPO services involves contracting with an external organization to take primary responsibility for providing a business process or function, such as customer management, transcription and captioning, processing services, human resources, procurement, logistics support, finance and accounting, engineering, facilities management, information technology and training. These customer care services and solutions are provided by our skilled customer service representatives to small and mid-sized companies in the healthcare, communication, business services, financial services, publishing, and travel and entertainment industries.

 

Report of Operations for the Three Months Ended August 31, 2011 and 2010

 

To become more profitable and competitive, we have to attract more clients, sell our services and generate more revenues.

 

Our revenue reported for the three months ended August 31, 2011 was $911,171, compared with $572,587 for the same period ended August 31, 2010. Our revenue generated for both periods was attributable to the sale of our BPO services and was comparable for both periods.

 

Returns and allowances are refunds for services not provided. Returns and allowances for the three months ended August 31, 2011 amounted to $2,651, compared with $5,934 for the same period ended August 31, 2010. We experienced less returns and allowances in the three months ended August 31, 2011 compared with the same period 2010 as a result of improved service delivery.

 

Our revenue less returns and allowances is our total revenue. Total revenue for the three months ended August 31, 2011 was $908,520, compared with $566,653 for the same period ended August 31, 2010.

 

Our operating expenses for the three months ended August 31, 2011 were $691,205, compared with $838,343 for the same period ended August 31, 2010. The decrease in our operating expenses for the three months ended August 31, 2011 compared with August 31, 2010 is largely attributable to: decreased wages and benefits, which decreased by $273,055. Below is a breakdown of our operating expenses for the three months ended August 31, 2011 and 2010.

 

		2011				2010
Wages and benefits		$	407,895			$	680,950
Rent			67,595				27,034
Advertising			16,434				20,539
Telephone, internet and utilities			45,979				25,250
Commissions			14,550				16,910
Settlements Expense			4,500				—
Legal and accounting			6,737				8,381
Depreciation			17,798				14,480
Selling, general and administrative			109,717				44,799
TOTAL OPERATING EXPENSES		$	691,205			$	838,343

  

We had other income of $1,698 for the three months ended August 31, 2011, compared with other income of $5,806 for the three months ended August 31, 2010. Our other expenses for both periods was a result of interest income.

 

We had net income of $142,013 for the three months ended August 31, 2011, compared with a net loss of $172,884 for the three months ended August 31, 2010.

 

Liquidity and Capital Resources

 

As at August 31, 2011, we had $673,049 in current assets and $719,642 in current liabilities. On August 31, 2011, we had a working capital deficit of $46,593.

 

Operating activities provided $327,512 in cash for the three months ended August 31, 2011. Our net income of $142,013, along with deferred tax asset of $77,000, and accrued expenses of $78,448 were the primary components of our positive operating cash flow.

 

Cash flows used by investing activities during the three months ended August 31, 2011 were $11,509 mainly as a result of $10,120 for the purchase of property and equipment.

 

Cash flows used by financing activities during the three months ended August 31, 2011 were $400,000 for payments on treasury stock.

 

Currently, our primary source of liquidity is cash flows provided by our operations. We will not require additional capital to execute our plan, unless we expand into additional facilities or grow through the acquisition of complementary businesses. Our current cash flows from operations are sufficient to meet our working capital requirements over the next 12 months.

 

Research and Development

 

We will not be conducting any product research or development during the next 12 months.

 

Off Balance Sheet Arrangements

 

As August 31, 2011, there were no off balance sheet arrangements.

 

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4.     Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of August 31, 2011.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Chris Johns.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 31, 2011, our disclosure controls and procedures are effective.  There have been no changes in our internal controls over financial reporting during the quarter ended August 31, 2011.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Limitations on the Effectiveness of Internal Controls

 

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

 

PART II – OTHER INFORMATION

 

Item 1.     Legal Proceedings

 

Loomis Bankruptcy

 

On or about January 6, 2011, a complaint was filed against us in the United States Bankruptcy Court for the District of Arizona (Case No. 2:10-bk-01885) by Joseph Charles Loomis (the “Debtor”). The Debtor is the subject of a Chapter 11 bankruptcy case. The complaint alleges that on January 26, 2010, after the commencement of his bankruptcy case, the Debtor made a payment of $500,000 to us without prior bankruptcy court approval and that the entire payment is subject to being ordered immediately returned to the bankruptcy estate. The payment was made pursuant to a written Stock Subscription Agreement executed between us and the Debtor or about January 1, 2010 whereby the Debtor agreed to purchase 833,333 shares of our common stock (the “Stock Sale”).

 

On February 28, 2011, the United States Bankruptcy Court approved a settlement agreement (the “Settlement Agreement”) between us and the Debtor. Under the Settlement Agreement, we are required to pay the Debtor $200,000 within 48 hours of entry of the order by the Bankruptcy Court approving the Settlement Agreement. In exchange for the above-referenced payment, the Debtor will return to us 333,332 shares of our common stock purchased as part of the Stock Sale.

 

Further under the Settlement Agreement, the Debtor shall be permitted to sell his remaining shares of stock acquired in the Stock Sale for a price of not less than $0.35 per share. At the expiration of 180 days from the date of entry of an order by the Bankruptcy Court approving the Settlement Agreement, we will buy back all of the remaining shares of stock sold by means of the Stock Sale for an amount such that the Debtor is reimbursed in the total amount of $500,000 as a result of the above transactions. In exchange, the Debtor will return to us all remaining shares of our common stock in his possession acquired on account of the Stock Sale.

 

On September 9, 2011 we entered in to an Amendment to Settlement Agreement (“Amendment”) with the Debtor in which he agreed to forbear his right to submit the judgment to the court. In addition, commencing as of April 1, 2011, we agree to make forbearance payments to Debtor on a monthly basis in the amount of 8% of the sum of $300,000 or $2,000 per month with each forbearance payment due and payable on the first business day of each month. Under this Amendment and within 48 hours of approval of this Amendment by the Bankruptcy Court, we shall pay the Debtor the past due forbearance payments (for the months of April, May, June, July and August) in the total amount of $10,000.

 

The remaining principal balance in the amount of $300,000 is due and payable to the Debtor on or before April 1, 2012.

 

Duryea Action

 

On June 27, 2011, a complaint was filed against us in the United States District Court of the District of Nevada (Case No. 2:11-cv-01054-GMN-GWF) by Joseph Duryea (“Duryea”), our former President and member of the board of directors. The complaint alleges that Duryea is entitled to certain benefits provided under his employment contract with the company on account of his termination with our company for “Good Reason.” He claims, among other things, that certain of our officers engaged in multiple activities which constituted breaches of their fiduciary duty and his employment agreement. He also alleges that he took stock that was overvalued based on our incorrect financial reports. He seeks compensatory and punitive damages in excess of $75,000.

 

On June 27, 2011, Mr. Joseph Duryea, our former President, filed a complaint (the “Complaint”) against us in the United States District Court for the District of Nevada (Case No. 2:11-cv-01054-GMN CWH) alleging breach of contract, breach of the covenant of good faith and fair dealing, tortious breach of contract, and fraud (the “Litigation”) in relation to an employment agreement (the “Employment Agreement”) we entered into with him on January 15, 2010.

 

On September 15, 2011, we entered into a settlement agreement (the “Settlement Agreement”) with Mr. Duryea to resolve the above Litigation. Under the terms of the Settlement Agreement, we agreed to pay Mr. Duryea a total of $85,000 (the “Settlement Funds”). Of this total amount, we agreed to pay $45,000 upon execution of the Settlement Agreement and the remaining $40,000 shall be paid in four equal installments, payable on or before October 15, 2011, November 15, 2011, December 15, 2011 and January 15, 2012.

 

Further under the Settlement Agreement, we agreed as follows:

 

§  We agreed that any failure on our part to make timely installment payments will make the entire remaining balance of the Settlement Funds immediately due and payable and we consented to the immediate entry of judgment against us for the amount of the remaining balance of the Settlement Funds, subject to pre-judgment interest from the date of the filing of the Complaint forward.

 

§  We agreed to make our best effort to correct SEC filings and any other sites to record that Mr. Duryea in fact resigned from his former position with us as President, as opposed to the company’s previous allegation that he had been “terminated.”

 

The Settlement Agreement provides for a mutual release of claims and a non-disparagement clause. Upon payment of the Settlement Funds, the Litigation will be dismissed. The parties acknowledged, however, that Mr. Duryea’s additional stock rights, as described in his Employment Agreement, as a stockholder of our company will remain intact.

 

Item 1A:  Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

 

We agreed to purchase back 833,333 shares of common stock for a total cost of $500,000 in accordance with a settlement agreement with a shareholder. We paid $200,000 and recorded the remaining $300,000 as a payable as of May 31, 2011, which remains payable at August 31, 2011.

 

We also agreed to purchase back 6,835,425 shares of common stock for a total cost of $500,000 in accordance with a settlement agreement with a departing officer our company. We paid $100,000 and recorded the remaining $400,000 as a payable as of May 31, 2011. This payable was paid during the three months ending August 31, 2011.

 

The private offering was exempt under Section 4(2) of the Securities Act of 1933, as amended (the “Act”), and/or Rule 506 promulgated under the Act.

 

Item 3.     Defaults upon Senior Securities

 

None

 

Item 4.     (Removed and Reserved)

 

Item 5.     Other Information

 

None

 

Item 6.      Exhibits

 

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

SIGNATURES

 

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	SupportSave Solutions, Inc.
Date:	October 17, 2011
	By: /s/ Christopher Johns Christopher Johns Title: Chief Executive Officer and Director