Ideal Financial Solutions Inc - FORM 10-Q/A

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - Ideal Financial Solutions Inc	Financial_Report.xls
EX-31.1 - SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - Ideal Financial Solutions Inc	idealfinancialexh311.htm
EX-32.1 - SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - Ideal Financial Solutions Inc	idealfinancialexh321.htm
EX-32.2 - SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER - Ideal Financial Solutions Inc	idealfinancialexh322.htm
EX-31.2 - SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER - Ideal Financial Solutions Inc	idealfinancialexh312.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2011

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934 FOR THE TRANSITION PERIOD FROM _________________ TO _________________

000-53922

(Commission File No.)

Ideal Financial Solutions, Inc.

(Exact name of registrant as specified in its charter)

Nevada		33-0999642
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

5940 S. Rainbow Blvd., Suite 3010

Las Vegas, Nevada, 89118

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (801) 302-2251

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 o.

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer [ ]

Non-accelerated filer [ ]

Accelerated filer [ ]

Smaller reporting company [ X ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): YES [ ] NO [X]

As of November 21, 2011 the registrant had 22,893,227 shares of common stock outstanding.

EXPLANATORY NOTE

On November 15, 2011, we filed our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 and failed to obtain the review of our interim financial statements by an independent registered public accounting firm. Our failure to complete the required review is a material weakness in our internal control over financial reporting. Since the date of the original filing, we have completed such a review.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	Page

Item 1.	Financial Statements	1

	Report of Independent Registered Public Accounting Firm	2

	Condensed Consolidated Balance Sheets As of September 30, 2011 and December 31, 2010 (Unaudited)	3

	Condensed Consolidated Statements of Operations For the Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2011 and 2010 (Unaudited)	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19

Item 4.	Controls and Procedures	19

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	20

Item 1A	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3.	Defaults Upon Senior Securities	20

Item 5.	Other Information	20

Item 6.	Exhibits	20

Signatures		21

Exhibits/Certifications		22

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements The accompanying unaudited condensed consolidated balance sheets, statements of operations, and statements of cash flows and the related notes thereto, have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. The financial statements reflect all adjustments, consisting only of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair presentation for the interim periods.

The accompanying financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in our Annual Report on Form 10-K filed with the Securities Exchange Commission on March 28, 2011.

The results of operations for the three and nine-month periods ended September 30, 2011 are not necessarily indicative of the results to be expected for the year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and the Shareholders

Ideal Financial Solutions, Inc.

We have reviewed the accompanying condensed consolidated balance sheets of Ideal Financial Solutions, Inc. and subsidiaries as of September 30, 2011 and December 31, 2010, the related condensed consolidated statements of operations for the three and nine months ended September 30, 2011 and 2010, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2011 and 2010. These condensed financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.

HANSEN, BARNETT & MAXWELL, P.C.

Salt Lake City, Utah

November 21, 2011

IDEAL FINANCIAL SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
	September 30,			December 31,
	2011			2010
ASSETS
Current Assets
Cash and cash equivalents	$	588,303		$	64,727
Trade accounts receivable, net		1,464,035			-
Merchant reserves		-			189,721
Prepaid Expenses		2,500			-
Related party notes receivable - current portion		1,037			5,655
Total Current Assets		2,055,875			260,103

Property and Equipment, net of accumulated depreciation of $61,982 and $46,857, respectively		29,262			33,742
Total Assets	$	2,085,137		$	293,845

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Trade accounts payable	$	161,744		$	238,389
Accrued liabilities		214,188			1,072,000
Deferred revenue		-			153,100
Notes payable		17,230			17,230
Total Current Liabilities		393,162			1,480,719
Shareholders' Equity (Deficit)
Series A convertible preferred stock, $0.001 par value; 1,000,000 shares authorized and outstanding; liquidation preference $10,053		10,053			10,053
Undesignated preferred stock, $0.001 par value; 9,000,000 shares authorized; no shares outstanding		-			-
Common stock, $0.001 par value; 160,000,000 shares authorized 22,899,317 and 22,246,661 shares outstanding, respectively		22,899			22,246
Additional paid-in capital		7,491,811			7,215,173
Note Receivable – Shareholder		(12,500	)
Accumulated deficit		(5,845,288	)		(8,434,346	)
Total Shareholders' Equity (Deficit)		1,691,975			(1,186,874	)
Total Liabilities and Shareholders' Equity (Deficit)	$	2,085,137		$	293,845

See accompanying notes to the condensed consolidated financial statements.

IDEAL FINANCIAL SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2011			2010			2011		2010

Revenue, net of refunds	$	3,297,149		$	595,364		$	4,661,693	$	5,606,155
Expenses
Marketing and selling		100,773			5,244			238,034		2,577,464
Customer service		214,463			174,345			686,543		460,080
Professional fees		161,108			113,314			333,955		510,271
Merchant costs		24,194			202,444			44,453		1,529,228
General and administrative		1,076,304			259,052			1,477,976		905,997
Total Expenses		1,576,842			754,400			2,780,961		5,983,040
Income (Loss) from Operations		1,720,307			(159,036	)		1,880,732		(376,885	)
Other Income (expense)		(2,165	)		25			526		5,252
Reversal of Accrual for Contingent Liability		707,500			-			707,500		-
Total Other Income (Expense)		705,535			25			708,026		5,252

Net Income (Loss)	$	2,425,642		$	(159,011	)	$	2,588,758	$	(371,633	)

Basic Earnings (Loss) Per Share	$	0.07		$	-		$	0.08	$	(0.02	)
Diluted Earnings (Loss) Per Share	$	0.07		$	-		$	0.08	$	(0.02	)

See accompanying notes to the condensed consolidated financial statements.

IDEAL FINANCIAL SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
	For the Nine
	Months Ended
	September 30,
	2011			2010
Cash Flows from Operating Activities
Net income (loss)	$	2,588,758		$	(371,633	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Share-based compensation		132,912			45,033
Depreciation and amortization		15,125			17,940
Changes in operating assets and liabilities:
Trade receivables		(1,464,035	)		-
Merchant reserves		189,721			(272,253	)
Other assets		(2,500	)		1,278
Trade accounts payable		(76,646	)		(124,871	)
Accrued liabilities		(691,016	)		729,132
Deferred revenue		(153,100	)		(147,665	)
Net Cash Provided By Operating Activities		539,219			(123,039	)

Cash Flows from Investing Activities
Proceeds or advances of related party notes receivable		4,986			-
Redemption of Common Stock		(9,983	)		-
Purchase of property and equipment		(10,646	)		(18,461	)
Net Cash Used in Investing Activities		(15,643	)		(18,461	)

Net Cash Used in Financing Activities		-			-
Net Change in Cash and Cash Equivalents		523,576			(141,500	)
Cash and Cash Equivalents at Beginning of Period		64,727			328,856

Cash and Cash Equivalents at End of Period	$	588,303		$	187,356

Supplemental Schedule of Noncash Investing and Financing Activities

Common stock sold in exchange for note receivable from related party	$	12,500		$	-

Land issued to officers in payment of accrued salary	$	-		$	70,870

Common stock surrendered in payment of note receivable from related party	$	-		$	17,090

Common stock issued to settle accrued liabilities to officers

166,796

See accompanying notes to the condensed consolidated financial statements.

IDEAL FINANCIAL SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Information – The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they are condensed and do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature. The accompanying financial statements should be read in conjunction with the Company’s most recent annual financial statements included in the Company’s annual report on Form 10-K filed with the SEC on March 28, 2011. Operating results for the three and nine-month periods ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

Organization and Nature of Operations – Ideal Financial Solutions, Inc. is incorporated under the laws of the State of Nevada and has three wholly-owned subsidiaries, which, with Ideal Financial Solutions, Inc., are referred to herein as the Company.

The Company markets and sells a suite of online software solutions to individuals and companies for both one-time payments as well as monthly subscription fees that enable the customers to access the Company’s software solutions online and to receive related customer support. The Company’s software includes education, support and automated online tools intended to enable customers to create additional cash resources, to reduce or eliminate non-asset-building debt and to build financial independence. The suite of software solutions is offered through the Company website and also sold as a “white label” solution to other companies who in turn, offer the services to their customers or employees. The Company initiates charges using electronic check or ACH payments to customers for the cost of the services or invoice corporate clients weekly.

Principles of Consolidation – The accompanying condensed consolidated financial statements include the operations, transactions and balances of Ideal Financial Solutions, Inc. and all of its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Business Condition – During the nine months ended September 30, 2011, the Company received $593,219 in cash from its operating activities. During the second quarter of 2010, the Company was notified of a purported credit card fine incurred in excess of the reserves held by a merchant bank. The Company previously reported this bogus fine on its books leading our independent auditors to issue a report dated March 25, 2011 that expressed substantial doubt about the Company’s ability to continue as a going concern. Management intends to mitigate these conditions by contesting claims, cutting costs, seeking out new customers and exploring new marketing opportunities. To reduce the merchant costs of fees and potential fines and penalties, during the latter half of 2010, the Company moved from credit card processing to other platforms. In addition, the Company has expanded its marketing by selling access to its software to corporate accounts rather than directly to individuals. Under these corporate accounts, the Company bills the corporations who then allow their employees and customers access to the suite of online services offered. Management believes that this should provide for a more stable and long-term customer base. Uncertainty as to the outcome of these efforts raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Revenue Recognition – The vast majority of the Company’s revenues currently come from providing various consulting services to our Customers. Customers are invoiced either weekly or monthly for the services provided during that period. Revenue is recognized upon the performance of the aforementioned services. Previously, one-time payment and monthly subscription fees vary and were based on the services provided to customers including access to the Company’s online software, upgraded access to the software, customer support and training. Online payments for subscription fees for each service were determined individually based on the price each service is charged to the customer and was recognized as revenue over the period the services are provided, less estimated refunds and processing fees based on historical experience rates.

Subscription fees received in advance of recognition as revenue were deferred until earned. Deferred revenue as of September 30, 2011 and December 31, 2010 were $0 and $153,100, respectively. Estimated refunds and chargebacks were estimated and accrued in the same period the revenue was earned. Accrued refunds as of September 30, 2011 and December 31, 2010 were $0 and $47,714, respectively and are included in accrued liabilities. With the diminishment of subscription revenue in favor of consulting revenue all of the Company’s revenues are now billed on a monthly basis so the Company is no longer receiving payments in advance of the services that need to be deferred. Since the Company is no longer receing payment from credit cards there is no longer a need to reserve for possible credit card chargebacks.

Accounts Receivable – During the first quarter of 2011, the Company began selling its online subscription-based services to corporate customers and invoices them on a weekly basis after the services have been provided. The Company generally does not require collateral and periodically reviews accounts receivable for amounts considered uncollectible. Allowances are provided for uncollectible accounts when deemed necessary. At this time the Company believes that all of its Accounts Receivable are collectible and therefore have reserved zero for bad debt. So as to assist our customers in their cash flow needs, Customers are not required to pay for a portion of such services until 180 days after being invoiced for such. We do not charge any interest or late fee on such invoices if paid within such terms.

Major Customers –During the nine months ended September 30, 2011, sales to three customers represented 41%, 37% and 13%, respectively. At September 30, 2011, these customers made up 43%, 38% and 15%, respectively, of accounts receivable.

Earnings (Loss) Per Share –The computations of basic earnings (loss) per share are based on net income (loss) divided by the weighted-average number of common shares outstanding during the period, adjusted for qualified participating securities, using the if-converted method, when the qualified participating securities are dilutive. Diluted earnings (loss) per share are calculated by dividing net income (loss) assuming dilution by the weighted-average number of common shares and potentially dilutive shares of common stock issuable upon conversion of non-participating shares. When dilutive, the potential common shares issuable upon exercise of warrants included in diluted earnings (loss) per share are determined by the treasury stock method.

For the three and nine months ended September 30, 2011, and for the three months ended September 30, 2010, there were 175,025 warrants that were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. For the nine months ended September 30, 2010, there were participating common stock equivalents from 1,000,000 shares of convertible preferred stock that are convertible into 10,000,000 shares of common stock that were excluded from the computations of basic and diluted loss per share and there were 1,175,025 warrants that were excluded from the calculation of diluted loss per share because their effects would have been anti-dilutive. The calculations of basic and diluted earnings (loss) per share were as follows:

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2011		2010			2011		2010
Net income (loss)	$	2,425,642	$	(159,011	)	$	2,588,758	$	(371,633	)
Weighted-average common shares outstanding		22,392,566		21,923,418			22,295,827		21,923,418
Effect of participating Series A convertible preferred stock		10,000,000		10,000,000			10,000,000		-
Basic weighted-average common shares outstanding		32,392,566		31,923,418			32,295,827		21,923,418
Dilutive effect of outstanding warrants		928,205		-			896,700		-
Diluted weighted-average common shares outstanding		33,320,761		31,923,418			33,192,527		21,923,418
Basic earnings (loss) per share	$	0.07	$	-		$	0.08	$	(0.02	)
Diluted earnings (loss) per share	$	0.07	$	-		$	0.08	$	(0.02	)

Reclassifications – Certain amounts presented in the 2010 condensed consolidated financial statements have been reclassified to conform to current-period presentation. As of September 30, 2011, a note receivable from a shareholder was reclassified from assets to the Stockholders' Equity section of the balance sheet. Additionally, for the three and nine month period ended September 30, 2011, a reversal of an acrual of contingent liability was reclassified from merchant costs to other income. These reclassifications had no effect on net income (loss) for the three or nine months ended September 30, 2010 and 2011.

NOTE 2 – SHAREHOLDERS’ EQUITY

Reverse Stock Split – On December 17, 2010, the board of directors approved a 200:1 reverse split of the outstanding common shares and a 50:1 reverse split on the number of authorized common shares. The board also approved a 50:1 reverse split on the number of authorized preferred shares and approved a 200:1 reverse split of the authorized and the outstanding preferred stock designated as series A convertible. The Company has retrospectively applied the reverse split for all periods presented. Following the reverse split, the Company has 1,000,000 shares of authorized and outstanding series A convertible preferred stock; 9,000,000 shares of authorized undesignated preferred stock; and 160,000,000 shares of authorized common stock with 22,899,317 common shares outstanding at September 30, 2011.

Common Stock – In February 2010, the Company awarded to an officer a total of 50,000 shares of unvested common stock. The common stock awarded vested over a one-year period. Compensation expense charged against operations for this stock-based award during the three and nine months ended September 30, 2011 was $0 and $5,667, respectively and is included in general and administrative expense in the accompanying consolidated financial statements. From February 2011 forward, the common stock was fully vested. In September 2011, the Board of Directors approved the awarding of 418,000 shares of common stock to certain Officers in exchange for forgiveness of $166,796 of previously accrued but unpaid Salaries. In September 2011, the Company awarded to an officer a total of 100,000 shares of common stock. Compensation expense in the amount of $54,000 was recorded. In September, 2011 the Company approved the sale of 50,000 shares of common stock to an Officer in exchange for an interest free non-recourse note in the amount of $12,500. In September 2011, the Company approved the issuance 135,763 shares of common stock for past investor relations consulting in the amount of $73,245. In August and September the Company repurchased 39,506 shares of its Common Stock in the amount of $9,983.

NOTE 3 – COMMITMENTS AND CONTINGENCIES

Employment agreement – In July 2003, the Company entered into employment agreements with its chief executive officer, and its president. In 2010, the Company entered into employment agreements with its chief operating officer and its previous chief financial officer. In August 2011 the Company entered into employment agreements with its new chief financial officer and general counsel. The employment agreements have no defined termination date and provide for an annual base compensation with annual reviews and adjustments. Employee agreements exist for other key management positions with varying annual base compensation and a twelve-month duration with an option to extend in perpetuity.

Merchant Claim – During 2009, the Company was notified of a claim from a merchant for alleged credit card fines and penalties incurred in excess of the reserves held by the merchant in the amount of $115,320. The Company has requested substantiation of the fines and penalties; however, the claimant has been unable to substantiate the claim. The Company is currently unable to estimate the outcome or the potential loss that may be incurred, if any, and believes that any loss that may be incurred as a result of this claim is negligible and has not made a provision in the accompanying consolidated financial statements, however, the outcome is uncertain.

During 2010, the Company was notified of a claim from a merchant account processor (the “merchant”) for fines and penalties incurred in excess of the reserves held by the merchant for $1,134,900. The fine was allegedly assessed by VISA, collected from the merchant and was an expense that could be passed on to the Company. Though the Company has contested the claim from the onset, a contingent liability of $707,500 was recorded for the amount included in the original demand letter from the merchant. During the third quarter of 2011, the Company has obtained information that has led the Company to now believe that the original demand was fraudulent. That information includes learning of the merchant’s purported legal issues, the lack of any contact from the merchant, our discontinuance of processing credit cards with the merchant, the failure of the merchant to follow contractually mandated VISA guidelines and industry wide knowledge that the merchant had a history or assessing bogus fines. Management of the Company is now of the opinion that the likelihood of this claim having to be paid is remote and therefore the Company reversed the $707,500 accrual for the claim in the third quarter of 2011. Management has concluded that there remains a remote risk that the claim could be reasserted against the Company. If it is reasserted, the Company would bear the costs of its defense and the risk that the Company may have to pay the amount claimed.

NOTE 4 – SUBSEQUENT EVENTS

Stock Buy-Back Plan – In July 2011, the Board of Directors of the Company authorized a plan to repurchase shares of our common stock in the open market with a value of up to $100,000 in the aggregate, but limited to $10,000 per week and cash availability, profitability and ability to pay obligations. In October, 2011 the Company purchased an additional 6,090 shares of its common stock for $3,060.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains various forward-looking statements. Such statements can be identified by the use of the forward-looking words "anticipate," "estimate," "project," "likely," "believe," "intend," "expect," or similar words. These statements discuss future expectations, contain projections regarding future developments, operations, or financial conditions, or state other forward-looking information. When considering such forward-looking statements, you should keep in mind the risk factors noted in the section entitled “Risk Factors” below and other cautionary statements throughout this Report and our other filings with the SEC. You should also keep in mind that all forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If one or more risks identified in this Report or any other applicable filings materializes, or any other underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected, or intended.

Unless the context requires otherwise, all references to “Ideal,” “we,” “Ideal Financial Solutions, Inc.,” or the “Company” in this Report refer to Ideal Financial Solutions, Inc. and all of its consolidated subsidiaries.

Company Overview

Our principal business is the providing of customer service, fulfillment, marketing, web design, online merchant activity, bookkeeping and other consulting services to third-party companies that wish to outsource their online marketing functions. These companies also offer our software to their employees or customers through licensing agreements.

We used to provide as our main business a suite of online software solutions used by businesses and individuals for the automated management of cash flows. These solutions include tools to effectively increase cash flow through debt elimination techniques, tax savings and wealth creation. We also provide access to other third-party personal financial solutions such as unsecured debt restructuring, insurance and investment options.

Our principal product offering was our Cashflow Management Tool, which has two components. The first is a debt management and reduction software tool called iDebtManager. iDebtManager is a web-based application used by customers to organize a debt payment plan. The second is called iBillManager, which interfaces with a third-party, electronic bill-payment system called Metavante, which uses electronic debit transactions to automate all bill payments for customers.

This shift in our core marketing is the result of a tumultuous and educational year in 2010. The process had caused a decrease in total revenue, but we have stream-lined our business and cut costs to the point where we are profitable and have systems in place that are scalable.

Management believes that we are well positioned in the marketplace as a supplier of cash management services in all fifty states. By leveraging the existing scalability of our system, our strategic marketing partners and world-class customer service partners, we believe that we can continue to grow at a strong rate over the long term.

General Outlook

We have generated net income of $2,425,642 and $2,588,758 during the three and nine months ended September 30, 2011, respectively; compared to the net loss generated in the three and nine months ended September 30, 2010, respectively. Revenues from our services increased dramatically compared to the three months ended September 30, 2010, as we have successfully implemented our new business model from an online system marketed directly to individuals to licensing and providing our services to other companies who offer or “white label” our product to their customers or employees. We also offer customer service and assist client companies with their web presence, online marketing, bookkeeping and merchanting solutions. Our expenses have increased but in a much smaller percentage than our revenue, leading us to increased profitability.

We have completed our registration with the SEC under the Securities Exchange Act of 1934. We are fully reporting with the SEC and are traded on the OTC Market tier: OTC.QB. We have recently completed a Form 211. If such is approved our stock will subsequently be traded on the OTC Bulletin Board. We have increased our customer service footprint by creating an in-house customer service team to better serve our customers and to assist with servicing the users of our products through licensing agreements with corporate client companies.

We have also begun our new marketing plan of bringing our services to the clients of companies that specialize in offering micro-loans including payday loan companies, credit unions and mortgage companies. We believe our services are a good match for these lenders, as it will help individuals improve their financial situation, which in turn helps them become better and more responsible borrowers.

Finally, in November our wholly owned subsidiary Dollars West, Inc. filed an application with the State of Utah to commence operations as a payday lender. We anticipate such application being approved by years end.

Results of Operations – Three Months Ended September 30, 2011 and 2010

The following discussions are based on the consolidated balance sheet at September 30, 2011 and statement of operations for the three months ended September 30, 2011 and 2010 and notes thereto.

Revenues and Cost of Revenues

Revenues are achieved through offering our various applications for automating debt reduction, cash management and wealth building to companies and individuals and also by licensing and providing our services to other companies who offer or “white label” our product to their customers or employees. We also offer customer service and assist client companies with their web presence, online marketing, bookkeeping and merchanting solutions. Revenues from sales of our services for the three months ended September 30, 2011 were $3,297,149, an increase of $2,701,785 from $595,364 for the three months ended September 30, 2010.

As we have shifted our core business from marketing directly to the public to providing services to other companies, we have seen a dramatic increase in revenues and related expenses, mostly personnel to provide our services. With the challenges of finding new opportunities and income sources, we have streamlined our processes and expenses to the point that we are profitable and are poised to scale our business model to new verticals and realize the benefits of our new system.

Expenses

Total operating expenses for the three months ended September 30, 2011 were $1,576,842, an increase of $822,442 from expenses of $754,400 for the three months ended September 30, 2010. The increase in operating expenses was due to increases in nearly all categories of operating expenses commensurate with the growth in our revenues for the three months ended September 30, 2011 as compared with the revenues for the three months ended September 30, 2010.

Our marketing and selling expenses increased by $95,529, to $100,773, in the three months ended September 30, 2011, from $5,244 in the three months ended September 30, 2010. This increase in marketing and selling expenses is a result of new efforts so as to obtain new corporate customers. Our customer service expenses increased by $40,118, to $214,463, in the three months ended September 30, 2011 from $174,345 in the three months ended September 30, 2010. The increase in customer service expense is due to increased compensation expense by the Company from our efforts to expand and improve our customer service by hiring a team of in-house customer service agents rather than using third party providers exclusively.

Expenses relating to professional fees increased by $47,794, to $161,108, in the three months ended September 30, 2011 from $113,314 in the three months ended September 30, 2010 due to an increase in costs related to reporting with the SEC including additional accounting staff, independent audit services and attorney fees. Our merchant costs decreased $178,250 from $202,444in the three months ended September 30, 2010 to $24,194 in the three months ended September 30, 2011due to a decrease in our direct consumer business. Our general and administrative expenses increased by $817,253 to $1,076,305 in the three months ended September 30, 2011 from $259,052 for the three months ended September 30, 2010. The increase in general and administrative expenses is due to increases in overall operations as revenues increased in 2011.

Our other Income/Expense increased by $705,409 due mostly to the reversal of the previously recorded accrual of a contingent liability related to a fraudulent demand letter about a purported fine as mentioned in Note 3.

For three months ended September 30, 2011, we have reported net income of $2,425,642, which represents an increase of $2,584,653 compared to our net loss of $159,011 for the three months ended September 30, 2010. The principal driver of this increase in net income is an increase in revenue, in excess of the increase in expenses.

Results of Operations – Nine Months Ended September 30, 2011 and 2010

The following discussions are based on the consolidated balance sheet at September 30, 2011 and statement of operations for the nine months ended September 30, 2011 and 2010 and notes thereto.

Revenues and Cost of Revenues

Revenues are achieved through mainly by providing consulting, website management and merchanting and other related services to our customers and secondarily by offering access to our various online applications for automating debt reduction, cash management and wealth building to companies. Revenues from sales of our services for the nine months ended September 30, 2011 were $4,661,963, a decrease of $944,192 from $5,606,155 for the nine months ended September 30, 2010.

As we have shifted our core business from marketing directly to the public to engaging other companies, we had seen a dramatic increase in revenues and related expenses. With the successful migration to our new model revenues and in a lesser percentage expenses have increased.

Expenses

Total operating expenses for the nine months ended September 30, 2011 were $2,780,961, a decrease of $3,202,079 from expenses of $5,983,040 for the nine months ended September 30, 2010. The decrease in operating expenses was due to decreases in most categories of operating expenses commensurate with our revenues for the nine months ended September 30, 2011 as compared with the nine months ended September 30, 2010.

Our marketing and selling expenses decreased by $2,339,430, to $238,034, in the nine months ended September 30, 2011, from $2,577,464 in the nine months ended September 30, 2010. This decrease in marketing expenses is a result of new efforts of working directly with other companies, which requires less marketing expenditures. Our customer service expenses increased by $226,463, to $686,543 in the nine months ended September 30, 2011 from $460,080 in the nine months ended September 30, 2010. The increase in customer service expense is due to the Company’s to expanding and improving customer service by bringing it in-house rather than relying on third parties exclusively.

Expenses relating to professional fees decreased by $176,316, to $333,955, in the nine months ended September 30, 2011 from $510,271 in the nine months ended September 30, 2010 due to a decrease in overall expenses and expenses directly related to registering with and complying with SEC rules and regulations. Our merchant costs decreased $1,484,775 from $1,529,228 in the nine months ended September 30, 2010 to $44,453, in the nine months ended September 30, 2011. We had less merchant costs due to a decrease in our direct consumer business. Our general and administrative expenses increased by $571,979 to $1,477,976, in the nine months ended September 30, 2011 from $905,997 for the nine months ended September 30, 2010 The increase in general and administrative expenses is due to increases in overall operations.

Our other Income/Expense increased by $702,774 due mostly to the reversal of the previously recorded accrual of a contingent liability related to a fraudulent demand letter about a purported fine as mentioned in Note 3.

For nine months ended September 30, 2011, we have reported net income of $2,588,758, which represents an increase of $2,960,391 compared to our net loss of $(371,633) for the nine months ended September 30, 2010. The principal driver of this increase in net income is an increase in revenue, in excess of the increase in expenses.

Liquidity and Capital Resources

Cash Flow.

We had $539,219 in cash provided by operations during the nine months ended September 30, 2011 compared to $123,039 used by operating activities during the nine months ended September 30, 2010.

For the nine months ended September 30, 2011, our primary source of cash has continued to be from operations. We used cash to pay down $76,646 in trade accounts payable, $150,312 to pay down accrued liabilities and to fund a decrease in deferred revenue of $153,100, as the revenue came out of deferment. We collected or wrote-off all merchant reserves, providing $189,721 in cash for the nine months ended September 30, 2011, compared to the $272,253 cash we used for the merchant reserve receivable for the nine months ended September 30, 2010. We used $1,464,035 to fund an increase in trade receivables. There were minimal financing activities in the first nine months of 2011 and investing activities included $10,646 of cash used for new computer purchases and the repurchase of $9,983 of the company’s Common Stock.

For the nine months ended September 30, 2010, we freed up cash by settling liabilities and paying for services with common stock valued at $299,708 and the reversal of a contingent liability of $707,500.

Capital Expenditures.

We expect capital expenditures during the next 12 months to include minor computer purchases, leasehold improvements and new furnishings. Cash from operations should be sufficient to fund any new equipment needs.

Current and Expected Liquidity.

As of September 30, 2011, we had cash and cash equivalents of $588,303, Accounts Receivable of $1,464,035 and other current assets of $3,537. As of September 30, 2011, we had current liabilities of $393,162, which is made up of $161,744 in accounts payable, $214,188 in accrued liabilities and $17,230 in notes payable, creating working capital of $1,662,713.

Although we have been able to operate without borrowing or selling stock, we believe our cash resources along with anticipated cash flow are sufficient to meet our operating needs for the next 12 months.

We have relied on cash from operations as the sole source of cash for over the past three years. We have used our positive cash flow from the last two years to pay down external debt and begin paying down accrued salaries and other liabilities, while increasing operations and staff and commencing the process of registering with the SEC.

Due to a streamlined business model and corporate structure, we currently are able to meet our cash requirements through revenues from our current customers, which generally generate $800,000 to $1,000,000 in cash per month. Even with increased expenses associated with being a reporting company, we expect to be able to experience positive cash flow to cover planned operations (but not extraordinary events) if operations continue at current levels. There is a risk that net cash flow will not continue at current levels during the remainder of 2011, and we may be required to seek additional capital and reduce expenditures.

To the extent we experience a net reduction in cash flow, we may be required to raise additional capital. In the event that we need additional capital, because we do not have traditional assets such as equipment, inventory or trade receivables, our access to traditional institutional financing is limited; however, we believe that any effort to raise additional capital would benefit from our absence of significant external debt, guaranties, off-balance sheet financing or similar long term liabilities. To raise additional capital, we would need to issue debt and/or equity securities, including potentially warrants and convertible securities. We do not have any commitments from any party to provide any such capital but do believe we could raise additional capital if needed.

Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, and all of the other information set forth in this Report before deciding to invest in shares of our common stock. In addition to historical information, the information in this Report contains forward-looking statements about our future business and performance. Our actual operating results and financial performance may be different from what we expect as of the date of this Report. The risks described in this Report represent the risks that management has identified and determined to be material to our company. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also materially harm our business operations and financial condition.

Our accountants have included an explanatory paragraph in our annual audited financial statements regarding our status as a going concern.

Our financial statements included in the Report have been prepared on the assumption that we will continue as a going concern. Our independent registered public accounting firm has stated that it substantially doubts our ability to continue as a going concern in a report dated as of March 25, 2011. This doubt is based on the fact that, as of December 31, 2010, we had a stockholders’ deficit of $1,186,874, and current liabilities exceeded current assets by $1,220,616.

Our operating results have fluctuated significantly in the past and will continue to fluctuate in the future, which could cause our stock price to decline.

Our operating results have fluctuated significantly in the past, and we believe that they will continue to fluctuate in the future, due to a number of factors, many of which are beyond our control. Factors that may affect our operating results include the following:

	•	additions and losses of customers;
	•	additions or losses of marketing and referral partners, or changes in the number or quality of clients referred by continuing marketing and referral partners;

	•	change in our business plan, including the recent decision to focus our marketing effort on businesses, rather than individuals, as clients;
	•	our ability to enhance our services and products with new and better functionality;
	•	costs associated with obtaining new customers, improving our products and expanding our management team and number of advisors;

	•	new product announcements or introductions or changes in pricing by our competitors;
	•	technology and intellectual property issues associated with our products; and

•

general economic trends, including the level of concern by the general public about debt and debt reduction.

If in future periods our operating results do not meet the expectations of investors, our common stock price may fall.

We may be unable to raise capital needed to pay current liabilities or for operations going forward or may be required to pay a high price for capital.

If cash generated from operations does not increase, or we experience unexpected increases in expenses, we will likely need to raise additional capital. We may not be able to raise the additional capital needed or may be required to pay a high price for capital. Factors affecting the availability and price of capital may include the following:

	•	the availability and cost of capital generally;
	•	our financial results;
	•	the experience and reputation of our management team;
	•	market interest, or lack of interest, in our industry and business plan;
	•	the price and trading volume of, and volatility in, the market for our common stock;
	•	our ongoing success, or failure, in executing our business plan;
	•	the amount of our capital needs; and
	•	the amount of debt, options, warrants and convertible securities we have outstanding.

We may be unable to meet our current or future obligations or to adequately exploit existing or future opportunities if we cannot raise sufficient capital, which in the long run may lead to a contraction of our business and losses.

As we shift our marketing focus toward businesses, who in turn make our services available to their employees or customers, our customer base is concentrated, such that a loss of a single or small number of, customers would significantly harm our business.

Historically, a significant portion of our revenues has been referred through a limited number of lead providers. During 2009 and 2010, our relationship with two significant lead providers terminated, resulting in a sharp decline in revenue. In addition, customers referred by these lead providers tended to be very short term. We may continue to work with lead providers and, as we do, we will be subject to the risk of losing a lead provider relationship and/or attracting short-term customers, leading to volatility in our financial results and related risks.

As a result of the risks associated with lead providers, we have expanded our marketing efforts by selling access to our services to corporate accounts. Under these corporate accounts, we bill the business entity, which in turn allows its employees and customers access to our services. Although we expect these relationships to be longer term than those generated by lead providers, these larger accounts create a risk of concentration. If single large, or a number of smaller, business entity terminates it relationship with us, we may experience a significant decline in revenue. In addition, larger corporate clients may be able to negotiate more favorable terms than would individual customers.

If we fail to differentiate ourselves in the marketplace and develop our brand recognition or otherwise compete, our revenues and profitability will be impaired.

We are in the business of providing software-based debt management, bill payment and financial management solutions. We believe that our principal competitors include mint.com, youneedabudget.com and mvelopes.com. We also compete to some extent with numerous nonprofit or for-profit debt consolidation services as well as financial advisers. The market for our products and services is highly competitive. Especially in light of the recent recession, the debt management business is evolving and growing rapidly, and companies are continually introducing new products and services.

We compete with other software-based solutions on the features and effectiveness of our product offerings, price, customer service and the effectiveness of our automatic bill payments system. In general, our primary weakness is our lack of name recognition in the market place. Many of our existing and potential competitors have longer operating histories, greater financial strength and more recognized brands in the industry. These competitors may be able to attract customers more easily because of their financial resources and awareness in the market. Our larger competitors can also devote substantially more resources to business development and may adopt more aggressive pricing policies. The profitability of our business depends upon our continuing to attract new customers, while retaining existing subscribers. If we are unable to strengthen our brand, differentiate ourselves in the marketplace and otherwise compete with the numerous competitors in our market place, we may contract and experiencing net losses.

Our business has benefitted from the recent economic downturn and may be harmed by a recovery.

The recent recession, together with the tightening of lending standards, caused many consumers to experience cash flow difficulties and become more aware of the risks of significant borrowing. These negative economic experiences, and a general interest in debt reduction and conservative cash flow management, led to significant growth in our business. As the U.S. economy recovers, consumers may lose interest in cash management and reduction of debt, which could lead to slower growth in customers and even an overall net loss in the number of customers. If this occurs, we will likely experience decreasing revenues and increasing net losses.

Even if the U.S. economy does not recover in the short-term, we may experience a loss in customer base because people who are unemployed or initiate bankruptcy protection typically do not use our services. This would also result in decreasing revenues and increasing net losses.

We are dependent on a third party to provide certain software that is integral to our iBillManager offering.

The iBillManager component of our Cashflow Management Tool interfaces with a third-party, electronic bill-payment system licensed from Metavante (acquired by Fidelity in 2009). The services agreement pursuant to which we offer iBillManager is subject to termination by either party upon 90 days advanced notice at the end of each annual renewal of the agreement. Without such services, we may not be able to continue to offer the iBillManager portion of our Cash Management Tool, which may disrupt our service, lead to the loss of customers and harm our business.

Our operations are subject to potential disruption from system failure and security risks that could lead to a loss of customers and harm our business.

Our Cash Management Tool runs on our Internet website, rather than customers’ computers, and is utilized by our customers through the Internet. Our ability to operate is dependent upon our ability to protect our website and network against interruptions, damages and other events that may harm our ability to provide services to our customers on a short-term or long-term basis and may lead to lawsuits, customer losses, liabilities and harm to our reputation. We may not have adequate quality assurance procedures in place or may fail to detect inadequacies until problems arise. If we are unable to identify problems on a timely basis, we could experience a loss of revenues and market share, damage to our reputation, increased expenses and legal actions by our customers.

Interruptions in service, transmissions of viruses and other problems arising from one of, or a combination of, a natural disaster, power outage, unauthorized access, computer virus, equipment, software or system failure or other disruption could result in, among other things, significant repair and recovery expenses and extensive customer losses and otherwise lead to a decrease of revenues, increase in expenses or adverse effect on our business, financial condition and results of operations.

In addition, financial and other personal information of our customers resides on servers we control. Despite precautions, unauthorized third parties may gain access to our customers’ personal and financial information as a result of lapses in security measures implemented by our Internet provider or by our company, or as a result of an intentional wrongdoing by employees of our company. If such unauthorized access occurs, the consequences to us and our business would be severe. These may include, for example, lawsuits by customers, expenses associated with required and recommended remedial action, legal or other action by governments and loss of reputation and customers, any of which would harm our business and financial condition.

We intend to expand our operations and increase our expenditures in an effort to grow our business. If we are unable to achieve or manage significant growth and expansion, operating results will suffer.

In order to successfully implement our business strategy, we must achieve substantial growth in our customer base through additional sales. We may not achieve such growth. If achieved, significant growth would place increased demands on our management, accounting systems, infrastructure and systems of financial and internal controls. Rapid growth would also require an increase in the capacity, efficiency and accuracy of our billing and customer support systems. This would require an increase in the number of our personnel, particularly within customer service and technical support. Because of competition for employees and difficulties inherent in hiring, retaining and training large numbers of service and support personnel in a short period of time, we may be short staffed at times or be staffed with relatively inexperienced personnel. Our labor, administrative, professional fees and other costs may also increase. Any failure to expand our technical and personnel infrastructure with our business could lead to a decline in the quality of our sales, marketing, service, or other aspects of our business and lead to a long-term decline in revenue and an increase in losses.

If we are unable to keep up with evolving industry standards and changing user needs, our business is likely to suffer, and we may need to deploy significant company resources to keep up with evolving industry standards and changing user needs.

The products in our cash flow management, debt payment and other markets are continuously evolving as technology and customer expectations evolve. As our customers’ expectations and industry standards continue to evolve, our success will depend, in part, on our ability to timely and accurately identify emerging trends and to modify our offerings accordingly. We may be unable to modify our proprietary technology, obtain licenses for key third-party technologies or integrate technologies rapidly and efficiently enough to keep pace with emerging trends. We may fail to identify and invest in technologies that subsequently dominate the industry, and we may build our offerings around, and invest in, technologies that fail to achieve a substantial foothold in the industry. In addition, new industry standards or technologies could render our services obsolete and unmarketable or require substantial reduction in the fees we charge. Any failure on our part to properly identify, invest in and adopt new technologies that subsequently achieve market acceptance in a timely and cost effective manner could lead to a substantial reduction in our market share, a reduction in our revenue and an increase in our operating costs. Any such decrease in revenues, or increase in costs, would harm our business, financial condition and results of operations.

Third party claims that we infringe upon their intellectual property rights could be costly to defend or settle and could harm our business and reputation.

Litigation regarding intellectual property rights is common in the software industry. Cash flow and debt management software products and services may be increasingly subject to third-party infringement claims as the number of competitors in our industry segment grows and the functionality of products in different industry segments overlaps. We may from time to time encounter disputes over rights and obligations concerning intellectual property that we developed ourselves or that we license from third parties. Third parties may bring claims of infringement against us, or against others from whom we license intellectual property, which may be with or without merit. We could be required, as a result of an intellectual property dispute, to do one or more of the following:

	•	cease making, selling, incorporating or using products or services that rely upon the disputed intellectual property;
	•	obtain from the holder of the intellectual property right a license to make, sell or use the disputed intellectual property, which license may not be available on reasonable terms, or at all;
	•	redesign products or services that incorporate disputed intellectual property;
	•	pay monetary damages to the holder of the intellectual property right; and
	•	spend significant amounts of time and money defending such a dispute.

The occurrence of any of these events could result in substantial costs and diversion of resources or could severely limit the products and services we can offer, or delay the delivery of products and services, which could seriously harm our business, operating results, reputation and financial condition.

If our protection of our intellectual property is inadequate, our competitors may gain access to our technology, our competitive position could be harmed, we could be required to incur expenses to enforce our rights, and our business may suffer.

We depend on our ability to develop and maintain the proprietary aspects of our technology. We do not own any patents, copyrights, trademarks or other intellectual property registrations. We seek to protect our trade secrets and other proprietary information through a combination of contractual provisions, confidentiality procedures, and common law copyright and trademark principles, but these actions may be inadequate. Protection of our intellectual property is subject to many risks, including the following:

	•	we have not applied for copyright registrations with respect to our proprietary rights in our core Cashflow Management Tool or related methods or ideas, and common law rights associated with copyrights and trade secrets afford only limited protection;
	•	our claims of proprietary ownership (and related common law copyright assertions) may be challenged or otherwise fail to provide us with the ability to prevent others from copying our technology;
	•	despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information we regard as proprietary;
	•	confidentiality may be compromised intentionally or accidentally by contractors, customers, other third parties or our employees; and
	•	others may develop independently equivalent or superior technology or intellectual property rights.

We are dependent upon key personnel who may leave at any time and may be unable to attract qualified personnel in the future, which could harm our anticipated growth, implementation of current business plans and may impair our financial performance.

We are highly dependent upon the continued services of our senior management team. We are constantly evaluating our executive and management resources. To the extent our executive officers and managers are parties to employment agreements, such agreements are terminable at will by such employees. If one or more of our executives or senior managers were to leave, particularly if several were to leave within a short period of time, we may experience a significant disruption in our ability to attract and retain customers, maintain and update our product offerings, and complete significant transactions in a timely and competent manner. In addition, we may be unable to recruit competent replacement personnel on a timely basis. The loss of the services of key executive or management personnel could harm our ability to execute our business plan and may impair our financial performance.

Compliance with corporate governance and public disclosure requirements may result in additional expenses.

We are subject to the reporting and other requirements of the Securities Exchange Act of 1934, as amended. The requirements include, without limitation, the obligation to file annual, quarterly and current reports with the SEC, to have in place certain controls and procedures and other obligations. Compliance with our disclosure and other obligations may consume a large amount of management attention and require significantly increased expenditures on legal, accounting and other services. This may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. Registration under the Exchange Act also makes us subject to certain liability provisions, which may create additional avenues for shareholders and regulators to make claims against the company.

Our directors, executive officers and principal stockholders have effective control of the company, preventing non-affiliate stockholders from significantly influencing our direction and future.

Our directors, officers, and 5% stockholders and their affiliates control approximately 65% of our outstanding shares of voting stock and are expected to continue to control a majority of our outstanding voting stock following any financing transactions projected for the foreseeable future. These directors, officers and affiliates effectively control all matters requiring approval by the stockholders, including any determination with respect to the acquisition or disposition of assets, future issuances of securities, declarations of

dividends and the election of directors. This concentration of ownership may also delay, defer or prevent a change in control and otherwise prevent stockholders other than our affiliates from influencing our direction and future.

There is a public market for our stock, but it is thin and subject to manipulation.

The volume of trading in our common stock is limited and can be dominated by a few individuals. In addition, many brokerages are refusing to trade in, or implement substantial restrictions on trading in, stock reported on the Pink Sheets. The limited volume, and trading restrictions, can make the price of our common stock subject to manipulation by one or more stockholders and will significantly limit the number of shares that one can purchase or sell in a short period of time. An investor may find it difficult to dispose of shares of our common stock or obtain a fair price for our common stock in the market.

The market price of our common stock may be harmed by our need to raise capital.

We need to raise additional capital in the near future and expect to raise such capital through the issuance of common stock and other rights with respect to common stock. Because securities in private placements and other transactions by a company are often sold at a discount to market prices, this need to raise additional capital may harm the market price of our common stock. In addition, the re-sale of securities issued in such capital-raising transactions, whether under Rule 144 or otherwise, may harm the market price of our common stock.

The market price for our common stock is volatile and may change dramatically at any time.

The market price of our common stock, like that of the securities of other smaller companies, is highly volatile. Our stock price may change dramatically as the result of announcements of our quarterly results, the rate of our expansion, significant litigation or other factors or events that would be expected to affect our business or financial condition, results of operations and other factors specific to our business and future prospects. In addition, the market price for our common stock may be affected by various factors not directly related to our business, including the following:

	•	intentional manipulation of our stock price by existing or future stockholders;
	•	short selling of our common stock or related derivative securities;
	•	a single acquisition or disposition, or several related acquisitions or dispositions, of a large number of our shares;
	•	the interest, or lack of interest, of the market in our business sector, without regard to our financial condition or results of operations;
	•	the adoption of governmental regulations and similar developments in the United States or abroad that may affect our ability to offer our products and services or affect our cost structure; and
	•	economic and other external market factors, such as a general decline in market prices due to poor economic indicators or investor distrust.

Our ability to issue Preferred Stock and common stock may significantly dilute ownership and voting power, negatively affect the price of our common stock and inhibit hostile takeovers.

Under our Articles of Incorporation, we are authorized to issue up to 10 million shares of Preferred Stock and 160 million shares of common stock without seeking stockholder approval. Any issuance of such Preferred Stock or common stock would dilute the ownership and voting power of existing holders of our common stock and may have a negative effect on the price of our common stock. The issuance of Preferred Stock without stockholder approval may also be used by management to stop or delay a change of control, or might discourage third parties from seeking a change of control of our company, even though some stockholders or potential investors may view possible takeover attempts as potentially beneficial to our stockholders.

We are unlikely to pay dividends on our common stock in the foreseeable future.

We have never declared or paid dividends on our stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business. We do not anticipate paying any cash dividends in the foreseeable future, and it is unlikely that investors will derive any current income from ownership of our stock. This means that your potential for economic gain from ownership of our stock depends on appreciation of our stock price and will only be realized by a sale of the stock at a price higher than your purchase price.

Our common stock is a “low-priced stock” and subject to regulations that limits or restricts the potential market for our stock.

Shares of our common stock are “low-priced” or “penny stock,” resulting in increased risks to our investors and certain requirements being imposed on some brokers who execute transactions in our common stock. In general, a low-priced stock is an equity security that:

	•	Is priced under five dollars;
	•	Is not traded on a national stock exchange, such as NASDAQ or the NYSE;
	•	Is issued by a company that has less than $5 million in net tangible assets (if it has been in business less than three years) or has less than $2 million in net tangible assets (if it has been in business for at least three years); and
	•	Is issued by a company that has average revenues of less than $6 million for the past three years.

We believe that our common stock is presently a “penny stock.” At any time the common stock qualifies as a penny stock, the following requirements, among others, will generally apply:

•		Certain broker-dealers who recommend penny stock to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to a transaction prior to sale.
•		Prior to executing any transaction involving a penny stock, certain broker-dealers must deliver to certain purchasers a disclosure schedule explaining the risks involved in owning penny stock, the broker-dealer’s duties to the customer, a toll-free telephone number for inquiries about the broker-dealer’s disciplinary history and the customer’s rights and remedies in case of fraud or abuse in the sale.
	•		In connection with the execution of any transaction involving a penny stock, certain broker-dealers must deliver to certain purchasers the following:
			•		bid and offer price quotes and volume information;
				•		the broker-dealer’s compensation for the trade;
				•		the compensation received by certain salespersons for the trade;
				•		monthly accounts statements; and
				•		a written statement of the customer’s financial situation and investment goals.

Off-Balance Sheet Arrangements

There were no off-balance sheet arrangements at September 30, 2011.

Critical Accounting Policies and Estimates

Principles of Consolidation – The accompanying consolidated financial statements include the operations, transactions and balances of Ideal Financial Solutions, Inc. and all of its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition – The vast majority of the Company’s revenues come from providing various consulting services to our Customers. Customers are invoiced either weekly or monthly for the services provided during that period. Revenue is recognized upon the performance of the aforementioned services. One-time payment and monthly subscription fees vary and are based on the services provided to customers including access to the Company’s online software, upgraded access to the software, customer support and training. Online payments for subscription fees for each service are determined individually based on the price each service is charged to the customer and are recognized as revenue over the period the services are provided, less estimated refunds and processing fees based on historical experience rates.

Subscription fees received in advance of recognition as revenue are deferred until earned. Deferred revenue as of September 30, 2011 and December 31, 2010 were $0 and $153,100, respectively. Estimated refunds and chargebacks are estimated and accrued in the same period the revenue is earned. Accrued refunds as of September 30, 2011 and December 31, 2010 were $0 and $47,714, respectively and are included in accrued liabilities.

Accounts Receivable – During the first quarter of 2011, the Company began selling its online subscription-based services to corporate customers and invoices them on a weekly basis after the services have been provided. The Company generally does not require collateral and periodically reviews accounts receivable for amounts considered uncollectible. Allowances are provided for uncollectible accounts when deemed necessary. So as to assist our customers in their cash flow needs, Customers are not required to pay for a portion of such services until 180 days after being invoiced for such. We do not charge any interest or late fee on such invoices if paid within such terms.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

Item 4. Controls and Procedures

(a) Based on the evaluation of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) required by paragraph (b) of Rules 13a-15 or 15d-15, our chief executive officer and our chief financial officer have concluded that, as of September 30, 2011, our disclosure controls and procedures were not effective in ensuring that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods required by governing rules and forms. Due to miscommunications between our Auditors and Management we are now amending our Form 10Q to reflect that our 10Q for the period ending September 30, 2011, as filed on November 15, 2011 was filed prior to the Auditors completing their review. This deficiency has now been rectified with new procedures being enacted so as to prevent this reoccurring.

(b) There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

Item 1A. Risk Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item; however, certain risk factors are identified in a section entitled “Risk Factors” in Item 2 of Part I of this Report.

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

Our Board of Directors has adopted a stock repurchase program which authorizes us to repurchase shares of our common stock in the public market, from time to time, at prevailing prices. The stock repurchase program currently authorizes the repurchase of up to 500,000 shares of our common stock. The following table summarizes our purchases under the stock repurchase program for 2011:

Period	Total Number		Average		Total Number		Maximum
	of Shares		Price		of Shares		dollar amt
	Purchased		per Share		Purchased		Remaining

August 2011		34,298		0.23		34,298		92,041
September 2011		5,208		0.37		39,506		90,017
October 2011		6,090		0.48		45,596		86,957
Total		45,596		0.28

(1)

Under the resolution adopted in July 2011, our Board of Directors authorized the repurchase of up to $100,000 to purchase shares of our common stock. Purchases are made at management’s discretion based on market conditions and our financial resources. As of November 21, 2011, we had spent approximately $13,043 of the $100,000 designated for repurchase by our Board of Directors. The authorization of our Board of Directors was for a period of ninety days. In November the Board of Directors reauthorized such repurchase with no fixed expiration date,

Item 3. Defaults Upon Senior Securities.

None

Item 5. Other Information

None

Item 6. Exhibits

a) See Exhibit Index attached hereto following the signature page.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Ideal Financial Solutions, Inc.


	November 21, 2011		By: /s/ Steven L. Sunyich
	Date		Steven L. Sunyich,
			Chief Executive Officer


	November 21, 2011		By: /s/ Scott M. Manson
	Date		Scott M. Manson
			Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Exhibit	Incorporated by Reference/ Filed Herewith
3.1	Articles of Incorporation	Incorporated by reference to the Registration Statement on Form 10 filed with the SEC on August 18, 2010, File No. 000-53922
3.2	Bylaws	Incorporated by reference to the Registration Statement on Form 10 filed with the SEC on August 18, 2010, File No. 000-53922
31.1	Section 302 Certification of Chief Executive Officer	Filed herewith
31.2	Section 302 Certification of Chief Financial Officer	Filed herewith
32.1	Section 906 Certification of Chief Executive Officer	Filed herewith
32.2	Section 906 Certification of Chief Financial Officer	Filed herewith

101.INS		XBRL Instance

101.SCH		XBRL Schema

101.CAL		XBRL Calculation

101.DEF		XBRL Definition

101.LAB		XBRL Label

101.PRE		XBRL Presentation

Ideal Financial Solutions Inc - FORM 10-Q/A - November 22, 2011

Attached files

Ideal Financial Solutions Inc Reports