UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarter Ended March 31, 2012

 

or

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission File Number  333-143039

 

SAVEDAILY, INC.

(Exact name of registrant as specified in its charter)

 

 

Nevada	20-8006878
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

 

3020 Old Ranch Parkway, Suite 140

Seal Beach, California 90740

(Address of principal executive offices)

 

(562) 795-7500

(Registrant’s telephone number, including area code)

 

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 past 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 (§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  ¨   No  ¨

 

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 (Do not check if a smaller reporting company)	¨	Smaller reporting company	x

 

 

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

Yes ¨    No x

  

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

 

Class	Outstanding as of May 7, 2012
Common Stock, $0.001 par value	44,347,224

 

 

TABLE OF CONTENTS

 

Heading		Page
	PART  I   —   FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 4.	Controls and Procedures	13
	PART  II   —   OTHER INFORMATION
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Mine Safety Disclosure	14
Item 5.	Other Information	14
Item 6.	Exhibits	14
	Signatures	15

 

 

 

PART  I   —   FINANCIAL INFORMATION

 

Item 1.                      Financial Statements

 

The accompanying unaudited balance sheet of SaveDaily, Inc. at March 31, 2012 and related unaudited statements of operations and cash flows for the three months ended March 31, 2012 and 2011 have been prepared by management in conformity with United States generally accepted accounting principles. As a result of the merger and reverse acquisition discussed in Note 1of the Financial Statements, the historical financial statements presented for periods prior to the acquisition date are the financial statements of SaveDaily.com, Inc., which had a fiscal year end of April 30. In connection with the merger and reverse acquisition the Company changed its fiscal year end to December 31. The common stock per share information in the financial statements for the three ended March 31, 2011 and related notes have been retroactively adjusted to give effect to the merger and reverse acquisition on August 22, 2011. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2011 financial statements included in the Report on Form 10-K filed on April 16, 2012. Operating results for the period ended March 31, 2012, are not necessarily indicative of the results that can be expected for any subsequent period.

 

  

SaveDaily, Inc.

Consolidated Balance Sheets

 

Assets		March 31, 2012				December 31, 2011
		(unaudited)
Current Assets
Cash		$	174,900			$	431,000
Accounts receivable			78,100				85,600
Deferred loan costs			57,900				96,100
Prepaid expenses and other current assets			71,000				56,800
Total current assets			381,900				669,500
Property & equipment (net)			20,200				17,200
Notes receivable			83,900				83,900
Other			25,300				23,900
Total assets		$	511,300			$	794,500
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable		$	164,400			$	214,100
Accounts payable-related parties			694,600				645,500
Accrued interest, related party			16,100				15,200
Other accrued expenses			701,800				502,900
Convertible debt obligations due within one year, net			465,200				111,500
Deferred income			191,600				154,600
Total current liabilities			2,233,700				1,643,800
Long-term debt-related party			200,000				200,000
Total Debt			2,433,700				1,843,800
Stockholders' Deficit:
Common stock-50,000,000 authorized $0.001 par value
44,347,224 issued & outstanding (44,293,890 in Dec)			44,400				44,300
Additional paid in capital			26,559,800				26,529,900
Unamortized deferred compensation			(748,600	)			(855,600	)
Subscriptions receivable-related parties			(317,400	)			(317,400	)
Accumulated deficit			(27,460,600	)			(26,450,500	)
Total Stockholders' Deficit			(1,922,400	)			(1,049,300	)
Total Liabilities and Stockholders' Deficit		$	511,300			$	794,500

 

 See notes to unaudited interim consolidated financial statements.

 

 

SaveDaily, Inc.

Consolidated Statements of Operations

(unaudited)

 

		Three Months Ended March 31, 2012				Three Months Ended March 31, 2011
Net sales of services		$	273,700			$	232,700
Costs applicable to sales & revenue			17,300				15,400
Gross Profit			256,400				217,300
Selling, general & administrative expenses			869,200				307,100
Equity compensation			107,000				-
Total Operating Expenses			976,200				307,100
Income (Loss) Before Other Income & Income Taxes			(719,800	)			(89,800	)
Other Income (expense)
Interest (expense), Net			(289,500	)			(36,600	)
Income (loss) from continuing operation before income taxes			(1,009,300	)			(126,400	)
Income taxes			800				-
Net Income (Loss)		$	(1,010,100	)		$	(126,400	)
Basic and Diluted Net Income Per Common Share		$	(0.02	)		$	(0.01	)
Weighted Average Common Shares Outstanding (Basic)			44,320,264				11,478,028

 See notes to unaudited interim consolidated financial statements.

SaveDaily, Inc.

Consolidated Statements of Cash Flows

(unaudited)

 

		Three Months Ended March 31, 2012				Three Months Ended March 31, 2011
Cash Flows from Operating Activities:
Net Loss		$	(1,010,100	)		$	(126,400	)
Adjustments required to reconcile net loss to cash flows
from operating activities:
Allowance for doubtful accounts			5,600				-
Accretion of debt discount			253,700				-
Amortization of deferred loan costs			38,200				-
Amortization of deferred compensation			107,000				-
Depreciation			1,600				1,400
Changes in Operating Assets & Liabilities:
Accounts receivable			1,900				22,700
Prepaid expenses			(14,200	)			22,200
Other assets			(1,400	)			-
Deferred income			37,000				(25,100	)
Accounts payable			(49,700	)			(25,500	)
Accrued expenses & related party payables			248,900				31,500
Net cash used by operating activities			(381,500	)			(99,200	)
Cash Flows from Investing Activities:
Notes receivable			-				(35,100	)
Purchase of equipment			(4,600	)			(1,200	)
Net cash used by investing activities			(4,600	)			(36,300	)
Cash Flows from Financing Activities:
Proceeds from sale of common stock			30,000				400,000
Loan proceeds			100,000				-
Net cash provided by financing activities			130,000				400,000
Net Change In Cash			(256,100	)			264,500
Cash-Beginning			431,000				85,600
Cash-Ending		$	174,900			$	350,100

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

  

Cash paid during the year for:
Income taxes		$	800			$	-
Interest		$	600			$	337

  

See notes to unaudited interim consolidated financial statements.

 

SaveDaily, Inc.

Consolidated Statement of Stockholders' Equity

(unaudited)

 

		Common Stock								Additional Paid-In				Subscriptions				Deferred				Accumulated
		Shares				Amount				Capital				Receivable				Compensation				Deficit				Total
Balance at December 31, 2011			44,293,890			$	44,300			$	26,529,900			$	(317,400	)		$	(855,600	)		$	(26,450,500	)		$	(1,049,300	)
Shares issued for cash			53,334				100				29,900				-				-				-				30,000
Compensation expense recognized			-				-				-				-				107,000				-				107,000
Net Loss			-				-				-				-				-				(1,010,100	)			(1,010,100	)
Balance at March 31, 2012			44,347,224			$	44,400			$	26,559,800			$	(317,400	)		$	(748,600	)		$	(27,460,600	)		$	(1,922,400	)

 

See notes to unaudited interim consolidated financial statements.

 

 

SAVEDAILY, INC.

Notes to the Consolidated Financial Statements

March 31, 2012

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

 

On August 22, 2011, Nine Mile Software, Inc., a Nevada corporation (“Nine Mile”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SD Acquisition Inc., a California corporation and a wholly-owned subsidiary of Nine Mile (“Merger Sub”), and SaveDaily.com, Inc., a California corporation, pursuant to which Merger Sub would be merged (the “Merger”) into SaveDaily.com, Inc., and SaveDaily.com, Inc. would become a wholly-owned subsidiary of Nine Mile. The Merger was accounted for as a reverse acquisition with SaveDaily being treated as the acquiring company for accounting purposes. Pursuant to the Merger the Company changed its name to SaveDaily, Inc.

 

In connection with the Merger, the Company acquired 100% of the issued shares of SaveDaily.com, Inc., in a share exchange where 1.0812286 shares of the Company were issued to the shareholders of SaveDaily.com, Inc. in exchange for each share of SaveDaily.com, Inc. for a total issuance of 33,000,000 common shares.

 

SaveDaily.com, Inc., a wholly-owned subsidiary of the Company as a result of the Merger was incorporated under the laws of the state of California on May 27, 1999. SaveDaily.com, Inc. is a registered investment adviser subject to regulations under the Securities and Exchange Commission. SaveDaily.com, Inc., provides a fully electronic solution for saving and investments to assist its customers in meeting their financial goals. SaveDaily.com, Inc. has two primary sources of revenue: money management (including distribution, marketing and advisory fees) and membership fees

 

 

NOTE 2- BASIS OF PRESENTATION

 

The accompanying consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of March 31, 2012 have been made.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's December 31, 2011 audited financial statements which can be found in the Form 10-K filed by the Company on April 16, 2012. The results of operations for the period ended March 31, 2012 are not necessarily indicative of the operating results for the full year.

 

As a result of the Merger discussed in Note 1, the historical financial statements presented for periods prior to the acquisition date are the financial statements of SaveDaily.com, Inc. The common stock per share information in the condensed financial statements for the three months ended March 31, 2011, and related notes have been retroactively adjusted to give effect to the reverse merger on August 22, 2011.

 

 

NOTE 3 - LIQUIDITY

 

The Company has experienced annual operating losses since 1999. As of March 31, 2012 the Company had a negative working capital of $1,851,800 and a stockholders’ deficit of $1,922,400. During the three months ended March 31, 2012 net cash used by operating activities was $381,500. During the past 12 months ended March 31, 2012 the Company added new management with extensive financial services experience and anticipates increased penetration of existing accounts and a growing pipeline of prospective new accounts. On March 28, 2012 we entered into a financing and security agreement (the “Financing Agreement”) pursuant to which the lender agreed to fund up to $3,000,000, $1,250,000 of which was funded as of April 13, 2012. The lender has the option to provide up to $1,750,000 of additional financing (the “Additional Financing”) by purchasing additional Notes. In connection with the Financing Agreement we executed a convertible senior secured promissory note, with interest accruing there under at the rate of six percent (6%) per annum, in favor of the lender. As security for its obligations under the Financing Agreement the Company granted the lender a first priority security interest in all of the Company’s assets. This financing allowed the Company to retire the $750,000 convertible note due in August 2012. We also entered into a bridge Financing Note for $100,000 which was retired upon receipt of the new funding.

 

 

 

 

NOTE 4 – EQUITY

 

During the period ended March 31, 2012 we issued 53,334 common shares to three individuals in exchange for $30,000 in cash. All holders of shares of common stock are entitled to receive dividends if and when declared and are entitled to one vote for each share on all matters submitted to a vote of the shareholders. These rights and preferences of the common shareholders remain unchanged. We have not designated or issued any preferred shares.

 

On August 11, 2011, the Board of Directors of the Company adopted the Company’s 2011 Equity Incentive Plan. On or about the same time, the shareholders of the Company approved the adoption of the Plan. The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by offering Participants the opportunity to share in such long-term success by acquiring a proprietary interest in the Company. The Plan seeks to achieve this purpose by providing for discretionary long-term incentive Awards in the form of Options (which may be Incentive Stock Options or Non-statutory Stock Options), Stock Appreciation Rights, Stock Grants, Restricted Stock Units and Cash Bonus Awards. The aggregate number of Shares reserved for Awards under the Plan is 10,000,000. The company did not grant any Awards during the three months ended March 31, 2012.

 

NOTE 5 - RELATED PARTY DEBT

 

Related party debt consists of the following as of March 31, 2012 December 31, 2011, respectively:

 

		March 31				Dec 31
Accounts payable		$	694,600			$	645,500
Accrued interest			16,100				15,200
Note payable to related parties bearing interest at 8%
at 10% with the entire principal due April, 2013			200,000				200,000
Total			910,700				860,000
Less current portion			(710,700	)			(660,700	)
Due after one year		$	200,000			$	200,000

 

 

 

NOTE 6– COMMITMENTS AND CONTINGINCIES

 

Qualified Investors LP Lawsuit. On September 7, 2011, Qualified Investors LP (“QILP”), filed a complaint in Superior Court for Orange County, California (the “QILP Complaint”) against SaveDaily.Com, Inc., the Company’s wholly-owned subsidiary (the “Subsidiary”) alleging that the Subsidiary had breached its payment obligations under a marketing agreement between QILP and the Subsidiary. The Subsidiary filed a demurrer to the QILP Complaint, asserting that the terms of the marketing agreement required that any dispute arising in connection with the marketing agreement be submitted to binding arbitration. On November 8, 2011, QILP filed an amended complaint acknowledging and agreeing that the dispute be referred first to mediation and thereafter to binding arbitration should mediation not be successful. Additionally, on September 13, 2011, QILP filed an application for a writ of attachment against the Subsidiary’s assets. In that QILP has now agreed to submit the matter to binding arbitration, the Subsidiary has asked that QILP withdraw its application for a writ of attachment. As of the date hereof, QILP has not responded to such request. The Company believes that a loss in this dispute is not probable and therefore has not recorded an accrual. In addition, the Company does not believe there is a reasonable possibility of a material loss from this dispute. Additionally, although Jeffrey Mahony, the Company’s Chief Executive Officer and a director of the Company, and Ken Carroll, a director of the Company, each own 20% of QILP, they do not control QILP or the maintenance of the QILP Complaint against the Subsidiary.

 

McGaughy Lawsuit. On September 7, 2011, Melvin McGaughy (“McGaughy”) filed a complaint in United States District Court, Central District of California (the “McGaughy Complaint”) against Harry S. Dent, Jr. (“Dent”) for breach of personal guaranty. Dent is a director of the Company, the chairman of the Board of Directors of the Company and a shareholder in the Company. In the McGaughy Complaint, McGaughy alleges that Dent has failed to make payments under a guaranty of certain Company indebtedness that Dent provided to McGaughy on or before February 1, 2006. Neither the Company nor its subsidiary is a party to the McGaughy Complaint. A motion to dismiss the McGaughy Complaint was filed by Dent on October 14, 2011. The Company is currently paying the costs of the defense of the McGaughy Complaint and the Company does not believe that it has any liability to McGaughy or to Dent in the event that McGaughy is successful in his litigation against Dent. Additionally, the Company believes that the payment by the Company of Dent’s legal fees and expenses is not material.

  

NOTE 7 – RECENTLY ISSUED ACCOUNTING STANDARDS

 

The Company has adopted all accounting pronouncements effective before March 31, 2012 which are applicable to the Company and does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements.

 

NOTE 8 – SUBSEQUENT EVENTS

 

On March 28, 2012 we entered into a financing and security agreement (the “Financing Agreement”) pursuant to which the lender agreed to fund up to $3,000,000, $1,250,000 of which was funded as of April 13, 2012. The lender has the option to provide up to $1,750,000 of additional financing (the “Additional Financing”) by purchasing additional Notes. In connection with the Financing Agreement we executed a convertible senior secured promissory note, with interest accruing there under at the rate of six percent (6%) per annum, in favor of the lender. As a result of the convertible nature of this note, the Company’s common stock equivalents will have exceeded its common shares authorized upon execution of the note. As security for its obligations under the Financing Agreement the Company granted the lender a first priority security interest in all of the Company’s assets. This financing allowed the Company to retire the $750,000 convertible note due in August 2012. We also entered into a bridge Financing Note for $100,000 which was retired upon receipt of the new funding.

 

 

 

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

 

Forward-looking Statements

 

Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (I) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.

 

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, international gold prices, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.

 

Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

 

The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q.

 

Plan of Operation

 

SaveDaily developed (over the course of eight years) and owns a proprietary financial services platform, the most recent version being in production for about three years, helping financial intermediaries succeed in bringing suitable and affordable investment services to everyday savers and investors. In the view of SaveDaily management, the mass market demographic is in need of affordable access to the relationships and investment strategies typically reserved only for affluent investors. SaveDaily was founded to provide persons of all income levels the information and tools necessary to invest and self manage their short and long term investment goals.

 

The everyday saver is often under-served because the acquisition and maintenance of their accounts are often unprofitable or only marginally profitable for financial institutions and brokerage houses. SaveDaily’s proven proprietary technology is a low cost, private label solution for these financial institutions designed specifically to serve the mass market - commonly referred to as the small investor and mass affluent investor, making up 90% of the investing population. Our private label platform offers mutual funds and any daily-valued product investments for both qualified and non-qualified account types.

 

The SaveDaily platform provides straight-through processing, record keeping and all-electronic money movement. With a complete end-to-end technological infrastructure solution, the financial services, defined contribution, and asset management market users gain a feature-rich, low cost, efficient, easy to use, and easy to deploy servicing platform. This open architecture, omnibus trading platform is flexible and unencumbered by laborious manual processes. Management believes that by remaining mutual fund, bank and clearing firm agnostic, SaveDaily’s platform is well positioned in our market. SaveDaily delivers mutual funds as its feature set, and at a price point our partners need to provide superior services to their investor clients at increased profit levels. Leveraging its scalable, all-electronic, sub-accounting and money movement platform, SaveDaily believes that it currently offers the industry's lowest cost, private-labeled, investment solutions to large banks, community banks, credit unions, and broker dealers. By helping these entities bring their investors private-labeled solutions, delivered under their respective brands, and leveraging virtually any third party money manager(s), investors in our service sets enjoy access to advisory services generally not readily available to this investor class.

 

By using our platform products, business partners of SaveDaily gain the ability to attract new customers, retain existing customers, lower servicing costs, and derive new revenue streams by incorporating a customizable mutual fund investing solution into their existing offerings. SaveDaily enables partner organizations to accelerate time-to-market by providing turn-key solutions and a robust Applications Programming Interface that supports tight integration between SaveDaily’s investor platform and their existing infrastructure, at any back-office or consumer touch point.

 

By utilizing SaveDaily’s proprietary platform products clients are able to initiate brokerage services with consumer-direct offerings, augment existing programs with financial advisors, more efficiently oversee portfolio management of trust funds, 401(k) Plans, 403(b) Plans, Safe Harbor IRA Rollovers, and provide for managed fund accounts. SaveDaily offers a full-service record keeping facility, providing participants with daily valuations and full-featured web access, all while maintaining compliance with pre-determined mutual fund models or approved product lists. All tax reporting, performance reporting, confirmation, and statement delivery is to be provided by SaveDaily directly to investors, or integrated into existing partner operations, for a seamless flow of regulated information to the investors

 

 

 

The Company

 

SaveDaily, Inc., formerly Nine Mile Software, Inc., a Nevada Corporation, conducts its business through its wholly owned subsidiary, SaveDaily.com, Inc., a California corporation incorporated on May 27, 1999. References herein to “SaveDaily”, unless otherwise note, refer to SaveDaily.com, Inc., the operating entity. SaveDaily produces and supports proprietary record keeping and workflow software solutions in the financial services industry that market products and services to everyday savers and investors. Mass market and mass affluent savers and investors typically have investable assets of less than $100,000 and generally make up the bulk of the retail client services by the banking industry, the qualified and defined benefits industry, and the debit card industry - all of which are target markets.

 

SaveDaily has had a history of losses and does not yet operate at break even cash flow. Since its inception, SaveDaily has received more than $14 million in equity from private sources. Over a course of eight years, working in conjunction with key firms within the financial services industry, SaveDaily developed a series of proprietary components into a fully integrated platform of technology solutions. We currently have 10 employees.

 

Our solutions, though continuing to evolve and be refined, are mature. We have been actively marketing these solutions since about 2008. Through various online portals, SaveDaily offers investments and record-keeping services directly to clients via our website located at www.savedaily.com, as well as indirectly to clients of business partners through a variety of white-labeled interfaces deployed with financial institution partners supporting investment accounts of all tax types. SaveDaily’s solutions operate successfully in our defined markets, enabling clients to find educational information, investment and account type wizards, and open and transact mutual fund investments in individual, joint, custodial, IRA (Individual Retirement Account) , ESA,(Educational Saving Account), and HSA Health Saving Account) accounts.

 

SaveDaily has formed strategic joint ventures to provide investment services to ethnically, religiously, and socio-economically focused communities, including African-American, Latino-American, and economically underserved and un-banked communities. In these communities, SaveDaily provides managed accounts of all tax types in conjunction with our strategic partners, who are themselves focused in these market places.

  

SaveDaily has partnered with UMB Bank, N.A. to provide Safe Harbor Automatic Rollover IRAs to terminated participants of qualified retirement plans, and has entered into over 1,500 agreements with retirement plan sponsors to handle their Safe Harbor Automatic Rollover IRAs.

 

SaveDaily also partners with third party administrators (TPAs) to create and offer a 401K/Qualified plan record-keeping platform aimed at TPAs, payroll associations and financial advisors. The platform was created to be private labeled by distribution partners, with SaveDaily providing record-keeping, trading, settlement and customer support.

 

SaveDaily launched an HSA investment sub-account product in 2007. This product is designed to link with existing banks and other entities that provide or manage direct deposit account support for HSAs. In September 2007, SaveDaily was selected as the investment solution for the largest HSA provider in the country, which began deployment of the company's solution to its client base in October 2008.

  

 

 

 

 

Results of Operations and Liquidity and Capital Resources 

 

Revenue

 

The Company has two primary sources of revenues: money management (including distribution, marketing and advisory fees), and membership fees that are account based and calculated based on a fixed fee for a specified time period and/or the amount of assets under management (AUM) for a particular account. Revenue for the three months ended March 31, 2012 increased $41,000 to $273,700 or 17.6% compared to $232,700 for the three months ended March 31, 2011. For the three months ended March 31, 2012 money management fees increased $9,200 to $18,900 or 94.8%. AUM based fees increased $12,400 to $48,300 or 34.5%, and membership fees increased $19,400 to $206,500 or 10.4%, respectively, compared to the three months ended March 31, 2011. Money management fees increased as more of the company’s individual account holders participated in mutual funds of one of the company’s partners. AUM based fees increased as the company’s assets under management as of March 31, 2012 grew to approximately $164 million or 125% from approximately $73 million as of March 31, 2011. Membership fees increased primarily due to additional health savings accounts. As a percentage of revenue, fees from money management, AUM, and membership were 6.9%, 17.6%, and 75.4% for the three months ended March 31, 2012, respectively compared to 4.2%, 15.4% and 80.4% for the three months ended March 31, 2011, respectively.

 

Costs Applicable to Revenues for Services

 

Costs applicable to revenues for services consist primarily of trust account fees and bank service charges. For the three months ended March 31, 2012 these costs increased $1,900 to $17,300 or 12.3% compared to $15,400 for the three months ended March 31, 2011. The increase resulted from a combination of more accounts and increased activity per account.

 

Operating Expenses

 

For the three months ended March 31, 2012 operating expenses increased $669,100 to $976,200 or 217.9% compared to $307,100 for the three months ended March 31, 2011. The growth was due to additional professional fees of $253,300, increases to salaries and benefits of $236,800, the amortization of deferred compensation for $106,900, and $19,100 for additional sales and marketing expenses. All other expenses increased a net $52,900.

 

Interest expense, net

 

For the three months ended March 31, 2012 interest expense increased $252,900 to $289,500 compared to $36,600 for the three months ended March 31, 2011. The components of the $289,500 net interest expense included $255,400 for the amortization of discounted notes, amortization of deferred loan costs totaling $38,200 offset by $4,100 of interest income.

 

Liquidity

 

At March 31, 2012, cash and cash equivalents totaled $174,900. We had total liabilities of $2,433,700 including $200,000 of long term debt and a stockholders’ deficit of $1,922,400, compared to total cash and cash equivalents of $431,000, total liabilities of $1,843,800 including $200,000 of long term debt and total stockholders' deficit of $1,049,300 at December 31, 2011.

 

Net cash used in operating activities was $381,500 for the three months ended March 31, 2012 compared to $99,200 for the three months ended March 31, 2011. The higher rate of cash used by operating activities for the three months ended March 31, 2012 was due to an increase in the net loss.

 

The Company has negotiated a financing and security agreement which provides up to $3,000,000 of debt based on certain terms and conditions and which it believes will provide sufficient working capital to fund the Company’s operations for the next 12 months. See Note 8- Subsequent Events to Notes to Consolidated Financial Statements.

  

Inflation

 

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

 

Off-balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

This item is not required for a smaller reporting company.

 

Item 4(T).

Controls and Procedures.

  

Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and principal accounting officer, to allow timely decisions regarding required disclosures.

 

 Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting. During the three months ended March 31, 2012, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).

 

 

 

  

PART  II   —   OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

Qualified Investors LP Lawsuit. On September 7, 2011, Qualified Investors LP (“QILP”), filed a complaint in Superior Court for Orange County, California entitled “Qualified Investors, LP, a California Limited Partnership, vs. SaveDaily.com, Inc., a California Corporation” (the “QILP Complaint”) against SaveDaily.Com, Inc., the Company’s wholly-owned subsidiary (the “Subsidiary”) alleging that the Subsidiary had breached its payment obligations under a marketing agreement between QILP and the Subsidiary. The Subsidiary filed a demurrer to the QILP Complaint, asserting that the terms of the marketing agreement required that any dispute arising in connection with the marketing agreement be submitted to binding arbitration. On November 8, 2011, QILP filed an amended complaint acknowledging and agreeing that the dispute be referred to first to mediation and thereafter to binding arbitration should mediation not be successful. Additionally, on September 13, 2011, QILP filed an application for a writ of attachment against the Subsidiary’s assets. In that QILP has now agreed to submit the matter to binding arbitration, the Subsidiary has asked that QILP withdraw its application for a writ of attachment. As of the date hereof, QILP has not responded to such request. The Company believes that a loss in this dispute is not probable and therefore has not recorded an accrual. In addition, the Company does not believe there is a reasonable possibility of a material loss from this dispute. Additionally, although Jeffrey Mahony, the Company’s Chief Executive Officer and a director of the Company, and Ken Carroll, a director of the Company, each own 20% of QILP, they do not exercise any control over QILP or the maintenance of the QILP Complaint against the Subsidiary.

 

McGaughy Lawsuit. On September 7, 2011, Melvin McGaughy (“McGaughy”) filed a complaint in United States District Court, Central District of California entitled “Melvin H. McGaughy, an individual, Melvin H. McGaughy, as Trustee of the Melvin H. McGaughy Irrevocable Trust; and Patricia G. Ericson, an individual, vs. Harry S. Dent, Jr., an individual” (the “McGaughy Complaint”) against Harry S. Dent, Jr. (“Dent”) for breach of personal guaranty. Dent is a director of the Company, the chairman of the Board of Directors of the Company and a shareholder in the Company. In the McGaughy Complaint, McGaughy alleges that Dent has failed to make payments under a guaranty of certain Company indebtedness that Dent provided to McGaughy on or before February 1, 2006. Neither the Company nor its subsidiary is a party to the McGaughy Complaint. A motion to dismiss the McGaughy Complaint was filed by Dent on October 14, 2011. The Company is currently paying the costs of the defense of the McGaughy Complaint and the Company does not believe that it has any liability to McGaughy or to Dent in the event that McGaughy is successful in his litigation against Dent. Additionally, the Company believes that the payment by the Company of Dent’s legal fees and expenses is not material.

 

The Company is often subject to various contingencies, the resolutions of which, its management believes will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Except to the extent disclosed above, the Company was not involved in any material litigation during the quarter ended March 31, 2012, or through the date of this filing.

  

 

Item 1A.

Risk Factors

 

This item is not required for a smaller reporting company.

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

On February 1, 2012 we sold 53,334 shares of common stock for $30,000.

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

Item 4.

Mine Safety Disclosures Not applicable

 

Item 5.

Other Information

 

None.

 

Item 6.

Exhibits

 

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

 

Exhibit 32.1

Certification of 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

 

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.

 

	SAVEDAILY, INC.
Date:  May 15, 2012	By: /S/   Jeff mahony
	Jeff Mahony,
	Chief Executive Officer
Date:  May 15, 2012	By: /S/   Michael F. Cronin
	Michael F. Cronin,
	Chief Financial Officer