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EX-32.1 - SECTION 906 CERTIFICATION - EZJR, Inc.ex321sec906.htm
EX-31.1 - SECTION 302 CERTIFICATION - EZJR, Inc.ex311sec302.htm

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 Quarterly Period Ended September 30, 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: 000-53810
 

EZJR, Inc.

(Exact name of registrant as specified in its charter)

Nevada   20-0667864
(State or Other Jurisdiction   (I.R.S. Employer
of Incorporation or Organization)   Identification No.)

 

        P. O. Box 1449, Duluth GA   30096
(Address of principal executive offices)   (Zip Code)

Telephone: 678-866-3337

(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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 [ ] Not Applicable

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 o Accelerated filer o Non-accelerated filer o 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 o No [X]

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section S 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS

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

As of December 14, 2012, the registrant’s outstanding common stock consisted of 10,386,563 shares, $0.001 par value. Authorized – 70,000,000 common shares.

 

Table of Contents

EZJR, Inc.

Index to Form 10-Q

For the Quarterly Period Ended September 30, 2012

PART I Financial Information 3
     
ITEM 1. Financial Statements 3
     Unaudited Consolidated Balance Sheets 3
     Unaudited Consolidated Statements of Operations 4
     Unaudited Consolidated Statements of Cash Flows 5
     
  Notes to the Unaudited Financial Statements 6
     
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16
     
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 29
     
ITEM 4T. Controls and Procedures 29
     
PART II Other Information 32
     
ITEM 1. Legal Proceedings 32
     
ITEM 1A. Risk Factors 32
     
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 32
     
ITEM 3 Defaults Upon Senior Securities 32
     
ITEM 4 Submission of Matters to a Vote of Security Holders 32
     
ITEM 5 Other Information 32
     
ITEM 6 Exhibits 33
     
  SIGNATURES 34
     

 

 

 

 

2

 

 
 

 

EZJR, INC. 
Consolidated Balance Sheets
(Unaudited)
             
      September 30,   December 31,  
      2012   2011  
ASSETS            
             
Current assets            
Cash    $                          67,726  $                          22,441  
Prepaid expense                                    -                               2,867  
Total current assets                             67,726                           25,308  
             
Furniture, Equipment and Software, Net of accumulated depreciation of $9,313 and $1,605                             64,832                           11,229  
Security deposits                             13,529                             1,700  
Total assets    $                        146,087  $                          38,237  
             
             
LIABILITIES AND STOCKHOLDERS' DEFICIT            
             
Current liabilities            
Accounts payable and accrued liabilities    $                          35,816  $                          41,118  
Loan application fee liability                           238,604                                  -    
Related party note payable                             20,000                                  -    
Related party payables                             59,202                           79,595  
Deferred rent                               8,887                                  -    
Total current liabilities                           362,509                         120,713  
Total Liabilities                           362,509                         120,713  
             
Stockholders' deficit            
Preferred stock, $0.001 par value,  5,000,000 shares authorized, no shares issued or outstanding                                    -                                    -    
Common stock, $0.001 par value,             
70,000,000 shares authorized, 10,386,563            
and 8,263,750 shares issued and outstanding            
as of 9/30/2012 and 12/31/2011, respectively                             10,387                             8,264  
Additional paid-in capital                           224,375                           56,673  
Accumulated deficit                         (451,184)                       (147,413)  
Total stockholders' deficit                         (216,422)                         (82,476)  
Total liabilities and stockholders' deficit    $                        146,087  $                          38,237  
             
The accompanying notes are an integral part of these consolidated financial statements

 

3

 
 

 

EZJR, INC. 
Consolidated Statements of Operations
(Unaudited)
                   
  For the three months ended   Nine Months   From Inception  
  September 30,   Ended September 30,    (April 12, 2011) to  
  2012 2011   2012   Sept. 30, 2011  
                   
REVENUES                  
Service fees, net of refunds of $10,559, $0, $16,974, and $0  $                   160,700  $                          -    $                          324,069  $                                     -    
Referral fees                    312,192                           -                             705,789                                      -    
Commission revenue                           100                      4,192                               9,346                                5,834  
Total revenues                    472,992                      4,192                        1,039,204                                5,834  
                   
Operating Expenses:                  
Commission expenses                              -                             -                             214,878                                      -    
Loan application fee costs                              -                             -                               58,905                                      -    
Selling costs                    462,261                    15,466                           746,650                              26,464  
Selling costs - related party                              -                             -                                 9,000                                      -    
General and administrative                    104,108                    18,120                           313,424                              35,520  
Total operating expenses                    566,369                    33,586                        1,342,857                              61,984  
                   
Other expenses                  
Interest expense                          (118)                           -                                  (118)                                      -    
Total other expenses                         (118)                           -                                  (118)                                      -    
                   
Net loss  $                   (93,495)  $                 (29,394)  $                        (303,771)  $                            (56,150)  
                   
Net loss per share - basic   $                       (0.01)  $                     (0.00)  $                              (0.03)  $                                (0.01)  
                   
Weighted average number of common                   
shares outstanding - basic               10,386,563               8,263,750                        9,764,493                         8,263,750  
                   
The accompanying notes are an integral part of these consolidated financial statements

 

 

4

 
 

 

EZJR, Inc.
Consolidated Statements of Cash Flows 
(Unaudited)
           
           
    For the Nine months ended
    September 30,
    2012 2011
           
OPERATING ACTIVITIES          
Net loss    $            (303,771)  $              (56,150)
Adjustments to reconcile net income (loss)           
to net cash used by operating activities:          
Depreciation                    7,709                   1,070
Consulting expense-stock-based                     1,600                         -  
Changes in operating assets and liabilities:          
Prepaid expenses                     2,867                         -  
Deposits                 (11,829)                 (4,200)
Accounts payable and accrued liabilities                    (5,302)                   2,129
Loan application liability                238,604                         -  
Related party payables                    9,000                         -  
Deferred rent                    8,887                         -  
Net cash used by operating activities                 (52,235)               (57,151)
           
INVESTING ACTIVITIES          
Purchases of fixed assets                  (11,312)               (12,833)
Net Cash used by Investing Activities                 (11,312)               (12,833)
           
FINANCING ACTIVITIES          
Proceeds from related party note payable                   20,000                         -  
Proceeds from related party advances                  117,545                 84,221
Repayment of related party advances                  (28,713)               (11,050)
Net cash provided by financing activities                108,832                 73,171
           
NET CHANGE IN CASH                  45,285                   3,187
           
CASH AND CASH EQUIVALENTS -           
BEGINNING OF PERIOD                  22,441                         -  
END OF PERIOD    $               67,726  $                  3,187
           
SUPPLEMENTAL DISCLOSURES:          
Interest paid   $                      -   $                       -  
Income taxes paid   $                      -   $                       -  
Non-cash investing and financing activities:          
Stock issued to settle related party payables   $            118,225 $                       -  
Stock issued to settle note payable   $              25,000 $                       -  
Purchase of software with note payable   $              50,000 $                       -  
           
The accompanying notes are an integral part of these consolidated  financial statements

 

5

 
 

 

EZJR, Inc.

Notes to the Consolidated Financial Statements

 

1. Description of the Company

 

EZJR, Inc. ("Company") ("EZJR") is an Internet marketing company and real estate company in Georgia.

 

Reverse Acquisition

 

In January 2012, EZJR, Inc. ("Company") ("EZJR") entered into a two-step transaction with OwnerWiz Realty Inc. (“OWR”), a privately-held Georgia corporation. The first step of the transaction occurred in January 2012, when an entity owned by the shareholders of OWR acquired seven million five hundred thousand (7,500,000) shares of EZJR, approximately 95.25% of the then outstanding shares of EZJR. The second step of the transaction occurred on March 1, 2012, when EZJR, Inc., EZJR Acquisition Corporation ("Sub"), a Nevada corporation and subsidiary of EZJR and OWR, entered into a Share Exchange Agreement and Plan of Merger pursuant to which the Sub was merged with and into OWR, with OWR surviving as a wholly-owned subsidiary of the Company. The Company acquired all of the outstanding capital stock of OWR in exchange for issuing 390,000 shares of EZJR common stock which were issued to two shareholders of OWR. As the former shareholders of OWR now own over 95% of the outstanding common stock of EZJR, the transaction is recorded as a reverse merger and resulted in a recapitalization with OWR being the acquirer for accounting purposes. Accordingly, the historical financial statements are those of OWR and have been prepared to give retroactive effect to the reverse acquisition.

 

Exit of Development Stage

 

EZJR Inc. is a Nevada corporation. One of the Company's wholly-owned subsidiaries, OWR, was incorporated and began operations on April 12, 2011 in the state of Georgia. The other, OW Marketing, Inc. (“OWM”), was incorporated in Georgia on October 23, 2011 and began operations in March 2012. The Company has 70,000,000 shares of $0.001 par value common stock authorized, of which are 10,386,563 shares are issued and outstanding at September 30, 2012. The Company has elected a December 31 year-end. The Company incurred significant, recurring revenue transactions during the quarter ended June 30, 2012, and as a result, is no longer considered to be a development stage company.

 

 

 

 

 

 

 

 

6

 
 

 

EZJR, Inc.

Notes to the Consolidated Financial Statements

 

Basis of Presentation and Use of Estimates in the Financial Statements

 

The Company has prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. We have condensed or omitted certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) pursuant to such rules and regulations. The unaudited consolidated financial statements reflect all adjustments, which are normal and recurring, that are, in the opinion of management, necessary to fairly state the financial position as of September 30, 2012 and the results of operations and cash flows for the three and nine-month periods ended September 30, 2012 and for the period from inception (April 12, 2011) to September 30, 2011. The results of operations for the three and nine-month periods ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012 or for any other periods. The unaudited financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2011, included in the Annual Report on Form 10-K filed with the SEC, as well as with our interim financial statements for the quarters ending March 31 and June 30 of this year.

 

Going Concern and Management's Plan

 

The Company has incurred losses from operations since inception, and as of September 30, 2012, the Company’s current liabilities far exceed its current assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is seeking additional sources of financing and is continuing to implement the business plan. Management believes these factors will contribute toward achieving profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

 

2. Summary of Significant Accounting Policies

 

Revenue Recognition

 

Service and Referral Fees

 

The Company, through its wholly owned subsidiary, OWM, operates several websites which offer users several services. These services include credit monitoring, credit repair, credit reports, rent to own real estate and real estate finance applications. The Company receives fees from its users for its credit related products and records those fees as revenue as they are received. The Company does not perform these credit related services, but rather refers the customer's information to third party companies. The Company receives referral fees from these third party credit service providers. Both of these fees are recorded as revenue when received.

 

Loan Application Fees

 

OWM has entered into a marketing agreement with SCS Private Funding (“SCS”). This agreement provides for OWM to generate loan applications for loans to be funded by SCS. The loan applications generated by OWM are generally from consumers that have had challenges with their credit and mortgage history. OWM receives a loan application fee of up to $5,000 from the prospective borrower on each transaction. After review of each application to see that minimum requirements are met, OWM sends the application along with $3,500 to SCS. None of the loans have been funded by SCS as of September 30, 2012.

7

 

EZJR, Inc.

Notes to the Consolidated Financial Statements

 

 

OWM received the following number of loan applications by state, and their status, as of September 30, 2012.

 

State Number of Loans Loan Status Open Refunded Place in Contract
Alabama 1 - 1 1
Arizona 2 2 - -
California - - - -
District of Columbia 1 - 1 -
Delaware 1 - 1 -
Florida 11 11 - -
Georgia 4 3 1 -
Illinois 4 3 1 -
Indiana 2 2 - -
Kentucky 1 - 1 -
Maine 2 2 - -
Maryland 2 2 - -
Michigan 3 2 1 1
North Carolina 1 1 1 -
New Jersey 1 1 - -
New York 2 2 - -
Ohio 2 2 - -
Pennsylvania 2 2 - -
South Carolina 1 1 - -
Texas 3 2 1 -
Virginia 1 1 - -
Washington 2 2 - -
Total 49 41 9 2

 

 

In July 2012, OWM became aware that SCS had been operating in violation of a final Order to Cease and Desist dated May 29, 2012, issued by the State of Georgia Department of Banking and Finance. As a result, OWM has ceased sending loan applications to SCS and is seeking to establish relationships with other sources in connection with loan applications it has received and anticipates receiving.

 

OWM has recorded the total loan application fees received from each prospective borrower as a loan application fee liability until such time as (i) a refund is made to that prospective borrower or (ii) the loan regarding that borrower is funded.

 

8

 

EZJR, Inc.

Notes to the Consolidated Financial Statements

 

Commission Revenue

 

The Company's wholly-owned subsidiary, OWR, is a licensed corporate real estate broker in the state of Georgia and contracts with real estate agents to provide customer leads and broker services in return for a participatory share of commissions earned on completed real estate sales and rental transactions. The Company reports the entire commission earned from a sales or rental transaction as revenue on a gross basis. Commission expenses as presented in the statement of operations represent the variable portion of the gross commission earned that is paid to the Company’s in-State sub-contracted agents who conduct the transactions. The Company recognizes revenue only when the real estate transaction has closed and all of the following criteria have been met: i) persuasive evidence of an arrangement exists; ii) delivery has occurred or services have been rendered; iii) the fee for the arrangement is fixed or determinable; and iv) collectibility is reasonably assured.

 

Cash Equivalents

 

The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of September 30, 2012, the Company’s cash and cash equivalents were on deposit in federally-insured financial institutions.

 

Concentration of Credit Risk for Cash Deposits at Banks

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Deposits at the Company's financial institutions are fully insured by the Federal Deposit Insurance Corporation (FDIC).

 

Fair Value of Financial Instruments

 

The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three tier hierarchy that prioritizes the inputs used to measure fair value, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3).

 

9

 
 

 

 

EZJR, Inc.

Notes to the Consolidated Financial Statements

 

Accounts payable are reported at their historical carrying values, which approximate their fair values based on their short-term nature.

 

The fair value measurements of the Company’s financial instruments at September 30, 2012 and December 31, 2011 were as follows:

  Level 1 Level 2 Level 3 Total
September  30, 2012        
Cash and cash equivalents $67,726 - - $67,726
December 31, 2011        
Cash and cash equivalents $22,441 - - $22,441

 

 

Basis for Recording Fixed Assets, Lives, and Depreciation Methods

 

Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:

 

  Furniture and fixtures 7 years  
  Equipment 3 to 7 years  
  Leasehold improvements Lesser of useful life or lease term  
  Software 5 years  

 

 

10

 

EZJR, Inc.

Notes to the Consolidated Financial Statements

 

 

Recent Accounting Pronouncements

 

We have reviewed all recent accounting pronouncements and do not believe any will have a material impact on our financial statement presentation upon their adoption.

 

 Loss Per Share

 

Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period and does not consider the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options. For the period since inception to date, the Company has not had any dilutive common stock equivalents.

 

During the (previous) quarter ended June 30, 2012, the Company engaged a law firm to assist with a new project for a fee projected to be $50,000. At that time, we recorded a liability for $50,000 and expense. During the quarter ended Sept 30, 2012, we have cancelled this project, and the law firm has agreed to release us from the liability. We have opted to record this expense, and this quarter's reversal of the expense, as an "Other Expense" item on our income statement. Neither our engagement, cancellation, or presentation decision will have any impact on our annual financial statement for 2012.

 

3. Related Party Transactions

 

Sales Lead Contract

 

The Company purchases its qualified client leads from an entity which is owned by a beneficial owner of the majority shareholder, and therefore a related party. Beginning May 1, 2011, the Company and the related party entered into a one-year agreement whereby the Company would receive a monthly minimum of 100 real estate sales leads for a fixed fee of $1,000 per month. All amounts payable per the agreement are unpaid, and separately identified on the face of our financial statements. Either party can terminate the contract by providing a 30 day notice.

 

 

 

11

 
 

 

EZJR, Inc.

Notes to the Consolidated Financial Statements

 

Shareholder Advances


The Company's main source of funding during its development stage has been its shareholders, who were owed $59,202 at September 30, 2012 (and $79,595 at Dec. 31, 2011). Our majority shareholder converted an additional $118,225 of loans into the Company to 1,477,813 shares of common stock at $0.08 per share earlier this year.

 

Contributed Capital

 

A beneficial owner of the Company's majority shareholder contributed cash to the Company totaling $63,100 since our inception on April 12, 2011. All of the cash contributed was during 2011.

 

Purchase of Equipment and Furniture

 

On April 20, 2011, the Company purchased used computer equipment and furniture totaling $2,113 from an entity owned by a beneficial owner of the majority shareholder. This related party amount remains unpaid and is included on the Company's balance sheet as a Related party payable.

 

Company Expenses Paid By Related Party on Behalf of the Company

 

In August 2011, a beneficial owner of the majority shareholder paid $1,682 to real estate agents contracted to performed services for the Company. These funds remain unpaid and are included on the Company's balance sheet as a Related party payable.

 

Software Purchase From Related Party

 

On January 21, 2012, the Company purchased a software platform from two individuals, one of which is a related party of Company. The software will interact with qualified client leads to calculate an actual dollar value for the consumer's credit score, by using a proprietary comprehensive algorithm.

 

The Company issued two notes payable, each in the amount of $25,000, to each of the individuals that owned the software, in satisfaction for the transaction. The notes were without collateral, bore interest at 6% per annum and were due on or before September 30, 2012. On March 21, 2012, the company issued 312,500 shares of its common stock valued at $25,000 to each of the note holders as full satisfaction of the notes payable.

 

12

 

EZJR, Inc.

Notes to the Consolidated Financial Statements

 

4. Note Payable - Related Party

 

Included in our related party liability on our balance sheet is a notes payable to our largest shareholder for $20,000, which we borrowed during August 2012. The note bears interest at prime rate plus 1 percent per annum and matures on August 31, 2013. The Company has pledged 1,000,000 restricted shares as collateral for its timely performance on this note. These shares are not currently issued, but would automatically be issued to the counterparty upon our default, in settlement of our note. However, management does not believe that our default is likely.

 

5. Commitments, Contingencies and Management's Plan

 

Facility Lease

 

In April 2012, the Company entered into a lease for a new office facility. The lease began May 1, 2012 and expires June 30, 2015. The first two months of rent are free, year one calls for monthly base rent of $4,724, year two has monthly base rent of $4,866 and year three has monthly base rent of $5,014. Rent expense is recorded on the straight-line method over the term of the lease. A security deposit of $4,724 was paid upon execution of the lease. Future lease payments related to the Company’s office lease as of September 30, 2012 are as follows:

 

  2012 (remainder of year) $14,172  
  2013 57,536  
  2014 59,277  
  2015 30,084  
  Total $          175,240  

 

Agent Contracts

 

The Company, as broker, has entered into agreements with Georgia licensed real estate agents which provide for the agents to conduct transactions on behalf of the Company in return for a split in the commission of completed real estate transactions. The agent portion of the commission can range from 40% to 90%, depending on the source of the client lead. Per the agreement, real estate agents do not earn their portion of the commission until receipt by the Company. The agents are paid a weekly fee for services, which in certain instances is offset by commissions received.

13

 
 

 

EZJR, Inc.

Notes to the Consolidated Financial Statements

 

Employment Contracts

 

On October 9, 2011, the Company entered into one-year employment agreements with two individuals. One was hired as Chief Compliance Officer (CCO) and the other was with the Company's CEO to continue serving in that role. The CCO's compensation terms have not been finalized and the CEO agreement calls for the officer to receive compensation of $9,600 per month.

 

 

Concentrations

 

Approximately 91% of the Company's referral fee revenue for the nine-month period ended Sept 30, 2012 was generated from two customers. Changes with these two customers could have a material adverse effect on the Company’s business, financial condition, and results of operations. No single customer provided 10% or more of product sales service fees and commission revenue is non-recurring.

 

14

 
 

 

 

EZJR, Inc.

Notes to the Consolidated Financial Statements

 

 

6. Stockholders’ Equity

 

Founders Shares

 

Two individuals founded the Company in April 2011. Initial capitalization of the Company resulted in 292,500 shares of common stock being issued to one individual and 97,500 shares of common stock being issued to the other individual for total consideration of $10.

 

Share Issuances

 

On March 21, 2012, the Company issued a total of 2,122,813 shares, with a fair value of $0.08 per share, of its common stock to satisfy obligations as follows:

 

        Shares      Amount  
Related party shareholder advances 1,477,813   $   118,225  
Note payable    312,500          25,000  
Note payable - related party    312,500          25,000  
Consulting services      20,000            1,600  
Total 2,122,813   $   169,825      

 

There were no issuances of stock during the three months ended September 30, 2012.

 

Proxy Statement

 

In May 2012, the Board of Directors approved a 3 for 1 forward stock split of the Company’s common stock, an increase in the number of authorized common shares from 70 million to 200 million, and to change the Company’s name from EZJR, Inc. to Realty Ramp, Inc. These matters, among others, will require approval of the majority of the Company’s common shareholders. A shareholders’ meeting to approve these changes has not as yet been set.

 

 

 

 

 

 

 

 

15

 
 

 

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

 

Forward-Looking Information

 

This Quarterly Report on Form 10-Q contains forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words "anticipate," "believe," "estimate," "will," "plan," "seeks," "intend," and "expect" and similar expressions identify forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in any forward-looking statements are reasonable, these plans, intentions, or expectations may not be achieved. Our actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied, by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Important factors that could cause actual results to differ materially from our forward-looking statements are set forth in this Quarterly Report on Form 10-Q All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this Quarterly Report on Form 10-Q. Except as required by federal securities laws, we are under no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

 

Critical Accounting Policies

 

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our Annual report on Form 10-K for the fiscal year ended December 31, 2011.

 

Overview of Current Operations

 

EZJR, Inc. (the “Company" or “EZJR”) was organized by the filing of Articles of Incorporation with the Secretary of State of the State of Nevada on August 14, 2006. The acquisition of the Company is considered to be a reverse merger transaction and a re-capitalization of the Company, and therefore all financial statements and other financial information presented is that of the Company.

 

OwnerWiz Realty Inc. (“OWR”) and OW Management, Inc. (“OWM”) are the Company’s wholly owned subsidiaries. OWR was incorporated April 12, 2011. OWR is a real estate company that provides service and products for first time home buyers and clients re-entering the path to home ownership representing buyers, sellers, developers and investors in all facets of real estate brokerage with a focus on serving the growing number of renters in the US. OWM commenced operations in April 2012. It operates several web sites which offer users a variety of services. These services include credit monitoring, credit repair, credit reports, rent to own real estate and real estate finance applications. OWM does not perform these credit related services, but rather refers the customer's information to third party companies.

 

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OWR’s Business

 

OwnerWiz Realty Inc. is a Georgia licensed real estate company that represents both buyers and sellers of homes and OWR earns commission revenues when the sales transactions are complete from the buyer or seller. OWR does not have the capital reserves sufficient to meet its current business obligations and needs to secure additional investment capital from outside sources or in the form of fees generated by assisting, advising and representing clients buying and selling real estate. Clients (buyers and sellers) will be obligated to pay for OWR’s performed services.

 

OWR generates revenues by selling realtor services to prospective homebuyers interested in residential properties. They focus on identifying rental properties that a prospective buyer can rent with an option to purchase the property at a later date. In some instances, these services will be provided by realtors employed or retained by our company. In other instances, OWR will refer these services to outside realtors. OWR will collect a fixed portion of the realtor commissions. In order to promote its realtor services, OWR will provide prospective homebuyers with comprehensive information on residential properties.

 

OWR’s principle business activities include: promoting, marketing, and selling realtor services to prospective homebuyers interested in residential properties.

 

Business Strategy

 

In the real estate industry, where competition for leads is fierce and expensive, OWR plans to attract clients efficiently and effectively. As other brokerage firms adapt to evolving technologies and practices, OWR plans to differentiate itself by developing better ways to attract clients by offering them a variety of properties to rent that the client can purchase a fixed price at a future date. OWR plans to identify these properties through newspaper advertising, established client lists and relying on MLS data. OWR wants to empower its agents with the information and tools needed to satisfy clients, work more effectively and manage costs successfully.

 

OWR is focused on growing its revenues by building its market share in strong and attractive markets. In doing so, OWR needs to specialize in a localized and customized approach that is tailored to meet the dynamics of each market. Management will need to organize its local management responsibilities, thus encouraging greater local independence and efficiency.

 

Because the competitive landscape varies by market, the growth initiatives OWR uses in each market will likely vary as well. Typically, OWR plans to engage additional independent contractor agents, to build its local referral networks, and to incentivize agents by compensating them at greater levels as their productivity increases. OWR also plans to pursue home listings business. The home listings business represents a significant revenue growth opportunity for OWR, and management plans to build a local referral networks, name recognition and reputation for local knowledge and expertise to drive the growth of the home listings business market by market.

 

 

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The management of OWR is focused on staying on top of changes in the way home buyers, home sellers and real estate agents seek to conduct business in the residential real estate industry and on fine-tuning its value proposition accordingly. Management plans to test in select markets alternatives to rebates that are designed to highlight and enhance the professionalism and high quality service of our agents. The continuous evaluation and refinement of OWR’s business model is critical to its culture, to its ability to differentiate its products and services from the competitors.

 

Marketing Strategy

 

OWR plans to maintain a marketing and sales force for its sales projects. Management will determine the appropriate advertising and selling plan for each project. Management wants to develop public awareness through marketing and advertising as well as referrals from customers.

 

OWR plans to utilize a customer relationship management system to track customer profiles, which will helps OWR forecast future customer requirements and general demand for new projects. By tracking customer profiles, management plans to build an internal data base, referred to as “customer relationship management system” which will list available properties for rent and potential clients who might be interested in renting these properties with a view towards future ownership. This will allow real-time information on the status of individual customer transactions as well as available inventory by project, which enables OWR better anticipate the preferences of current and future customers. Management plans to develop customer awareness through advertising. The various advertising media to market OWR’s real estate properties and brand name, include newspapers, magazines, television, radio, e-marketing and outdoor billboards.

 

Real Estate Agents

 

Management believes that consumers want to work with real estate agents that possess strong professional skills, including depth and breadth of knowledge in their local markets. OWR’s real estate agents are required to be licensed REALTORS and typically have extensive market knowledge of the markets they serve and are active members of their local, state and national real estate and MLS associations. As is customary in the real estate brokerage industry, agents earn a portion of the commissions they generate for OWR, which is known as their split. OWR commission splits to its agents typically vary based on eligible production. OWR plans to utilize the service of agents who are independent contractors.

 

 

 

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Government Regulation

 

The real estate industry is highly regulated. A real estate business must comply with the requirements governing the licensing and conduct of real estate brokerage and brokerage-related businesses in the jurisdictions in which they do business. These laws and regulations contain general standards for and prohibitions on the conduct of real estate brokers and sales associates, including those relating to licensing of brokers and sales associates, fiduciary and agency duties, administration of trust funds, collection of commissions, advertising and consumer disclosures. Under most state law, real estate brokers have the duty to supervise and are responsible for the conduct of their brokerage business.

 

The most extensive regulations applicable to OWR’s business are at the state level and are typically overseen by state agencies dedicated to real estate matters. Additionally, the residential real estate industry is also regulated by federal and local authorities.

 

Local regulation

 

Local regulations govern the conduct of the real estate brokerage business. Local regulations generally require additional disclosures by the parties to a real estate transaction or their agents, or the receipt of reports or certifications, often from the local governmental authority, prior to the closing or settlement of a real estate transaction.

 

State regulation

 

Real estate licensing laws vary from state to state, but generally all individuals and entities acting as real estate brokers or salespersons must be licensed in the state in which they conduct business. A person licensed as a broker may either work independently or may work for another broker in the role of an associate broker, conducting business on behalf of the sponsoring broker. A person licensed as a salesperson must be affiliated with a broker in order to engage in licensed real estate brokerage activities. Generally, a corporation engaged in the real estate brokerage business must obtain a corporate real estate broker license (although in some states the licenses are personal to individual brokers). In order to obtain this license, most jurisdictions require that an officer of the corporation be licensed individually as a real estate broker in that jurisdiction. If applicable, this officer-broker is responsible for supervising the licensees and the corporation’s real estate brokerage activities within the state. Real estate licensees, whether they are brokers, salespersons, individuals or entities, must follow the state’s real estate licensing laws and regulations. These laws and regulations generally prescribe minimum duties and obligations of these licensees to their clients and the public, as well as standards for the conduct of business, including contract and disclosure requirements, record keeping requirements, requirements for local offices, trust fund handling, agency representation, advertising regulations and fair housing requirements.

 

 

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Further, OWR may be subject to litigation claims alleging breaches of fiduciary duties by its licensed brokers and violations of unlawful state laws relating to business practices or consumer disclosures. Management cannot predict with certainty the cost of defense or the ultimate outcome of these or other litigation matters filed by or against OWR, including remedies or awards, and adverse results in any such litigation may harm our business and financial condition.

 

Federal regulation

 

In addition to state regulations, several federal laws and regulations govern the real estate brokerage business. The applicable federal regulations include the federal fair housing laws and the Real Estate Settlement Procedures Act (“RESPA”) of 1974, as amended, which is administered and enforced by the Consumer Financial Protection Bureau. RESPA and comparable state statutes, among other things, restrict payments which real estate brokers, agents and other settlement service providers may receive for the referral of business to other settlement service providers in connection with the closing of real estate transactions. Such laws may to some extent restrict preferred vendor arrangements involving our brokerage business. RESPA and similar state laws require timely disclosure of certain relationships or financial interests that a broker has with providers of real estate settlement services.

 

There is a risk that OWR could be adversely affected by current laws, regulations or interpretations or that more restrictive laws, regulations or interpretations will be adopted in the future that could make compliance more difficult or expensive. There is also a risk that a change in current laws could adversely affect OWR’s business.

 

In addition, regulatory authorities have relatively broad discretion to grant, renew and revoke licenses and approvals and to implement regulations. Accordingly, such regulatory authorities could prevent or temporarily suspend OWR from carrying on some or all of our activities or otherwise penalize OWR if our practices were found not to comply with the then current regulatory or licensing requirements or any interpretation of such requirements by the regulatory authority. Our failure to comply with any of these requirements or interpretations could have a material adverse effect on our operations.

OWR is also, to a lesser extent, subject to various other rules and regulations such as:

 

  ·         the Gramm-Leach-Bliley Act which governs the disclosure and safeguarding of consumer financial information;

 

· ·         various state and federal privacy laws;

 

· ·         the USA PATRIOT Act;

 

  ·         restrictions on transactions with persons on the Specially Designated Nationals and Blocked Persons list promulgated by the Office of Foreign Assets Control of the Department of the Treasury;

 

 

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  ·         federal and state “Do Not Call” and “Do Not Fax” laws;
  ·         “controlled business” statutes, which impose limitations on affiliations between providers of title and settlement services, on the one hand, and real estate brokers, mortgage lenders and other real estate providers, on the other hand; and

 

  ·         the Fair Housing Act.

 

OWR is subject to federal and state consumer protection laws including laws protecting the privacy of consumer non-public information and regulations prohibiting unfair and deceptive trade practices. In particular, under federal and state financial privacy laws and regulations, OWR must provide notice to consumers of its policies on sharing non-public information with third parties, must provide advance notice of any changes to our policies and, with limited exceptions, must give consumers the right to prevent sharing of their non-public personal information with unaffiliated third parties. These consumer protection laws could result in substantial compliance costs and could interfere with the conduct of OWR’s business.

OWR’s failure to comply with any of the foregoing laws and regulations may subject OWR to fines, penalties, injunctions and/or potential criminal violations. Any changes to these laws or regulations or any new laws or regulations may make it more difficult for OWR to operate its business and may have a material adverse effect on OWR’s operations.

 

Federal and state labor regulation.

 

In addition to the real estate regulations discussed above, OWR is subject to federal and state regulations relating to employment and compensation practices. OWR is subject to Internal Revenue Service, Fair Labor Standards Act and state law guidelines as they apply to real estate agents, who are classified as independent contractors.

 

Third-party rules

 

In addition to governmental regulations, OWR is subject to rules established by private real estate trade organizations, including, among others, local MLSs, NAR, state Associations of REALTORS, and local Associations of REALTORS. The rules of the various MLSs to which OWR belong vary, and specify, among other things, how OWR as a broker member can use MLS listing data.

 

 

 

 

 

 

 

 

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OWM’s Business

 

OW Marketing, Inc., operates several websites which offer users several services. These services include credit monitoring, credit repair, credit reports, rent to own real estate and real estate finance applications. The Company receives fees from its users for its credit related products and records those fees as revenue as they are received. The Company does not perform these credit related services, but rather refers the customer's information to third party companies. The Company receives referral fees from these third party credit service providers.

 

OWM entered into a marketing agreement with SCS Private Funding (“SCS”). This agreement provided for OWM to generate loan applications for loans to be funded by SCS. The loan applications generated by OWM are generally from consumers that have had challenges with their credit and mortgage history. OWM generally receives a loan application fee of $5,000 from the prospective borrower on each transaction. After review of each application, OWM sends the application along with $3,500 to SCS. None of the loans have been funded as of November 20, 2012.

 

In July 2012, OWM became aware that SCS had been operating in violation of a final Cease and Desist order issued by the State of Georgia. OWM has ceased sending loan applications to SCS and is seeking other financing sources for the loan applications it has received and those that it expects to receive in the future.

 

The Company has recorded the total loan application fees received as a loan application fee liability until such time as a refund is made to the prospective borrower or the loan closes.

 

As of September 30, 2012, the Company had received 42 loan applications totaling $207,105 in loan application fees. Of these applications, five have been issued refunds subsequent to September 30, 2012. Through September 30, 2012 the Company had remitted $49,000 to SCS. During the period from July 1, 2012 through August 15, 2012, the Company received 14 loan applications with deposits totaling $62,605. Of these, two have been issued refunds and the remaining applicants were notified that the Company could not process their applications and that the borrowers could request a refund. Loan application fee costs of $58,905 for the three and six month periods ended September 30, 2012 relate to payments made to SCS Private Funding and other costs related to those applications.

 

Competition

 

The market for residential real estate brokerage services is very competitive. Realtors compete for business primarily on the basis of services offered, reputation, personal contacts, and realtor commission. At the national level, no individual real estate brokerage firm holds more than a 3% share of the national market, and the ten largest real estate brokerage firms hold less than 6% collectively of the national market, in 2009, according to REAL Trends. However, the ten

 

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largest national brands that franchise individual brokerages accounted for a significant percentage of total brokered transaction volume, providing the potential for significant national and local influence. OWR competes with these brokerages at the local level to represent home buyers and sellers.

 

OWR’s larger competitors include Prudential Financial, Inc., RE/MAX International Inc. and Realogy Corporation, which owns the Century 21, Coldwell Banker, Better Homes and Gardens and ERA franchise brands, a large corporate relocation business and NRT Incorporated, the largest brokerage in the United States. NRT Incorporated owns and operates brokerages that are typically affiliated with one of the franchise brands owned by Realogy. OWR is also subject to competition from local or regional firms, as well as individual real estate agents. The smaller competing real estate brokerages include Palmer House Properties, Crown Realty and Management, Manning Properties based in Atlanta. All of these companies may have greater financial resources than OWR does, including greater marketing and technology budgets.

 

If competition results in lower average realtor commission rates or lower sales volume by OWR’s realtors, OWR’s revenues will be affected adversely. There is no assurance that OWR will be able to compete successfully against present or future competitors or that competitive pressures faced by OWR will not have a material adverse effect on OWR.

 

The management of OWR believes that the key competitive factors in the residential real estate segment include the following:

 

    level of responsiveness to clients;

 

    local knowledge;

 

    overall quality client service;
       
    client’s ability to control the home rental/purchase and home sale process;

 

    level of commissions charged to sellers or incentives provided to buyers

 

Management believes that its focus on the rental market will differentiate itself from firms that are limited to traditional approaches to generating customers.

 

Intellectual Property

 

The Company plans to rely on a combination of trademark, copyright, trade secret and patent laws in the United States as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. EZJR plans also to rely on copyright laws to protect our future computer programs and our proprietary databases.

 

 

 

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From time to time, the Company may encounter disputes over rights and obligations concerning intellectual property. Also, the efforts management has taken to protect its proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm the business, the brand and reputation, and the ability to compete. Also, protecting the Company’s intellectual property rights could be costly and time consuming.

 

Employees

 

The Company currently has approximately twenty-two employees. From time to time the Company may utilize the services of independent contractors on a part-time as needed basis.

The Company’s sole officer performs most all of the key job functions for the Company.

 

Properties

 

The Company's corporate headquarters are located at: 3055 Breckenridge Blvd., Suite 310, Duluth, GA 30096. The Company does not own any real property.

 

RESULTS OF OPERATIONS

 

The Company commenced operations April 12, 2011, so comparative results from 2011 are not applicable this quarter. Prior year results are presented for the period from inception (April 12, 2011) to September 30, 2011. Total unaudited revenue realized for the three and nine month periods ended September 30, 2012 was $472,992 and $1,039,204, respectively. Over 67% of the total revenues came from referral fees during the nine month period. The referral fees accounted for $312,192 for the three months ending September 30, 2012; and, $705,789 for the nine months ending September 30, 2012.

 

Approximately 91% of the Company's referral fee revenue for the nine-month period ended Sept 30, 2012 was generated from two customers. Changes with these two customers could have a material adverse effect on the Company’s business, financial condition, and results of operations. No single customer provided 10% or more of product sales service fees and commission revenue is non-recurring.

 

Total operating expenses were $566,369 and $1,342,857 during the three and nine month periods ending September 30, 2012, respectively. Operating expenses for the three months period ending September 30, 2012 consisted of $462,261 in selling costs and $104,108 in general and administrative costs. Operating expenses for the nine months period ending September 30, 2012 consisted of $214,878 in commission expenses, $58,905 in loan application fee costs, $746,650 in selling costs, $9,000 in selling costs – related party and $313,424 in general and administrative costs.

 

 

 

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Selling costs consist principally of payments for hosting of our websites, including labor and advertising costs during the three and nine month periods ending September 30, 2012. Related party selling costs consist of a $1,000 per month lead generation agreement with an entity that is a related party and were $9,000 during the nine month period ending September 30, 2012. Referral fees are amounts paid to outside contractors for leads sent to us which result in service fee revenue. General and administrative expenses were $104,108 and $313,424 during the three and nine month periods ending September 30, 2012, respectively. The increase in all of our operating expenses resulted from increasing operations.

 

Net loss was $(93,495) or $(0.01) per share and $(303,771) or $(0.03) per share during the three and nine month periods ending September 30, 2012, respectively.

 

Loan application fees incurred during the three month period ended September 30, 2012 were the result of a marketing agreement entered into by the Company’s OWM subsidiary with SCS Private Funding (“SCS”). This agreement provides for OWM to generate loan applications for loans to be funded by SCS. The loan applications generated by OWM are generally from consumers that have had challenges with their credit and mortgage history. OWM generally receives a loan application fee of up to $5,000 from the prospective borrower on each transaction. After review of each application, OWM sends the application along with $3,500 to SCS. None of the loans have been funded as of November 20, 2012. OWM received the following number of loan applications by state, and their status, as of November 20, 2012.

 

State Number of Loans Loan Status Open Refunded Place in Contract
Alabama 1 - 1 1
Arizona 2 2 - -
California - - - -
District of Columbia 1 - 1 -
Delaware 1 - 1 -
Florida 11 11 - -
Georgia 4 3 1 -
Illinois 4 3 1 -
Indiana 2 2 - -
Kentucky 1 - 1 -
Maine 2 2 - -
Maryland 2 2 - -
Michigan 3 2 1 1
North Carolina 1 1 1 -
New Jersey 1 1 - -
New York 2 2 - -
Ohio 2 2 - -
Pennsylvania 2 2 - -
South Carolina 1 1 - -
Texas 3 2 1 -
Virginia 1 1 - -
Washington 2 2 - -
Total 49 41 9 2

 

 

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In July 2012, OWM became aware that SCS had been operating in violation of a final Order to Cease and Desist dated May 29, 2012, issued by the State of Georgia Department of Banking and Finance. As a result, OWM has ceased sending loan applications to SCS and is seeking to establish relationships with other sources in connection with loan applications it has received and anticipates receiving.

 

OWM has recorded the total loan application fees received from each prospective borrower as a loan application fee liability until such time as (i) a refund is made to that prospective borrower or (ii) the loan regarding that borrower is funded.

 

Going Concern

 

Our ability to continue as a going concern is contingent upon the successful completion of current and additional financing arrangements and our ability to achieve and maintain profitable operations.

 

Therefore, management plans to raise equity capital to finance the operating and capital requirements of the Company. While the Company is devoting its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

Summary of product research and development that we will perform for the term of our plan of operation.

 

Not applicable.

 

Expected purchase or sale of plant and significant equipment

 

We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time.

 

 

 

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Significant changes in the number of employees

 

We are dependent upon our officer/director for our future business development. As our operations expand, we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2012, the Company had $67,726 of cash, current assets of $67,726, total assets of $146,087 and $362,509 in current liabilities, including $79,202 due to related parties.

 

The Company's main source of funding during its development stage has been its shareholders, who were owed $79,202 at September 30, 2012 (and $79,595 at December 31, 2011). Our majority shareholder converted an additional $118,225 of loans to the Company to 1,477,813 shares of common stock at $0.08 per share earlier this year.

 

EZJR anticipates generating losses and therefore may be unable to continue operations in the future. EZJR anticipates it will require additional capital in order to grow its real estate transaction business by increasing headcount and its budget for 2012. EZJR may use a combination of equity and/or debt instruments to fund its growth strategy or enter into a strategic arrangement with a third party.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Critical Accounting Policies and Estimates

 

Revenue Recognition: The Company is a licensed corporate real estate broker in the state of Georgia and contracts with real estate agents to provide customer leads and broker services in return for a participatory share of commissions earned on completed real estate sales and rental transactions. The Company reports the entire commission earned from a sales or rental transaction as revenue on a gross basis. Commission Expenses as presented in the statement of operations represent the variable portion of the gross commission earned that is paid to the Company’s in-State sub-contracted agents who conduct the transactions. The Company recognizes revenue only when the real estate transaction has closed and all of the following criteria have been met: i) persuasive evidence of an arrangement exists; ii) delivery has occurred or services have been rendered; iii) the fee for the arrangement is fixed or determinable; and iv) collectibility is reasonably assured.

 

 

 

 

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Critical Accounting Policies and Estimates

 

Revenue Recognition:

 

Service and Referral Fees

 

The Company, through its wholly owned subsidiary, OWM, operates several websites which offer users several services. These services include credit monitoring, credit repair, credit reports, rent to own real estate and real estate finance applications. The Company receives fees from its users for its credit related products and records those fees as revenue as they are received. The Company does not perform these credit related services, but rather refers the customer's information to third party companies. The Company receives referral fees from these third party credit service providers. Both of these fees are recorded as revenue when received.

 

Loan Application Fees

 

OWM has entered into a marketing agreement with SCS Private Funding (“SCS”). This agreement provides for OWM to generate loan applications for loans to be funded by SCS. The loan applications generated by OWM are generally from consumers that have had challenges with their credit and mortgage history. OWM receives a loan application fee of up to $5,000 from the prospective borrower on each transaction. After review of each application to see that minimum requirements are met, OWM sends the application along with $3,500 to SCS. None of the loans have been funded by SCS as of November 20, 2012.

 

Commission Revenue

 

The Company's wholly-owned subsidiary, OWR, is a licensed corporate real estate broker in the state of Georgia and contracts with real estate agents to provide customer leads and broker services in return for a participatory share of commissions earned on completed real estate sales and rental transactions. The Company reports the entire commission earned from a sales or rental transaction as revenue on a gross basis. Commission Expenses as presented in the statement of operations represent the variable portion of the gross commission earned that is paid to the Company’s in-State sub-contracted agents who conduct the transactions. The Company recognizes revenue only when the real estate transaction has closed and all of the following criteria have been met: i) persuasive evidence of an arrangement exists; ii) delivery has occurred or services have been rendered; iii) the fee for the arrangement is fixed or determinable; and iv) collectibility is reasonably assured.

 

Recent Pronouncements

 

The Company's management has evaluated all recently issued accounting pronouncements through the filing date of these financial statements and does not believe that any of these pronouncements will have a material impact on the Company's financial position and results of operations.

 

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

Item 4T. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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 rules and forms adopted by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, who is also the sole member of our Board of Directors, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, our disclosure controls and procedures were not effective. Our disclosure controls and procedures were not effective because of the "material weaknesses" described below under "Management's report on internal control over financial reporting," which are in the process of being remediated as described below under "Management Plan to Remediate Material Weaknesses."

 

Management's Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:

 

  • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
  • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and
  • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements

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Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Further, over time control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.

 

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2012. In making its assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its assessment, management has concluded that we had certain control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As a result, our internal control over financial reporting was not effective as of September 30, 2012.

 

A "material weakness" is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. As a result of management's review of the investigation issues and results, and other internal reviews and evaluations that were completed after the end of quarter related to the preparation of management's report on internal controls over financial reporting required for this quarterly report on Form 10-Q, management concluded that we had material weaknesses in our control environment and financial reporting process consisting of the following:

 

1)   lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;

 

2)          insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;

 

We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition and results of operations for the quarter ended September 30, 2012. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

 

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Management Plan to Remediate Material Weaknesses

 

Management believes that the material weaknesses set forth in item (2) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods. In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

 

We plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.

 

We believe the remediation measures described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

This quarterly report does not include an attestation report of the Corporation's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Corporation's registered public accounting firm pursuant to temporary rules of the SEC that permit the Corporation to provide only the management's report in this quarterly report.

 

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PART II. OTHER INFORMATION

 

Item 1 - Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.

 

Item 1A - Risk Factors

 

See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and the discussion in Item 1, above, under "Liquidity and Capital Resources."

 

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

 

No shares were issued during the Quarter ending September 30, 2012.

 

Item 3 - Defaults Upon Senior Securities

 

None.

 

Item 4 - Submission of Matters to a Vote of Security Holders

 

None.

 

Item 5 - Other Information

 

None

 

 

 

 

 

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Item 6 - Exhibits

 

 

Exhibit Number   Ref   Description of Document
         
         
31.1       Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         
32.1       Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
         
101   *   The following materials from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language).:
         
        (1) Consolidated Balance Sheets at September 30, 2012 (unaudited), and December 31, 2012 (audited).
         
        (2) Consolidated Unaudited Statements of Operations for the three-month period ending September 30, 2012, September 30, 2011, the nine-month period ended September 30, 2012, and the period from inception to September 30, 2012.
         
        (3) Consolidated Unaudited Statements of Cash Flows for the nine-month period ended September 30, 2012 and September 30, 2011.
         
        (4)    Notes to the financial statements.
         

 

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

 

 

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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.

Date: December 14, 2012

  EZJR, Inc.
  Registrant
  By: /s/ Adam Alred
  Adam Alred
Director and CEO (principal executive, financial and accounting officer)

 

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