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EX-31.1 - CERTIFICATION - OLB GROUP, INC.f10q0315ex31i_theolbgroup.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended MARCH 31, 2015

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from _______to _______

 

Commission File Number: 000-52994

 

THE OLB GROUP, INC.

(Exact name of small business issuer as specified in its charter)

 

DELAWARE   13-4188568

(State or other jurisdiction of incorporation or

organization)

 

(IRS Employer

Identification No.)

 

200 Park Avenue, Suite 1700, New York, NY 10166

(Address of principal executive offices)

 

(212) 278-0900

(Registrant's telephone number)

(Former name, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

  

Indicate by check mark whether the registrant 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 ¨ 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

 

As of May 5, 2015 the Company had outstanding 11,300,434 shares of its common stock, par value $0.0001.

 

 

 

 
 

 

THE OLB GROUP, INC.

 

FORM 10-Q

 

For the Quarterly Period Ended March 31, 2015

 

INDEX

 

PART I Financial Information 3
Item 1. Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 15
Item 4. Controls and Procedures 15
     
PART II Other Information 16
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Mine Safety Disclosures 16
Item 5. Other Information 16
Item 6. Exhibits 16
Signatures 17

 

2
 

 

PART I - FINANCIAL INFORMATION

  

Item 1.     Financial Statements

 

The OLB Group, Inc.

 

FINANCIAL STATEMENTS

 

March 31, 2015 and December 31, 2014

 

3
 

 

TABLE OF CONTENTS

 

Condensed Balance Sheets as of March 31, 2015 (unaudited) and December 31, 2014 5
   
Condensed Statements of Operations for the Three Months Ended March 31, 2015 and 2014 (unaudited) 6
   
Condensed Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014 (unaudited) 7
   
Notes to the Condensed Financial Statements (unaudited) 8

 

4
 

 

The OLB Group, Inc.
Condensed Balance Sheets
   March 31,
2015
   December 31,
2014
 
   (unaudited)     
ASSETS          
CURRENT ASSETS          
Cash  $154   $- 
           
Total Current Assets   154    - 
           
OTHER ASSETS          
           
Internet domain   4,965    4,965 
           
TOTAL ASSETS  $5,119   $4,965 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
CURRENT LIABILITIES          
Cash overdraft  $-   $313 
Accounts payable   17,670    21,415 
Accrued interest   836    - 
Notes payable - related party   50,000    - 
Accrued officer compensation   47,573    - 
           
Total Current Liabilities   116,079    21,728 
           
TOTAL LIABILITIES   116,079    21, 728 
           
STOCKHOLDERS’ DEFICIT          
Preferred stock, $0.01 par value, 50,000,000 shares authorized,          
no shares outstanding   -    - 
Common stock, $0.0001 par value; 200,000,000 shares authorized,          
11,300,434 and 11,300,434 shares issued and outstanding, respectively   1,130    1,130 
Additional paid-in capital   14,608,450    14,608,450 
Accumulated deficit   (14,720,540)   (14,626,343)
           
Total Stockholders’ Deficit   (110,960)   (16,763)
           
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT  $5,119   $4,965 

 

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

 

5
 

 

The OLB Group, Inc.
Condensed Statements of Operations
(Unaudited)
   For the Three Months Ended 
   March 31, 
   2015   2014 
Revenue        
Insurance program  $15,742   $25,596 
Licensing   -    50,000 
Other   2,500    - 
Net revenue   18,242    75,596 
           
Cost of revenue   7,108    8,598 
           
Gross margin   11,134    66,998 
           
OPERATING EXPENSES:          
    Officers salary   68,750    68,750 
    General and administrative   35,745    41,005 
Total operating expenses   104,495    109,755 
Loss from operations   (93,361)   (42,757)
           
OTHER INCOME:          
    Interest expense   (836)   (2,963)
Total Other Expense   (836)   (2,963)
           

NET LOSS BEFORE INCOME TAXES

  $(94,197)  $(45,720)
Income taxes    -    - 
NET LOSS  $

(94,197

)  $

(45,720

)
           

BASIC AND DILUTED LOSS PER SHARE

  $(0.01)  $(0.01)
           

BASIC AND DILUTED WEIGHTED AVERAGE SHARES

   11,300,434    11,300,434 

 

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

 

6
 

 

The OLB Group, Inc.
Condensed Statements of Cash Flows
(Unaudited)
  

For the Three Months Ended

March 31,

 
   2015   2014 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net loss  $(94,197)  $(45,720)
Adjustments to Reconcile Net Loss to Net Cash Used by Operations:          
           
Changes in assets and liabilities:          
Increase in accounts receivable   -    (25,000)
Increase in accounts payable and accrued expenses   (2,909)   52,155 
Increase in accrued salary   47,573    - 
           
Net Cash Used by Operating Activities   (49,533)   (18,565)
           
CASH FLOWS FROM INVESTING ACTIVITIES   -    - 
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Decrease in cash over draft   (313)   - 
Proceeds from related party notes payable   50,000    25,000 
           
Net Cash Provided by Financing Activities   49,687    25,000 
           
NET CHANGE IN CASH   154    6,435 
           
CASH – BEGINNING OF PERIOD   -    2,819 
           
CASH – END OF PERIOD  $154   $9,254 
           
CASH PAID FOR          
           
Interest  $-   $- 
Income taxes  $-   $- 

 

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

 

7
 

 

The OLB Group, Inc.

Notes to the Condensed Financial Statements

March 31, 2015

(Unaudited)

 

NOTE 1 - BACKGROUND

 

The Company incorporated in the State of Delaware on November 18, 2004 for the purpose of merging with OLB.com (On-line Business), Inc., a New York corporation incorporated in 1993 (“OLB.com”). The merger was done for the purpose of changing our state of incorporation from New York to Delaware.

 

As result of the merger, the Company acquired all of the assets of OLB.com, including its intellectual property assets. In connection with the merger, each of the former common and preferred stockholders of OLB.com received five shares of our common stock in exchange for each outstanding share of OLB.com

 

We currently offer monthly subscription packages which includes a health benefits package. These arrangements are generally renewable monthly and revenue is recognized over the renewal period.  

 

We also provide ecommerce development and consulting services on a project by project basis.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These financial statements should be read in conjunction with the audited financial statements and footnotes for the year ended December 31, 2014 included on the Company’s Form 10-K. The results of the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for the full year ending December 31, 2015.

 

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control, and preventing and detecting fraud. Our system of internal accounting control is designed to assure, among other items, that: (1) recorded transactions are valid; (2) valid transactions are recorded; and (3) transactions are recorded in the proper period in a timely manner to produce financial statements that present fairly our financial condition, results of operations, and cash flows for the respective periods being presented.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

Concentration of credit risk

 

Financial instruments which potentially subject the Company to concentration of credit risk consist of cash deposits.  The Company maintains cash with various major financial institutions.  The Company performs periodic evaluations of the relative credit standing of these institutions.  To reduce risk, the Company performs credit evaluations of its customers and maintains reserves for potential credit losses.

 

8
 

 

Cash and Cash Equivalents

 

We consider all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. There were no cash equivalents as of March 31, 2015 and December 31, 2014.

 

Revenue and cost recognition

 

The Company recognizes revenue on its Omni Commerce Solution licensing when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collection is reasonably assured.

 

Costs are recorded at the time the related revenue is recorded. Payment processing costs are recorded in the period the costs are incurred and customer acquisition costs are comprised primarily of telemarketing costs and service costs and other additional benefit services.

 

Membership Fees

 

The Company recognizes revenues from membership fees for the sales of health-related discount benefit plans as earned as part of the ShopFast program. These arrangements are generally renewable monthly and revenue is recognized over the renewal period.  As these products often include elements sold through contracts with third-party providers, the Company considers each contractual arrangement in accordance with the Revenue Recognition topic of the FASB ASC 605. The Company’s current contracts meet these requirements for reporting revenue on a gross basis. The Company records a reduction in revenue for refunds, chargeback’s from credit card companies, and allowances based upon actual history and management’s evaluation of current facts and circumstances.

 

Accounts Receivable

 

Revenues that have been recognized but not yet received are recorded as accounts receivable. Losses on receivables will be recognized when it is more likely than not that a receivable will not be collected. An allowance for estimated uncollectible amounts will be recognized to reduce the amount of receivables to its net realizable value. The allowance for uncollectible amounts is evaluated quarterly.

 

Stock-based Compensation

 

We account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to nonemployees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.

 

We account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation—Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.  The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.

 

Net Loss per Share

 

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period.  The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented.

 

The Company’s diluted loss per share is the same as the basic loss per share for the three months ended March 31, 2015 and 2014, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded 75,000 warrants for the three months ended March 31, 2015 and 2014.

 

9
 

 

Fair value of financial instruments

 

For certain of the Company’s non-derivative financial instruments, including cash and cash equivalents, receivables, accounts payable, and other accrued liabilities, the carrying amount approximates fair value due to the short-term maturities of these instruments. The estimated fair value of long-term debt is based primarily on borrowing rates currently available to the Company for similar debt issues. The fair value approximates the carrying value of long-term debt.

 

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures.  The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

  Level 1. Observable inputs such as quoted prices in active markets;
  Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;
  Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The following presents the gross value of assets and liabilities that were measured and recognized at fair value, as of March 31, 2014 and December 31, 2014.

 

  Level 1: None
  Level 2: None
  Level 3: None

 

Income Taxes

 

We follow ASC 740-10-30, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income and Comprehensive Income in the period that includes the enactment date.

 

We adopted ASC 740-10-25 (“ASC 740-10-25”) with regard to uncertainty income taxes.  ASC 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under ASC 740-10-25, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740-10-25 also provides guidance on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods and requires increased disclosures.  We had no material adjustments to our liabilities for unrecognized income tax benefits according to the provisions of ASC 740-10-25.

 

10
 

 

Recent Accounting Pronouncements

 

In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted.

 

In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers”. The update gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide goods or services, would supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included in Subtopic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts. The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition. 

 

The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position. 

 

NOTE 3 - RELATED PARTY TRANSACTIONS

 

On December 23, 2014, the Board of Directors of The OLB Group, Inc., approved the exchange of certain non-revenue generating assets in satisfaction of certain outstanding liabilities of the company to and loans from Mr. Yakov and other debt holders in satisfaction of debts.  These assets consist of domain names and software code, all of which have been fully amortized.  The transfer of these assets did not have any impact on the company’s current and future revenues. It would require additional capital investment in these assets to be able to generate revenues, of which there is no assurance.  The Company’s current lack of trading volume and low stock price does not allow the company to raise the necessary capital. The company believes that the relief from the debt is of greater benefit to the company and the stockholders than maintaining ownership of non-productive assets that are not generating revenue but may create expense.

 

According to the above exchange, the following outstanding debt and accrued compensation was extinguished:

 

a.On December 30, 2014, Herzog & Co. agreed to extinguish the total principal outstanding of $183,000 and $12,183 of accrued interest. The total amount of $195,183 was credited to additional paid in capital.
   
b.On December 30, 2014, the CEO, Ronny Yakov agreed to extinguish accrued compensation of $213,495. In addition, Mr. Yakov agreed to assume liabilities totaling $55,336. The total amount of $268,831 was credited to additional paid in capital.

 

During the three months ended March 31, 2015, the Company borrowed $50,000 from Herzog & Co. The notes accrue interest at 10% and are due within one year. As of March 31, 2015, the Company owed Herzog & Co $50,000 in principal and $836 of accrued interest.

 

11
 

 

NOTE 4 – STOCK WARRANTS

 

On July 10, 2013, the Company issued 75,000 warrants. The warrants have a 2 year term and exercise price of $1.00. A summary of the status of the Company’s outstanding stock warrants as of March 31, 2015 and December 31, 2014 and changes during the periods is presented below:

 

   Warrant   Weighted
Average
Price
 
Outstanding, December 31, 2014   75,000   $1.00 
           
Issued   -    - 
Exercised   -    - 
Forfeited   -    - 
Expired   -    - 
           
Outstanding, March 31, 2015   75,000   $1.00 
           
Exercisable, March 31, 2015   75,000   $1.00 

 

    Outstanding   Exercisable 
Range of
Exercise
Prices
   Number
Outstanding
at
3/31/2015
   Weighted
Average
Remaining
Contractual
Life
   Weighted
Average
Exercise
Price
   Number
Exercisable
at
3/31/2015
   Weighted
Average
Exercise
Price
 
                            
$1.00    75,000    .28   $1.00    75,000   $1.00 

 

NOTE 5 – GOING CONCERN

 

The financial statements are presented on the basis that the Company is a going concern.  A going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time.  The Company has incurred significant losses from operations, has an accumulated deficit of $14,720,540 and a working capital deficit of $115,925, which together raises substantial doubt about its ability to continue as a going concern.  Management is presently pursuing equity financing and investment opportunities with investment bankers and private investors. The ability of the Company to achieve its operating goals and to obtain such additional finances, however, is uncertain.  The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

 

The Company anticipates that it will continue to incur losses for some time. The Company’s continued existence is dependent on its ability to generate additional revenues and on obtaining additional financing from its stockholders and external sources.  Accordingly, there can be no assurance that the Company will succeed in executing its plans and have all the financing necessary for its operations.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

   

NOTE 6 – SUBSEQUENT EVENTS

  

The Company has evaluated subsequent events in accordance with the provisions of ASC 855 noting no reportable subsequent events.

 

 

12
 

 

 

Forward-Looking Statements

 

The information in this report contains forward-looking statements. All statements other than statements of historical fact made in report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

 

The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

 

Item 2:  Management’s Discussion and Analysis or Plan of Operation

 

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this filing as well as with Management’s Discussion and Analysis or Plan of Operations contained in the Company’s Report on Form 10-K, for the year ended December 31, 2014, filed with the Securities and Exchange Commission.  

 

Company Overview and Description of Business

 

We were incorporated in the State of Delaware on November 18, 2004 for the purpose of merging with OLB.com (On-line Business), Inc., a New York corporation incorporated in 1993 (“OLB.com”). The merger was done for the purpose of changing our state of incorporation from New York to Delaware.

 

As a result of the merger, we acquired all of the assets of OLB.com, including its intellectual property. In connection with the merger, each of the former common and preferred stockholders of OLB.com received five shares of our common stock in exchange for each outstanding share of OLB.com common and preferred stock and, in addition, the former holders of the Series A stock of OLB.com received one warrant for each such preferred share and the former holders of the Series B Preferred Stock of OLB.com received two warrants for each such preferred share, to purchase shares of our common stock. An aggregate of 1,345,098 shares of common stock were issued in connection with the merger.

 

We are authorized to issue 200,000,000 shares of common stock, par value $0.0001 per share, and 50,000,000 shares of preferred stock, par value $0.01 per share. We currently have 11,300,434 shares of common stock issued and outstanding. No shares of preferred stock are currently outstanding.

 

Our Business

 

We currently offer monthly subscription packages which includes a health benefits package. These arrangements are generally renewable monthly and revenue is recognized over the renewal period.  

 

We also provide ecommerce development and consulting services on a project by project basis.

 

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2015 AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2014

 

REVENUE

 

Revenue from our insurance program for the three months ended March 31, 2015 decreased $9,854 to $15,742 from $25,596 for the three months ended March 31, 2014. The decrease can be attributed to a decrease in the number of subscribers to our insurance program and lower premiums for some.

 

During the three months ended March 31, 2014, we signed our first White Label Software licensing agreement. Per the terms of that agreement the Company recognized $50,000 for set up and implementation fees.

 

During the three months ended March 31, 2015 we recognized $2,500 from software development services that were provided.

 

13
 

 

GROSS MARGIN

 

Gross margin from operations for the three months ended March 31, 2015 decreased $55,864, or 83.4% to $11,134 from $66,998 for the three months ended March 31, 2014. The decrease in gross margin is a direct result of the licensing agreement revenue recognized in 2014 and not in 2015.

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

General and administrative expenses decreased $5,260, to $35,745 for the three months ended March 31, 2015 from $41,005 for the three months ended March 31, 2014. A majority of G&A expense consists of professional fees and travel expense.

 

OTHER INCOME AND EXPENSE

 

Interest expense decreased from $2,963 for the three months ended March 31, 2014 to $836 for the three months ended March 31, 2015. The decrease can be attributed to the elimination of the interest expense from credit card debt.

 

NET LOSS

 

The net loss increased by $48,477 from a loss of $45,720 for the three months ended March 31, 2014, to a loss of $94,197 for the three months ended March 31, 2015. This increase in net loss can be attributed to the lack of licensing revenue in the current year.

 

LIQUIDITY AND CAPITAL RESOURCES

 

During the three months ended March 31, 2015, the Company borrowed $50,000 from Herzog & Co. The notes accrue interest at 10% and are due within one year. As of March 31, 2015, the Company owed Herzog & Co $50,000 in principal and $836 of accrued interest.

 

The financial statements as of March 31, 2015 have been prepared under the assumption that we will continue as a going concern through December 31, 2015. Our independent registered public accounting firm has issued their report on the December 31, 2014 financial statements that included an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern ultimately is dependent on our ability to generate a profit which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of financial statements requires management to make estimates and disclosures on the date of the financial statements. On an on-going basis, we evaluate our estimates including, but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. We believe that the following critical accounting policies affect our more significant judgments and estimates in the preparation of our financial statements.

 

Revenue

 

The Company recognizes revenue on its Omni Commerce Solution licensing when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collection is reasonably assured.

 

Costs are recorded at the time the related revenue is recorded. Payment processing costs are recorded in the period the costs are incurred and customer acquisition costs are comprised primarily of telemarketing costs and service costs and other additional benefit services.

 

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Membership Fees

 

The Company recognizes revenues from membership fees for the sales of health-related discount benefit plans as earned as part of the ShopFast program. These arrangements are generally renewable monthly and revenue is recognized over the renewal period. As these products often include elements sold through contracts with third-party providers, the Company considers each contractual arrangement in accordance with the Revenue Recognition topic of the FASB ASC 605. The Company’s current contracts meet these requirements for reporting revenue on a gross basis. The Company records a reduction in revenue for refunds, chargeback’s from credit card companies, and allowances based upon actual history and management’s evaluation of current facts and circumstances.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Control and Procedures

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Interim Chief Financial Officer.

 

Based upon that evaluation, the Chief Executive Officer and the Interim Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at March 31, 2015 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. The Company’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Interim Financial officer as appropriate to allow timely decisions regarding required disclosure.

 

Internal Control over Financial Reporting

 

Management’s Report on Internal Control over Financial Reporting

 

Internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) is a process designed by, or under the supervision of, our principal executive and principal financial officers, and effected 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 generally accepted accounting principles. The management is responsible for establishing and maintaining adequate internal control over our financial reporting. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the Internal Control – Integrated Framework developed by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our Chief Executive Officer and Interim Financial Officer have concluded that our internal control over financial reporting were not effective as of March 31, 2015.

 

We are aware of the following material weaknesses in internal control that could adversely affect the Company’s ability to record, process, summarize and report financial data:

 

Due to the size of the Company we lack the personnel to maintain an adequate level of separation of duties.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to material affect, our internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

  

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

Exhibit Number   Exhibit Description
     
31.1   Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
31.2   Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
32   Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
101   Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 formatted in Extensible Business Reporting Language (XBRL).

 

 

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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: May 14, 2015 By: /s/ Ronny Yakov
  Name: Ronny Yakov
  Title:

President and Interim Chief Financial Officer

(Principal Executive Officer, Principal Financial and Accounting Officer)

 

 

 

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