UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended SEPTEMBER 30, 2014

 

☐ 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 ☒     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 ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐      No ☒

 

As of November 3, 2014 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 September 30, 2014

 

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			12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk			15
Item 4.	Controls and Procedures			15
PART II	Other Information			15
Item 1.	Legal Proceedings			15
Item 1A.	Risk Factors			15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			15
Item 3.	Defaults Upon Senior Securities			16
Item 4.	Mine Safety Disclosures			16
Item 5.	Other Information			16
Item 6.	Exhibits			16
Signatures				17

  

  

PART I - FINANCIAL INFORMATION

  

Item 1.     Financial Statements

 

The OLB Group, Inc.

 

FINANCIAL STATEMENTS

 

September 30, 2014 and December 31, 2013

  

  

TABLE OF CONTENTS

 

Balance Sheets as of September 30, 2014 (unaudited) and December 31, 2013	5
Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2013 (unaudited)	6
Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013 (unaudited)	7
Notes to the Financial Statements (unaudited)	8

  

  

The OLB Group, Inc.  Balance Sheets

 

		September 30, 2014				December 31, 2013
		(unaudited)
ASSETS
CURRENT ASSETS
Cash		$	1,575			$	2,819
Total Current Assets			1,575				2,819
OTHER ASSETS
Intangible assets, net			-				-
Internet domain			4,965				4,965
TOTAL ASSETS		$	6,540			$	7,784
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	78,806			$	78,260
Notes payable - related party			130,000				50,000
Accrued officer compensation			160,169				-
Total Current Liabilities			368,975				128,260
TOTAL LIABILITIES			368,975				128,260
STOCKHOLDERS’ EQUITY (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			14,144,436				14,144,436
Accumulated deficit			(14,508,001	)			(14,266,042	)
Total Stockholders’ Equity (Deficit)			(362,435	)			(120,476	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)		$	6,540			$	7,784

    

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

  

  

The OLB Group, Inc.  Statements of Operations (Unaudited)

 

		For the Nine Months Ended September 30,								For the Three Months Ended September 30,
		2014				2013				2014				2013
Revenue
Insurance program		$	57,662			$	74,752			$	19,048			$	24,111
Development			11,862				-				11,862				-
Licensing			50,000				-				-				-
Net revenue			119,524				74,752				30,910				24,111
Cost of sales			22,806				26,144				6,342				5,437
Gross margin			96,718				48,608				24,568				18,674
OPERATING EXPENSES
Officer’s compensation			206,250				206,250				68,750				68,750
General & administrative expenses			120,664				104,689				44,223				39,616
Total operating expenses			326,914				310,939				112,973				108,366
Loss from operations			(230,196	)			(262,331	)			(88,405	)			(89,692	)
OTHER INCOME (EXPENSE)
Interest expense			(11,763	)			(5,469	)			(4,944	)			(2,397	)
Total other income (expense)			(11,763	)			(5,469	)			(4,944	)			(2,937	)
NET LOSS		$	(241,959	)		$	(267,800	)		$	(93,349	)		$	(92,089	)
BASIC LOSS PER SHARE		$	(0.02	)		$	(0.03	)		$	(0.01	)		$	(0.01	)
BASIC WEIGHTED AVERAGE SHARES			11,300,434				10,434,935				11,300,434				10,579,307

 

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

  

  

The OLB Group, Inc. Statements of Cash Flows (Unaudited)
		For the Nine Months Ended September 30,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(241,959	)		$	(267,800	)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operations:
Changes in assets and liabilities:
Increase in accounts payable and accrued expenses			160,715				161,544
Net Cash Used by Operating Activities			(81,244	)			(106,256	)
CASH FLOWS FROM INVESTING ACTIVITIES			-				-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of common stock			-				75,000
Proceeds from related party notes payable			80,000				25,000
Net Cash Provided by Financing Activities			80,000				100,000
NET CHANGE IN CASH			(1,244	)			(6,256	)
CASH – BEGINNING OF PERIOD			2,819				8,883
CASH – END OF PERIOD		$	1,575			$	2,627
CASH PAID FOR
Interest		$	-			$	-
Income taxes		$	-			$	-

 

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

 

  

The OLB Group, Inc.

Notes to the Financial Statements

September 30, 2014

(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.

  

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Income Taxes

 

Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence; it is more likely than not such benefits will be realized. The Company’s deferred tax assets were fully reserved at September 30, 2014 and December 31, 2013.

 

The Company accounts for its income taxes using the Income Tax topic of the FASB ASC 740, which requires the recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

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.

 

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.

 

Property and Equipment

 

Property and equipment are stated at cost.  Depreciation and amortization are provided utilizing the straight-line method over the related asset’s estimated useful life.  Assets under capital leases and leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvement.

 

The Company adopted FASB ASC 350-40, Internal Use Software, which requires the capitalization of internal use software and other related costs under certain circumstances.  The Company is implementing a direct shopping database.  External direct costs of materials and services and payroll costs of employees working solely on the application development stage of the project will be capitalized as required. To date we have not capitalized any software development costs.

 

Maintenance and repairs are charged to expense as incurred; renewals and improvements that extend the useful life of the assets are capitalized.  Upon retirement or disposal, the asset cost and the related accumulated depreciation and amortization are eliminated from the respective accounts and a resulting gain or loss, if any, is included in the results of operations.

  

 

These assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable.  Furthermore, the assets are evaluated for continuing value and proper useful lives by comparison to expected future cash projections.

  

Revenue and cost recognition

 

Revenues will be recognized when title and risk of loss transfers to the customer and the earnings process is complete. In general, title passes to our customers upon the customer's receipt of the merchandise. Revenue is accounted for in accordance with the Revenue Recognition topic of the FASB ASC 605, reporting revenue gross as a principal versus net as an agent. Revenue is recognized on a gross basis since our company has the risks and rewards of ownership, latitude in selection of vendors and pricing, and bears all credit risk. Our company records all shipping and handling fees billed to customers as revenues and related costs as cost of goods sold, when incurred.

 

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.

 

Marketing Fees and Materials

 

The Company markets certain of its products through a telemarketing sales organization whereby independent distributors establish their own network of associates. The independent distributors pay the Company a fee to become marketing representatives on behalf of the Company. In exchange, the representatives receive access, on an annual basis, to various marketing and promotional materials and tools as well as access to customized management reports; accordingly revenue from marketing fees is recognized over an annual period.  The Company also earns ancillary revenue from the sale of marketing materials which is recognized when the materials are provided to the representatives.

 

Intangible assets

 

Intangible assets are carried at cost and amortized over their estimated useful lives, generally on a straight-line basis over two years. The Company reviews identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value.

 

Stock-based Compensation

 

We account for equity instruments issued in exchange for the receipt of goods or services from non-employees. Costs are measured at the fair market value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of the date on which there first exists a firm commitment for performance by the provider of goods or services or on the date performance is complete. The Company recognizes the fair value of the equity instruments issued that result in an asset or expense being recorded by the company, in the same period(s) and in the same manner, as if the Company has paid cash for the goods or services.

 

 

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.

 

There were no potentially dilutive shares outstanding as of September 30, 2014 and 2013.

 

Recent Accounting Pronouncements

 

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.

 

In July 2013, the FASB issued ASU No. 2013-11: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forward Exists. The new guidance requires that unrecognized tax benefits be presented on a net basis with the deferred tax assets for such carry forwards. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.

 

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3 - INTANGIBLE ASSETS

 

On June 17, 2010 the Company completed an asset purchase agreement with Retailer Networks, Inc. (RNI). Pursuant to the terms of that agreement the Company purchased a number of intangible assets from RNI, including, but not limited to, customer information, trademarks, domain names, and educational resources for e-commerce.

 

The following table summarizes the Company’s carrying amount of intangible assets as of September 30, 2014 and December 31, 2013:

 

Amortizable Intangible Assets		September 30, 2014				December 31, 2013
Customer and Product Information		$	390,030			$	390,030
Trademarks, domain names, & other intangibles			91,007				91,007
Educational Resource			65,005				65,005
Total Intangible Assets			546,042				546,042
Less accumulated amortization			(546,042	)			(546,042	)
Net Intangible Assets		$	-			$	-

 

The amortizable intangible assets have useful lives not exceeding two years and a weighted average useful life of two years. As of December 31, 2012 all intangible assets had been fully amortized.

 

 

NOTE 4 - STOCKHOLDERS’ EQUITY (DEFICIT)

 

The company has 50,000,000 preferred shares authorized at the par value of $0.01. There were no preferred shares outstanding at September 30, 2014 and December 31, 2013.

 

On February 28, 2013, the Company issued 166,666 shares of common stock for $25,000 cash. Shares were issued at $0.15 per share.

 

On April 16, 2013, the Company issued 166,666 shares of common stock for $25,000 cash. Shares were issued at $0.15 per share.

 

On July 10, 2013, the Company issued 75,000 shares of common stock for $25,000 cash. Shares were issued at $0.33 per share.

 

On December 31, 2013, 713,790 shares of common stock were issued for conversion of $214,137 of accrued officer compensation. The stock was issued at $0.30, resulting in additional compensation expense of $214,137. 

 

NOTE 5 - RELATED PARTY TRANSACTIONS

 

On December 31, 2013, the Company issued 713,790 shares of common stock to its CEO in conversion of $214,137 of accrued compensation. The stock was issued at $0.30, resulting in additional compensation expense of $214,137.

 

During the year ended December 31, 2013, the company owed a majority shareholder $50,000 in notes payable. The notes accrue interest at 10% and are due within one year. As of December 31, 2013, total accrued interest on the notes was $1,705.

 

During the nine months ended September 30, 2014, the Company borrowed an additional $80,000 from the same majority shareholder. The notes accrues interest at 10% and are due within one year. As of September 30, 2014, the Company owed the shareholder a total of $130,000 in principal and $8,100 of accrued interest.

  

NOTE 6 – 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 $14,508,001 and a working capital deficit of $367,400, 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 7 – SUBSEQUENT EVENTS

  

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

  

 

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, 2013, filed with the Securities and Exchange Commission.  

 

PLAN OF OPERATION

 

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.

 

Overview

 

The OLB Group is an OMNI Channel, eCommerce Company based in New York City which utilizes multiple offshore development teams. Our product is ShopFast, which is an offering suite of software products for small retailers. As a cloud-based solution, the Company offers a new mobile commerce SaaS service within their existing framework. Utilizing the cloud provides a turnkey solution to small retailers, merchant acquiring banks, and white label solutions for ISOs; looking for a one-stop, unified solution to their eCommerce, mCommerce, marketing, Point-of-Sale, and inventory management needs. This cloud-based solution manages data located in physical stores, online stores and offices providing real-time dashboards with relevant information. We have developed the software product   ShopFast-POS.

 

Potential Markets

 

We intend to generate revenues from the following sources:

 

●	sales of ShopFast DSD and ShopFast PC to our clients;
●	revenue 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;
●	sales of the related services we provide to our clients, including maintenance of the OLB Database and processing of orders made on our clients’ websites for products from the OLB Database; and
●	profits from sales of the products from the OLB Databases remaining after we pay the product commissions to the client.

 

Services

 

The Company now aims to launch a new mobile commerce SaaS service within its existing framework to provide a turnkey solution to small retailers, merchant banks, and ISOs that are looking for a one-stop unified solution to their eCommerce, mCommerce, marketing, Point-of-Sale, and inventory management needs.

 

The ShopFast All In One unified solution and inventory management tool will be available to retailers and managed in a single dashboard. A small retailer will be able to get a POS system with a built-in CRM on an iPad or any tablet, and access the same POS on a computer from anywhere. There will be a multi-location system to manage inventory and track it by barcode and QR codes. This will enable coupons and loyalty programs for customers, as well as data feeds to all major search engines such as Google, Bing, and Yahoo.

  

  

We are also extremely excited to launch a new ‘White Label’ solution for Merchant Banks and ISOs as an integrated API to our system. Our solution will provide the merchant banks and ISOs with the tools to compete with payment solutions in the market place such as PayPal, Amazon Payments, Square, Google Checkout, and Intuit POS. Other online POS system offerings may appear similar to ours, but no competitor offers all of the tools we do, combined as a unified solution.

 

We started a pilot for one of the top 10 leading U.S. merchant banks, with revenues of over $16 billion, and over 200,000 Merchant clients to implement a group of merchants with all our Mobile Commerce services. We will be providing the inventory, marketing and gateway tools to the mobile applications of the bank and the merchant website.

 

New Products

 

PayAnywhereBills is a cloud-based system that allows users to bill customers online and accept payment by credit card and ACH. PayAnywhereBills simplifies billing and payments for small businesses while enabling operations to become more efficient. As only 30% of SMBs currently collect payments electronically, and more than half of these businesses name cash flow as their leading business challenge, the market potential for this service is immense. With PayAnywhereBills, business owners can utilize features such as recurring billing, web payment forms, credit card processing, email invoicing, and more. The SaaS-delivered service makes it easy to collect, track, invoice, and manage receivables on one user-friendly platform.

 

PayAnywhereAnything is an online payment acceptance SaaS solution that enables mobile acceptance of credit cards and features an easy-to-use POS system.

 

RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2014 AS COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2013

 

REVENUE

 

Revenue from operations for the three months ended September 30, 2014 increased $6,799 to $30,910 from $24,111 for the three months ended September 30, 2013. The increase can be attributed to additional revenue recognized from software development services that were provided.

 

GROSS PROFIT

 

Gross margin from operations for the three months ended September 30, 2014 increased $5,894 to $24,568 from $18,674 for the three months ended September 30, 2013. Gross margin increased due to the additional revenue.

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

General and administrative ("G&A") expenses increased $4,607, to $44,223 from $39,616 over the prior period. A majority of G&A expense consists of professional fees, travel expense and website development costs.

 

NET LOSS

 

Net loss increased by $1,260 to $93,349 from $92,089 for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013.

  

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2014 AS COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2013

 

REVENUE

 

Revenue from our insurance program for the nine months ended September 30, 2014 decreased $17,090 to $57,662 from $74,752 for the nine months ended September 30, 2013. The decrease can be attributed to a decrease in the number of subscribers to our insurance program.

 

During the nine months ended September 30, 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 implementations fees. In addition $11,862 was recognized from software development services that were provided.

 

GROSS MARGIN

 

Gross margin from operations for the nine months ended September 30, 2014 increased $48,110 to $96,718 from $48,608 for the nine months ended September 30, 2013. The increase in gross margin is a direct result of the licensing agreement revenue.

 

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

General and administrative ("G&A") expenses increased $15,975, to $120,664 from $104,689 over the prior period. A majority of G&A expense consists of professional fees, travel expense and website development. A majority of the increase is a result of increased travel and trade show expense and an increase in expense for website development.

 

NET LOSS

 

Net loss decreased by $25,841 to $241,959 from $267,800 for the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013. The decrease is a result of the revenue recognized from the software licensing agreement.

  

LIQUIDITY AND CAPITAL RESOURCES

 

During the nine months ended September 30, 2014, the Company used $81,244 of cash for operating activities and received $80,000 from financing activities.

 

During the nine months ended September 30, 2014, the Company borrowed $80,000 from a majority shareholder. The notes accrue interest at 10% and are due within one year. As of September 30, 2014, the Company owed the shareholder a total of $130,000 in principal and $8,100 of accrued interest.

 

The financial statements as of September 30, 2014 have been prepared under the assumption that we will continue as a going concern through December 31, 2014. Our independent registered public accounting firm has issued their report on the December 31, 2013 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.

 

We anticipate that our future liquidity requirements will require a need to obtain additional financing. The Company’s primary source of financing in the past consisted of loans from its Chief Executive Officer and principal stockholder, Ronny Yakov. Although Mr. Yakov has provided financing in the past, he has no binding commitment to continue such financing. More recently the Company has been able to fund its operations from revenue, stockholders’ loans and the sale of common stock.

 

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

 

Revenues will be recognized when title and risk of loss transfers to the customer and the earnings process is complete. In general, title passes to our customers upon the customer's receipt of the merchandise. Revenue is accounted for in accordance with the Revenue Recognition topic of the FASB ASC 605, reporting revenue gross as a principal versus net as an agent. Revenue is recognized on a gross basis since our company has the risks and rewards of ownership, latitude in selection of vendors and pricing, and bears all credit risk. Our company records all shipping and handling fees billed to customers as revenues and related costs as cost of goods sold, when incurred.

 

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.

 

 

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 September 30, 2014 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 was not effective as of September 30, 2014 and December 31, 2013.

 

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.

 

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

 

On February 28, 2013, the Company issued 166,666 shares of common stock for $25,000 cash. Shares were issued at $0.15 per share.  Proceeds from the sale were used to fund general operating expenses.

 

On April 16, 2013, the Company issued 166,666 shares of common stock for $25,000 cash. Shares were issued at $0.15 per share.  Proceeds from the sale were used to fund general operating expenses.

 

 

On July 10, 2013, the Company issued 75,000 shares of common stock for $25,000 cash. Shares were issued at $0.33 per share.  Proceeds from the sale were used to fund general operating expenses.

 

On December 31, 2013, 713,790 shares of common stock were issued for conversion of $214,137 of accrued officer compensation.

  

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)

  

  

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: November 4, 2014	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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