OLB Group - 10-Q quarterly report FY

 

Washington, D.C. 20549

 

 

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

 

For the quarterly period ended June 30, 2009

 

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

 

For the transition period from _______to _______

 

Commission File Number: 000-52994

 

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

 

 

(Address of principal executive offices)

 

(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.

 

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 July 31, 2009, the Company had outstanding 56,782,832 shares of its common stock, par value $0.01.

 

 

 

 

 

 

 

 

Item 1.     Financial Statements

 

 

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

 

(Unaudited)

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

 

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

 

(Unaudited)

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

 Notes to the Financial Statements

The unaudited financial statements have been prepared by The OLB Group, Inc. (the “Company”), pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management; necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited financial statements and footnotes for the year ended December 31, 2008 included on the Company’s Form 10-K.  The results of the six months ended June 30, 2009 are not necessarily indicative of the results to be expected for the full year ending December 31, 2009.

 

 

 

The Company considers all highly liquid investments purchased with an original maturity date of three months or less from the date of purchase to be a cash equivalent.

 

 

Financial instruments, which potentially subject the Company to concentration of credit risk, consist of accounts receivable and 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.

 

 

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

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

 

 Notes to the Financial Statements

 

FASB 159 – Fair Value Option for Financial Assets and Financial Liabilities

FASB 141 (revised 2007) Business combinations

FASB 162, “The Hierarchy of Generally Accepted Accounting Principles” (FAS 162).  

The adoption of the above pronouncements is not expected to have a material impact on our financial condition or results of operations.

 

In February 2008, the Company renewed the employment agreement with its founder and President that expires on February 28, 2013. The agreement provides for an annual salary of $275,000, fringe benefits and an incentive bonus based on achievement of certain performance targets.

 

During 2008 the company converted $208,600 of accrued salary and loans owed to the Company’s President into 12,991,765 shares of common stock.

 

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, and has a working capital deficit of approximately $642,678 which together raise substantial doubt about its ability to continue as a going concern. Management is presently pursuing 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 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.

    

We are e-commerce service provider, which enables a business desiring to sell goods and services on the internet to utilize the our e-commerce resources and support services, thus creating economies of scale and cost efficiencies for e-commerce sellers throughout the entire e-commerce process.

 

The products that we plan to distribute over the next year and will account for most of our business are as follows:

There are a number of trends in the eCommerce/direct response marketing industry, the most significant of which is the trend toward integrated marketing strategies. Integrated marketing campaigns involve not only advertising, but also sales promotions, internal communications, public relations, social networking, and other disciplines. The objectives of integrated marketing are to promote our products and services,

Price is no longer the sole motivator of purchasing behavior for our potential customers. With the availability of similar products from multiple sources, customers are increasingly looking for distributors who provide a tangible value-added to their products. As a result, we provide a broad range of products and related services. Specifically, we will provide research and consultancy services, artwork and design services, and fulfillment services to our customers. These services will be provided in-house as well as outsourced by our current suppliers.

We can provide no assurances that our expectations described above will be realized.

  

Our plan of operation is to launch the marketing of the software component of our ShopFast PC product by the end of the forth quarter of fiscal 2009, to produce a 30 minute infomercial to promote this product, as well as short form two minute commercials after completing the longer infomercial, depending on the funds available to the Company for such purposes. We intend to run the advertisements for a period of time and to use focus groups to determine the prices at which we can obtain the highest level of reseller orders and then to launch a full scale media campaign. If the ratio of media spending to product orders is at least $1.50 return in orders on $1.00 spent on advertising, we would continue such advertising. Otherwise, we would consider alternatives to the advertising methods tried. After adjustments to the marketing plan and getting a satisfactory return rate on the media expenditures, we intend to launch a nationwide television distribution campaign.

 

 

Over the next twelve months, we do not expect to purchase or sell any significant equipment. We are currently redesigning ShopFast PC so that the Internet Storefront can be created by a client having limited computer expertise without our assistance. In previous versions of ShopFast DSD, the Internet Storefront would have had to have been created by an administrator employed by us. We are redesigning ShopFast PC so that the client can create the Internet Storefront on the client’s own, in the following five steps:

 

Step 1:Choose the categories of items to be sold on the store.

 

Step 2: Design the store by choosing layouts, fonts, colors and a logo.

 

Step 3: Personalize the store by adding descriptive text

 

Step 4: Account information to facilitate payments for the store subscription as well as payment of commissions

 

Step 5: Final store confirmation and immediate store generation.

 

If we successfully test our ShopFast PC product, we are planning to develop or acquire additional products to complement our e-commerce products. We anticipate that we will also need to make expenditures in the following areas: to expand our existing ecommerce platform and replace some of the existing hardware and servers to service the volume of transactions we anticipate and to add more marketing and administrative personnel, although our initial plan is outsource significant services to third party providers. The additional products to be developed and/or acquired have not yet been identified, but are expected to be the result of requests by clients and/or their customers for additional functionality, services, payment methods and/or product availability.

 

We are currently in the quality assurance testing phase for our re-developed ShopFast DSD software, which is based on a different design platform than the prior versions, allowing it to operate faster and under all computer operating systems that can fully support Internet Explorer 5.0 or higher. ShopFast DSD will have be a customized product to the needs of the particular clients. The immediately prior paragraph is also applicable to the successful testing of our re-developed ShopFast DSD product.  If we are unable to raise capital, we will not be able to implement our plans.

  

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

General and administrative  ("G&A") expenses decreased by $50,333 or 45% to $60,343 for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. For the six months ended June 30, 2009. This decrease in expense was the result of a decrease in professional fees and services for the software development.

 

NET LOSS

 

 Net loss decreased by $112,889 to $132,515 for the six months ended June 30, 2009 as compared to six months ended June 30, 2008.  This decrease in net loss was the result of the decrease in G&A expenses for professional fees & software development.  

 

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30, 2009, the Company generated $23,168 of cash from operating activities, as compared to $71,252 cash used through six months ended June 30, 2008. The decrease in the use of cash was from higher revenue from the internet sales. 

 

 

Cash provided from financing activities during the six months ended June 30, 2009 was $(23,136) as compared to $69,230 through six months ended June 30, 2008. Our capital needs have primarily been met from the loans or repayment of loans from our president.

Our financial statements as of the six months ended June 30, 2009 have been prepared under the assumption that we will continue as a going concern through December 31, 2009. Our independent registered public accounting firm has issued their report 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 sources of funding to date consists 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. We may not be able to obtain such additional financing or, if obtained, such financing may not be available and/or not be on terms favorable to us.

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 require 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 is accounted for in accordance with Emerging Issue Task Force Issue No. 99-19, 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, in accordance with Emerging Issue Task Force Issue No. 00-10, accounting for shipping and handling fees and costs.

  

 

Currently we have no accounts receivable. We are required to make judgments based on historical experience and future expectations, as to the realizability of our accounts receivable. We make these assessments based on the following factors: (a) historical experience, (b) customer concentrations, customer credit worthiness, (d) current economic conditions, and (e) changes in customer payment terms.

During the year ended December 31, 2007 and in 2008, the Company adopted the following accounting pronouncements which had no impact on the financial statements or results of operations:

FASB 159 – Fair Value Option for Financial Assets and Financial Liabilities

FASB 141 (revised 2007) Business combinations

FASB 162, “The Hierarchy of Generally Accepted Accounting Principles” (FAS 162).  

 

 

The adoption of the above pronouncements is not expected to have a material impact on our financial condition or results of operations.

 

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.

 

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act ”), that are designed to ensure that information required to be disclosed by us inreports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our President and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management designed its disclosure controls and procedures to provide reasonable assurance that the objectives of the disclosure controls and procedures are met.  The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of June 30, 2009, we carried out an evaluation, under the supervision and with the participation of our President and Interim Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our President and Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported, within the time periods specified for each report and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

 

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.

 

 

None.

 

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.

None.

 

 

None.

 

None.

 

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.