OLB Group, Inc. — FY 2012 Form 10-K
Reporting period: Year ended December 31, 2012; comparative figures are for FY 2011. This is an annual filing, not a standalone fourth-quarter report. OLB describes itself as an early-stage e-commerce software and services company, with limited quality-control test marketing and no broad commercial launch reported for the year.
Financial performance and condition
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Revenue | $130,508 | $184,758 |
| Gross profit / margin | $83,078 / 64% | $120,824 / 66% |
| Operating expenses | $752,278 | $714,203 |
| Operating loss | $669,200 | $593,379 |
| Net loss | $783,856 | $679,491 |
| Basic loss per share | $0.11 | $0.10 |
| Cash used in operations | $166,962 | $60,063 |
| Cash provided by financing | $175,000 | $57,000 |
- Revenue fell $54,250, or 30%, primarily because fees from health-related discount benefit plans declined. Gross profit fell $37,746 and gross margin decreased two percentage points.
- General and administrative expense rose 23% to $204,257; the filing attributes much of the increase to software development. Amortization expense was $273,021 in each year, and the related intangible assets were fully amortized by year-end 2012.
- Year-end cash was $8,883, total assets $13,848, and current liabilities $85,483, producing a $76,600 working-capital deficit. Stockholders’ deficit was $71,635. The balance sheet reports no separate notes payable at year-end.
- Financing included $75,000 from common-stock sales and $100,000 in convertible-note proceeds. The company also issued shares to convert debt and accrued CEO compensation. Shares outstanding increased from 7,155,548 to 10,178,312 during 2012.
- Interest expense was $42,747; other items included a $77,518 loss on debt settlement and a $5,609 gain on settlement of debt. The company reported no cash interest or income-tax payments.
Changes, outlook, and material risks
- OLB plans to market ShopFast PC and ShopFast DSD, with full marketing and infomercial efforts described as planned for the second quarter of 2013, subject to available funding. Management says current cash and investment balances will not support the next 12 months of development and overhead; additional debt or equity financing is needed, with no assurance it will be available on acceptable terms.
- The filing also describes planned mobile-commerce and SaaS offerings, including unified retail/POS tools and PayAnywhereBills, and a pilot with a large merchant bank. These are forward-looking plans; the filing does not report material revenue from these initiatives.
- Management expects continued losses and notes that prior experience suggests negative cash flow for six to nine months after commencing operations. The auditor’s report highlights recurring losses and a working-capital deficit as raising substantial doubt about the company’s ability to continue as a going concern. The financial statements include no adjustments for that uncertainty.
- Key business risks include dependence on one supplier, Baker & Taylor, third-party fulfillment, limited financing, intense competition, security and technology risks, and dependence on CEO Ronny Yakov. OLB had one full-time employee and no independent directors or audit committee.
- OLB reported ineffective internal control over financial reporting due to insufficient segregation of duties and untimely recording of certain transactions. Management separately concluded disclosure controls were effective. No material legal proceedings or off-balance-sheet arrangements were reported.
- Yakov’s five-year employment agreement runs through February 28, 2018, with annual salary of $275,000, a $1,500 monthly car allowance, and a potential $100,000 performance bonus. The filing reports $433,410 of accrued salary converted to 2,167,045 shares.
Investor verification points
- Confirm the company’s current liquidity, financing availability, and ability to fund operations; the filing identifies substantial going-concern doubt.
- Verify whether the planned 2013 product launches, marketing campaigns, and merchant-bank pilot proceeded, and whether they generated meaningful revenue or cash flow.
- Reconcile the debt-conversion disclosures: the filing describes a $77,518 settlement loss in the income statement but also says the loss was charged to additional paid-in capital; the share-conversion pricing is also described inconsistently, including $0.15 and $0.20 references.
- Track dilution and related-party transactions, including the CEO salary conversion, future financing, and the CEO’s reported majority ownership and control.
- Monitor supplier concentration, fulfillment performance, internal-control remediation, and progress toward appointing independent directors and establishing board committees.