OLB Group, Inc. — Q2 2015 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2015; financial statements are unaudited. OLB offers monthly health-benefit subscriptions and ecommerce development, consulting, and software services.
Financial results
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $11,779 | $13,018 | $30,021 | $88,614 |
| Gross margin | $5,439 (46.2%) | $5,152 (39.6%) | $16,573 (55.2%) | $72,150 (81.4%) |
| Operating expenses | $90,173 | $104,186 | $194,668 | $213,941 |
| Operating loss | $(84,734) | $(99,034) | $(178,095) | $(141,791) |
| Net loss | $(86,398) | $(102,890) | $(180,595) | $(148,610) |
For the six months, operating cash used was $99,355, versus $52,246 in 2014. Financing provided $99,687, including $100,000 borrowed from related party Herzog & Co.; cash increased by $332 to $332. At June 30, current assets were $332 and current liabilities were $202,655, for a $202,323 working-capital deficit. Total liabilities were $202,655; related-party notes payable were $100,000, with $2,500 accrued interest. Stockholders’ deficit was $197,358. No cash interest or income taxes were paid in the six-month period.
Changes versus prior period
- Q2 revenue declined $1,239 (about 9.5%), which management attributed to fewer insurance-program subscribers and lower premiums for some members. The quarterly net loss narrowed by $16,492.
- Six-month revenue fell $58,593 (about 66%), and net loss widened by $31,985. Management attributed the revenue and gross-margin decline primarily to a $50,000 software licensing setup and implementation fee recognized in Q1 2014 that did not recur; 2015 included $2,500 of software development revenue.
- Six-month G&A expense declined $19,273. Interest expense declined to $2,500 from $6,819, which management attributed to elimination of interest on credit-card debt.
Outlook, risks, and other notable items
- Management states that losses are expected to continue for some time and identifies substantial doubt about the company’s ability to continue as a going concern. It is pursuing equity financing and investment opportunities, but says the outcome is uncertain and continued operations depend on additional revenue and financing.
- On July 22, 2015, the company executed an additional $25,000 note with John Herzog, bearing 10% interest and due within one year.
- Management reported disclosure controls were effective, but internal control over financial reporting was not effective because the company lacks sufficient personnel to maintain adequate segregation of duties. No change in internal controls during the quarter was reported.
- The company reported no legal proceedings. It provided no specific financial guidance.
Important facts for investors to verify
- Availability, timing, and terms of financing, including the related-party notes and the subsequent $25,000 borrowing.
- Subscriber trends, insurance-program revenue, and the ability to secure recurring licensing or services revenue.
- Cash needs and the company’s plans to address its working-capital deficit and substantial going-concern doubt.
- Progress in remediating the material weakness in financial reporting controls.
- The 2014 licensing revenue comparison and the status of the company’s revenue-generating plans; the filing says assets exchanged to extinguish prior debt were non-revenue-generating and would require further investment to produce revenue.