OLB GROUP, INC. - 10-K Filing Summary
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended December 31, 2009. The OLB Group, Inc. is a smaller reporting company incorporated in Delaware, operating as an e-commerce service provider. The company develops software products (ShopFast Direct Shopping Database and ShopFast Profit Center) enabling clients to create internet storefronts to sell products from a third-party maintained database. The company does not hold inventory or operate warehouses, relying entirely on suppliers for fulfillment. As of the filing date, the company had one full-time employee and five part-time contractors.
Key Financial Metrics
| Metric | 2009 | 2008 |
|---|---|---|
| Net Revenues | $290,159 | $73,081 |
| Gross Profit | $77,017 | $12,621 |
| Gross Margin | 26.5% | 17.3% |
| Net Loss | $(323,069) | $(482,775) |
| Cash Used in Operating Activities | $(43,082) | $(67,986) |
| Cash Provided by Financing Activities | $42,967 | $66,323 |
| Cash and Cash Equivalents (Ending) | $555 | $670 |
| Working Capital Deficit | $(85,214) | $(510,163) |
| Total Liabilities | $85,769 | $510,833 |
Note: The working capital deficit improved significantly in 2009 due to the conversion of substantial accrued salaries and related party loans into common stock.
Material Changes vs. Prior Period
- Revenue Growth: Net revenues increased by approximately 300% ($217,078) compared to 2008. This increase is primarily attributed to fees from the sale of health-related discount benefit plans as part of the ShopFast program.
- Expense Reduction: General and administrative expenses decreased by $91,560 (42%) due to reduced professional fees and services.
- Loss Reduction: The net loss decreased by $159,706 (33%) to $323,069, driven by higher gross profit and lower operating expenses.
- Debt Conversion: A significant portion of liabilities was eliminated through equity conversion. In December 2009, the company issued approximately 14.2 million shares to convert $421,908 of accrued salaries/loans and $286,110 of company debt assumed by an officer.
- Stock Issuances: The company issued 1,000,000 shares for services in February 2009 and the aforementioned shares for debt conversion in December 2009.
Outlook, Risks, and Management Commentary
- Going Concern: The company's auditors have issued a report expressing substantial doubt about the company's ability to continue as a going concern. This is due to recurring losses and a working capital deficit. Continued existence depends on generating sufficient revenue and obtaining additional financing.
- Liquidity: Cash balances are critically low ($555). The company anticipates needing additional financing to fund operations and marketing efforts planned for the second quarter of 2010. Primary funding sources have historically been loans from the CEO, Ronny Yakov, who has no binding commitment to provide further funds.
- Operational Plan: Management plans to launch full-scale marketing of the ShopFast PC software in Q2 2010, utilizing infomercials. They aim to achieve a return of at least $1.50 in orders for every $1.00 spent on advertising.
- Risks:
- Financing: Failure to secure additional capital could force the company to curtail or cease operations.
- Supplier Dependence: The company relies on a single supplier (Baker & Taylor Fulfillment, Inc.) for product fulfillment. Loss of this supplier would materially impact operations.
- Competition: The company faces intense competition from major online retailers (Amazon, eBay) and other e-commerce service providers.
- Internal Controls: Management has concluded that disclosure controls and procedures are not effective due to a lack of personnel and separation of duties.
- Subsequent Event: In February 2010, the company received a net settlement of approximately $86,887 ($175,000 less $88,113 in attorney fees) regarding a prior lawsuit.
Investor Verification Checklist
- Capital Adequacy: Verify if the company has secured the additional financing required to survive beyond the current cash balance of $555.
- Revenue Sustainability: Confirm if the revenue growth from health-related discount plans is sustainable or if it was a one-time anomaly.
- Marketing Execution: Monitor the Q2 2010 launch of ShopFast PC marketing and the resulting customer acquisition rates versus the $1.50 return target.
- Supplier Agreements: Assess the stability of the relationship with Baker & Taylor Fulfillment, Inc., given the company's total reliance on this single vendor.
- Related Party Transactions: Review the terms of future loans or equity conversions involving CEO Ronny Yakov, who controls 63% of the voting power.