OLB Group, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2016; financial statements are unaudited. OLB offers monthly health-benefit subscription packages and ecommerce development and consulting services.
Financial results
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | $19,254 | $11,779 | $45,293 | $30,021 |
| Gross margin, dollars | $14,340 | $5,439 | $34,694 | $16,573 |
| Operating expenses | $92,956 | $90,173 | $187,029 | $194,668 |
| Operating loss | $(78,616) | $(84,734) | $(152,335) | $(178,095) |
| Net loss | $(78,961) | $(86,398) | $(152,680) | $(180,595) |
| Basic and diluted loss per share | $(0.01) | $(0.00) | $(0.02) | $(0.02) |
Q2 gross margin was approximately 74.5% of revenue, compared with 46.2% a year earlier; the six-month figures were approximately 76.6% and 55.2%, respectively. The company remained loss-making.
Material changes and liquidity
- Q2 subscription revenue declined to $9,807 from $11,779, which management attributed to fewer insurance-program subscribers and lower premiums for some members. Development revenue was $9,447, versus none in Q2 2015.
- For the six-month period, subscription revenue rose to $35,846 from $27,521, attributed to more subscribers early in 2016. Development revenue increased to $9,447 from $2,500.
- Six-month G&A declined to $49,529 from $57,168; officer compensation was unchanged at $137,500. Interest expense fell to $345 from $2,500.
- Operating cash use was $38,359, compared with $99,355 in the prior-year period. Financing provided $35,484, including a $35,000 related-party loan. Cash declined from $2,875 at year-end 2015 to zero at June 30, 2016.
- At June 30, total assets were $4,965, including a $4,965 internet domain and no cash. Current liabilities were $168,138, resulting in a $168,138 working-capital deficiency. Stockholders’ deficit was $163,173.
Outlook, risks, and other matters
- Director John Herzog lent the company $35,000 on May 26, 2016. The unsecured loan bears 10% interest and is due on or before May 26, 2017.
- OLB depends on related parties for financial support. Management says support has been confirmed in writing, but there is no binding agreement or legal obligation to provide future funding. If support ends, management may need to reduce operating costs.
- Management expects sufficient capital resources to meet projected cash-flow needs, but the filing gives differing time horizons: through year-end 2016 in the financial-statement note and through the next 12 months in MD&A. The company was working to manage liabilities and improve cash flow.
- Disclosure controls were deemed effective, while internal control over financial reporting was deemed ineffective because the company lacks sufficient personnel for adequate segregation of duties.
- The filing reports no legal proceedings, unregistered sales, or defaults upon senior securities. Management cautions that forward-looking statements are uncertain and interim results are not necessarily indicative of full-year results.
Important facts for investors to verify
- Whether related-party funding will continue, and how the company will meet obligations with zero cash and a substantial working-capital deficit.
- The basis and timing of management’s liquidity projections, including the differing forecast periods stated in the filing.
- Subscriber trends, subscription revenue durability, and whether development projects can generate recurring revenue.
- Repayment and interest obligations under the related-party loan, and progress in addressing the disclosed internal-control weakness.
As of August 4, 2016, 13,479,297 common shares were outstanding.