OLB Group, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; financial statements are unaudited. OLB offers monthly health-benefit subscription packages and project-based e-commerce development and consulting services.
Financial performance and position
| Metric | Q1 2016 | Q1 2015 / prior date |
|---|---|---|
| Revenue | $26,039 | $18,242 |
| Gross profit (reported as “gross margin”) | $20,354; about 78.2% of revenue | $11,134; about 61.0% of revenue |
| Operating expenses | $94,073 | $104,495 |
| Operating loss | $(73,719) | $(93,361) |
| Interest expense | $0 | $836 |
| Net loss | $(73,719) | $(94,197) |
| Basic loss per share | $(0.01) | $(0.01) |
| Cash used in operating activities | $5,886 | $49,533 |
| Cash and total assets at March 31, 2016 | $4,569 and $9,534 | Cash at Dec. 31, 2015: $2,875; total assets: $7,840 |
| Current liabilities at March 31, 2016 | $93,746 | $18,333 at Dec. 31, 2015 |
| Stockholders’ deficit at March 31, 2016 | $(84,212) | $(10,493) at Dec. 31, 2015 |
Revenue was entirely subscription revenue in Q1 2016; the filing attributes its increase to more insurance-program subscribers and higher premiums for some. Development revenue was $0, versus $2,500 in Q1 2015. General and administrative expense fell by $10,422 to $25,323, while officer compensation remained $68,750.
Cash from financing was $7,580, consisting of an advance from an officer; cash increased by $1,694 during the quarter. The balance sheet reports $18,603 in accounts payable, $67,563 in accrued compensation, and $7,580 due to an officer. The filing reports a working-capital deficiency of $89,177. It states that prior related-party loans had been converted to common stock; no interest expense was recorded in Q1 2016.
Outlook, risks, and controls
- Management said projected resources should cover cash-flow requirements through 2016 in the notes, and through the next twelve months in MD&A. These are management expectations, not quantified guidance, and the filing cautions results may differ.
- The company expects it may rely on related parties for future support, but says there is no binding agreement or legal obligation requiring that support. If support is withdrawn, management may need to reduce operating costs. The company also says it is managing liabilities and seeking to improve cash flow and liquidity.
- Disclosure controls were judged effective at March 31, 2016, but internal control over financial reporting was judged ineffective. The disclosed material weakness was insufficient personnel to maintain adequate segregation of duties because of the company’s size.
- The filing lists no legal proceedings, unregistered equity sales, or defaults upon senior securities. It provides no specific revenue or earnings guidance.
Important facts for investors to verify
- Whether the subscriber and premium increases can be sustained, given the small revenue base and continuing losses.
- How the company will meet its $93,746 of current liabilities and address the stated $89,177 working-capital deficiency.
- Whether related-party financial support will remain available despite the absence of a binding commitment.
- How and when management plans to remediate the material weakness in internal control over financial reporting.
- Which liquidity outlook period management intends: through year-end 2016 or through the next twelve months.