OLB Group, Inc. — Q3 2013 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2013. OLB describes itself as an e-commerce software and services provider, offering ShopFast products and related services.
Financial performance
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $24,111 | $31,431 | $74,752 | $98,640 |
| Gross profit | $18,674 | $19,121 | $48,608 | $60,315 |
| Operating loss | $(89,692) | $(207,100) | $(262,331) | $(506,027) |
| Net loss | $(92,089) | $(216,524) | $(267,800) | $(510,554) |
| Basic loss per share | $(0.01) | $(0.03) | $(0.03) | $(0.07) |
Gross margin as a share of revenue was approximately 77% in Q3 and 65% for the nine-month period, versus approximately 61% in both comparable 2012 periods. The filing attributes lower revenue primarily to fewer health-plan subscribers and lower premiums. Nine-month revenue declined 24%; net loss narrowed 48%, which management attributed mainly to the absence of amortization expense and lower general and administrative costs. Nine-month operating expenses included $206,250 of officer compensation and $104,689 of G&A; amortization was zero, compared with $204,953 in 2012.
Cash, liabilities, and capital
- Cash was $2,627 at September 30, down from $8,883 at year-end 2012. Operating activities used $106,256 in cash; financing provided $100,000, comprising $75,000 from common-stock sales and $25,000 from a related-party note. Investing cash flow was zero.
- Current liabilities were $272,028, against current assets of $2,627, resulting in a $269,401 working-capital deficit. Total liabilities were $272,028; stockholders’ deficit was $264,436, and accumulated deficit was $13,981,726.
- The $25,000 related-party note bears 10% interest, is due within one year, and had accrued $651 interest at quarter-end. The company also reported $159,818 in accrued officer compensation.
- Common shares outstanding were 10,586,644 as of November 6, 2013. The company issued 408,332 shares for $75,000 during the first nine months and had 75,000 outstanding warrants exercisable at $1.00 per share.
Outlook, risks, and other notable items
- Management plans to market ShopFast PC in Q4 2013, subject to available funds, and described ongoing product development, mobile-commerce services, and a pilot with a large U.S. merchant bank. The filing provides no quantified revenue or earnings guidance and does not establish pilot results or commercial uptake.
- The company states it expects continuing losses and needs additional financing. Its accumulated losses and working-capital deficit raise substantial doubt about its ability to continue as a going concern; financing plans and their success are uncertain, and the CEO has no binding commitment to provide further funding.
- Management reported disclosure controls were effective, but internal control over financial reporting was ineffective because the company lacked sufficient personnel to maintain segregation of duties.
- No legal proceedings or reportable subsequent events were disclosed. Management stated it was not required to provide market-risk disclosures or a separate risk-factors section as a smaller reporting company.
Important facts for investors to verify
- Available cash and the timing, amount, and terms of needed external financing, including any further related-party support.
- Whether planned product launches and the merchant-bank pilot progress to paying customers and sustainable revenue.
- Subscriber and premium trends in the health-related benefit program and their continuing effect on revenue.
- Remediation of the segregation-of-duties material weakness, and potential dilution from future equity issuances or warrant exercise.