Business Context and Reporting Period
Company: The OLB Group, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2010
Business Overview: The Company is an e-commerce service provider offering resources and support services, including the "ShopFast" program for health-related discount benefit plans and software solutions (ShopFast PC and ShopFast DSD). The Company is classified as a smaller reporting company.
Key Financial Metrics
| Metric | Nine Months Ended Sep 30, 2010 | Nine Months Ended Sep 30, 2009 | Three Months Ended Sep 30, 2010 | Three Months Ended Sep 30, 2009 |
|---|---|---|---|---|
| Net Revenues | $155,160 | $241,709 | $51,879 | $63,453 |
| Gross Profit | $46,952 | $105,766 | $26,834 | $35,820 |
| Gross Margin | 30.3% | 43.8% | 51.7% | 56.4% |
| Net Loss | $(234,469) | $(200,104) | $(110,017) | $(67,589) |
| Cash Balance (End of Period) | $553 | $119 | $553 | $119 |
| Total Assets | $655,568 | $5,520 | $655,568 | $5,520 |
| Total Liabilities | $210,236 | $85,769 | $210,236 | $85,769 |
| Working Capital | $(209,683) | $(85,214) | $(209,683) | $(85,214) |
Debt and Liquidity: The Company has no long-term debt listed on the balance sheet but holds significant accrued liabilities, including $149,240 in accrued salary. Cash flow from operating activities was negative $110,002 for the nine-month period. Financing activities provided $110,000 primarily from the sale of common stock.
Material Changes vs. Prior Period
- Revenue Decline: Net revenues decreased 35% ($86,549) for the nine months ended September 30, 2010, compared to the prior year. This is attributed to a decrease in subscribers for health-related discount benefit plans.
- Increased Expenses: General and administrative expenses increased 74% ($69,365) year-over-year due to higher marketing, web-related, and internet connectivity costs.
- Asset Acquisition: Total assets increased significantly from $5,520 to $655,568. This is primarily due to the acquisition of intangible assets (customer information, trademarks, domain names) valued at $650,050 from Retailer Networks, Inc. (RNI) in June 2010.
- Equity Transactions: The Company issued 11,556,835 shares and 13,316,835 warrants to RNI as part of the asset purchase. Additionally, the Company sold 3,928,572 shares of common stock to RNI for cash proceeds of $110,000.
- Legal Settlement: The Company recorded a non-operating gain of $86,887 from the settlement of a lawsuit regarding a non-performance claim on a consulting agreement.
Outlook, Risks, and Management Commentary
- Going Concern: The filing includes a "Going Concern" warning. The Company has incurred significant losses and has a working capital deficit of approximately $209,683. Management states that the ability to continue as a going concern is dependent on obtaining additional equity or debt financing, which is not guaranteed.
- Product Strategy: Management plans to launch the marketing of the ShopFast PC software component in the fourth quarter of 2010. The strategy involves producing an infomercial and testing media spending ratios (targeting a $1.50 return on $1.00 spent) before a nationwide campaign.
- Product Redesign: The Company is redesigning ShopFast PC to allow clients to create their own internet storefronts without administrative assistance, aiming to reduce costs and improve scalability.
- Financing Needs: The Company anticipates a need for additional financing to expand its e-commerce platform, replace hardware, and hire personnel. Primary funding to date has come from loans by the CEO, who has no binding commitment to continue financing.
Investor Verification Checklist
- Cash Position: Verify the extremely low cash balance of $553 and the immediate need for capital to sustain operations.
- Revenue Sustainability: Assess the decline in subscriber-based revenue and the viability of the new ShopFast PC marketing strategy.
- Intangible Asset Valuation: Review the $650,050 valuation of intangible assets acquired from RNI and the associated amortization schedule (2-year life).
- Related Party Transactions: Confirm the terms of the asset purchase and stock sales to RNI, as well as the accrued salary of $149,240 owed to officers.
- Financing Commitments: Determine if any binding commitments for future financing exist, given the explicit statement that the CEO has no obligation to provide further loans.