Item
2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Company
Overview and Description of Business
We
were incorporated in the State of Delaware on November 18, 2004 for the purpose of merging with OLB.com (On-line Business), Inc.,
a New York corporation incorporated in 1993 (“OLB.com”). The merger was done for the purpose of changing our state
of incorporation from New York to Delaware.
As
a result of the merger, we acquired all of the assets of OLB.com, including its intellectual property. In connection with the
merger, each of the former common and preferred stockholders of OLB.com received five shares of our common stock in exchange for
each outstanding share of OLB.com common and preferred stock and, in addition, the former holders of the Series A stock of OLB.com
received one warrant for each such preferred share and the former holders of the Series B Preferred Stock of OLB.com received
two warrants for each such preferred share, to purchase shares of our common stock. An aggregate of 1,345,098 shares of common
stock were issued in connection with the merger.
We
are authorized to issue 200,000,000 shares of common stock, par value $0.0001 per share, and 50,000,000 shares of preferred stock,
par value $0.01 per share. We currently have 13,479,297 shares of common stock issued and outstanding. No shares of preferred
stock are currently outstanding.
Our
Business
We
currently offer monthly subscription packages which includes a health benefits package. These arrangements are generally renewable
monthly and revenue is recognized over the renewal period.
We
also provide ecommerce development and consulting services on a project by project basis.
Results
of Operations for the Three Months Ended September 30, 2017 compared to the Three Months Ended September 30, 2016
REVENUE
Revenue
from our subscription program for the three months ended September 30, 2017 increased $1,789 to $9,941 from $8,152 for the three
months ended September 30, 2016. The increase can be attributed to an increase in the number of subscribers to our insurance program.
GENERAL
AND ADMINISTRATIVE EXPENSES
General
and administrative expenses increased $22,047, to $43,023 for the three months ended September 30, 2017 from $20,976 for the three
months ended September 30, 2016. A majority of G&A expense consists of professional fees and travel expense; however, the
increase was due to increased spending on computer and internet expense.
OTHER
INCOME AND EXPENSE
Interest
expense increased from $2,972 for the three months ended September 30, 2016 to $9,787 for the three months ended September 30,
2017. All interest expense is from the related party loans (Note 3).
NET
LOSS
The
net loss increased by $26,376 from a loss of $89,768 for the three months ended September 30, 2016, to a loss of $116,144 for
the three months ended September 30, 2017.
Results
of Operations for the Nine Months Ended September 30, 2017 compared to the Nine Months Ended September 30, 2016
REVENUE
Revenue from our subscription program for the nine months ended September 30, 2017 increased $812 to $40,601
from $39,789 for the nine months ended September 30, 2016. We also recognized $2,975 of revenue from development services provided
for the nine months ended September 30, 2017 as compared to $13,656 for the nine months ended September 30, 2016.
GENERAL
AND ADMINISTRATIVE EXPENSES
General
and administrative expenses increased $35,595, to $106,100 for the nine months ended September 30, 2017 from $70,505 for the nine
months ended September 30, 2016. A majority of G&A expense consists of professional fees and travel expense; however, the
increase was due to increased spending on computer and internet expense.
OTHER
INCOME AND EXPENSE
Interest
expense increased from $3,317 for the nine months ended September 30, 2016 to $26,020 for the nine months ended September 30,
2017. All interest expense is from the related party loans (Note 3).
NET
LOSS
The net loss increased by $67,340
from a loss of $242,448 for the nine months ended September 30, 2016, to a loss of $309,788 for the nine months ended September
30, 2017.
LIQUIDITY
AND CAPITAL RESOURCES
During
the nine months ended September 30, 2017, the Company used $54,556 of cash for operating activities, as compared to $111,186
cash used through the nine months ended September 30, 2016.
Cash
provided from financing activities during the nine months ended September 30, 2017 was $53,500 as compared to $110,000 for
the nine months ended September 30, 2016.
As
discussed in Note 3, one of our Directors and his affiliated company has funded the Company with related party loans. The Company
plans to continue to use the financial resources of its related parties, if necessary; however, there are no assurances that the
Director, or the Company, will be in a financial position to do so. Despite the fact that the related parties have confirmed in
writing the intention to provide financial support, the Company does not have any binding agreements now or in the past with the
related parties obligating them to fund the future debt or any other obligations. The related parties are not otherwise
under any legal obligation to provide the Company with capital.
If
the related parties withdraw their financial support to enable the company to fund its current activities, management will be
required to reduce the Company’s cash from operations by reducing operating costs. In addition, the Company is working to
manage its current liabilities while it continues to make changes in operations to further improve its cash flow and liquidity
position. Based upon current cash flow projections, management believes the Company will have sufficient capital resources to
meet projected cash flow requirements through the next twelve months.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have
been prepared in accordance with generally accepted accounting principles in the United States. The preparation of financial statements
requires management to make estimates and disclosures on the date of the financial statements. On an on-going basis, we evaluate
our estimates including, but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical
experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. We believe
that the following critical accounting policies affect our more significant judgments and estimates in the preparation of our
financial statements.
Revenue
The
Company recognizes revenue on its Omni Commerce Solution licensing when persuasive evidence of an arrangement exists, services
have been rendered, the sales price is fixed or determinable, and collection is reasonably assured.
Costs
are recorded at the time the related revenue is recorded. Payment processing costs are recorded in the period the costs are incurred
and customer acquisition costs are comprised primarily of telemarketing costs and service costs and other additional benefit services.
Membership
Fees
The Company recognizes revenues
from membership fees for the sales of health-related discount benefit plans as earned as part of the ShopFast program. These arrangements
are generally renewable monthly and revenue is recognized over the renewal period. As these products often include elements sold
through contracts with third-party providers, the Company considers each contractual arrangement in accordance with the Revenue
Recognition topic of the FASB ASC 605. The Company’s current contracts meet these requirements for reporting revenue on
a gross basis. The Company records a reduction in revenue for refunds, chargebacks from credit card companies, and allowances
based upon actual history and management’s evaluation of current facts and circumstances.
ITEM
4. CONTROLS AND PROCEDURES
Disclosure
Control and Procedures
As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried
out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as
of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation
of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Interim Chief
Financial Officer.
Based
upon that evaluation, the Chief Executive Officer and the Interim Chief Financial Officer concluded that the Company’s disclosure
controls and procedures were ineffective at September 30, 2017 to ensure that information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission rules and forms. The Company’s disclosure controls and procedures include
controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files
or submits under the Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer
and Interim Financial officer as appropriate to allow timely decisions regarding required disclosure.
Internal
Control over Financial Reporting
Management’s
Report on Internal Control over Financial Reporting
Internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) is a process designed by,
or under the supervision of, our principal executive and principal financial officers, and effected by our board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. The management is responsible
for establishing and maintaining adequate internal control over our financial reporting. Under the supervision and with the participation
of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting using the
Internal Control – Integrated Framework
developed by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our Chief Executive
Officer and Interim Financial Officer have concluded that our internal control over financial reporting were not effective as
of September 30, 2017.
We
are aware of the following material weaknesses in internal control that could adversely affect the Company’s ability to
record, process, summarize and report financial data:
Due
to the size of the Company, we lack the personnel to maintain an adequate level of separation of duties.
Changes
in Internal Control Over Financial Reporting
There
has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially
affected, or is reasonably likely to material affect, our internal control over financial reporting.