UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2018

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from _______to _______

 

Commission File Number: 000-52994

 

THE OLB GROUP, INC.

(Exact name of small business issuer as specified in its charter)

 

DELAWARE   13-4188568

(State or other jurisdiction of
incorporation or organization)

 

(IRS Employer

Identification No.)

 

200 Park Avenue, Suite 1700, New York, NY 10166

 (Address of principal executive offices)

 

(212) 278-0900

(Registrant's telephone number)

 

(Former name, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer ☐

Accelerated filer ☐

  Non-accelerated filer ☐ Smaller reporting company ☒
  Emerging growth company ☐  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

As of May 11, 2018 the Company had outstanding 19,825,364 shares of its common stock, par value $0.0001.

 

 

 

 

 

 

THE OLB GROUP, INC.

 

FORM 10-Q

 

For the Quarterly Period Ended March 31, 2018

 

INDEX

 

PART I Financial Information 1
Item 1. Financial Statements (unaudited) 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
Item 4. Controls and Procedures 10
     
PART II Other Information 11
Item 1. Legal Proceedings 11
Item 1A. Risk Factors 11
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Mine Safety Disclosures 11
Item 5. Other Information 11
Item 6. Exhibits 11
Signatures 12

  

 

 

  

PART I - FINANCIAL INFORMATION

  

Item 1. Financial Statements

 

The OLB Group, Inc.

Condensed Balance Sheets

 

    March 31,     December 31,  
    2018     2017  
ASSETS   (Unaudited)        
Current Assets:            
Cash   $ 353     $ 580  
Prepaids     15,000       -  
                 
Total Current Assets     15,353       580  
                 
Other Assets:                
                 
Internet domain     4,965       4,965  
                 
TOTAL ASSETS   $ 20,318     $ 5,545  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Current Liabilities:                
Accounts payable   $ 89,968     $ 89,640  
Accrued interest, related party     296       -  
Accrued compensation     91,591       -  
Loans payable, related party     34,481       3,481  
                 
Total Current Liabilities     216,336       93,121  
                 
Total Liabilities     216,336       93,121  
                 
Stockholders’ Deficit                
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares outstanding     -       -  
Common stock, $0.0001 par value; 200,000,000 shares authorized, 19,825,364 and 19,825,364 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively     1,984       1,984  
Additional paid-in capital     15,590,821       15,590,821  
Accumulated deficit     (15,788,823 )     (15,680,381 )
                 
Total Stockholders’ Deficit     (196,018 )     (87,576 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 20,318     $ 5,545  

    

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

  1  

 

  

The OLB Group, Inc.

Condensed Statements of Operations

(Unaudited)

  

    For the Three Months Ended
March 31,
 
    2018     2017  
             
Revenue   $ 9,904     $ 15,498  
                 
Operating expenses                
Cost of revenue     4,097       5,469  
Officer’s compensation     93,750       68,750  
General & administrative expenses     20,203       27,478  
Total operating expenses     118,050       101,697  
                 
Loss from operations     (108,146 )     (86,199 )
                 
Other Expense                
Interest expense     (296 )     (7,529 )
                 
Total other expense     (296 )     (7,529 )
                 
Net Loss   $ (108,442 )   $ (93,728 )
                 
Loss per share, basic and diluted   $ (0.01 )   $ (0.01 )
                 
Weighted average shares outstanding, basic and diluted     19,825,364       13,479,297  

  

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

  2  

 

 

The OLB Group, Inc.

Condensed Statements of Cash Flows
(Unaudited)

 

    For the Three Months Ended March 31,  
    2018     2017  
CASH FLOWS FROM OPERATING ACTIVITIES            
Net loss   $ (108,442 )   $ (93,728 )
Adjustments to Reconcile Net Loss to Net Cash Used in Operations:                
                 
Changes in assets and liabilities:                
prepaids     (15,000 )     -  
Accounts payable     328       18,300  
Accrued officer compensation     91,591       60,189  
Accrued interest, related party     296       -  
                 
Net Cash Used in Operating Activities     (31,227 )     (15,239 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES     -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from related party notes payable     31,000       15,500  
                 
Net Cash Provided by Financing Activities     31,000       15,500  
                 
Net Change in Cash     (227 )     261  
                 
Cash – Beginning of Period     580       1,160  
                 
Cash – End of Period   $ 353     $ 1,421  
                 
Cash Paid For:                
Interest   $ -     $ -  
Income taxes   $ -     $ -  

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

  3  

 

 

The OLB Group, Inc.

Notes to the Condensed Financial Statements

March 31, 2018

(Unaudited)

 

NOTE 1 - BACKGROUND

 

The Company 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 result of the merger, the Company acquired all of the assets of OLB.com, including its intellectual property assets. 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

 

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.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These unaudited financial statements should be read in conjunction with the audited financial statements and footnotes for the year ended December 31, 2017 included on the Company’s Form 10-K. The results of the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year ending December 31, 2018.

 

Going Concern

The accompanying financial statements have been prepared assuming the company will continue as a going concern. The company has limited cash resources, recurring cash used in operations and an operating losses history. As shown in the accompanying financial statements, as of March 31, 2018, the Company had a working capital deficiency of $200,983 and a net loss of $108,442 for the three months ended March 31, 2018. The Company’s cash flow used in operating activities was $31,227, while $31,000 was provided by financing from related parties. These factors among others, raise substantial doubt about the company’s ability to continue as a going concern. The accompanying financial statements do not reflect any adjustments that might result if the company is unable to continue as a going concern.

 

Subsequent to the quarter ending March 31, 2018, the Company consummated a business acquisition that may enable us to continue as a going concern. As discussed in Note 5, the Company has created three new subsidiaries, acquired certain assets, including cash, and revenue generating operations that may enable the Company to alleviate the doubt about continuing as a going concern.  The Company is currently in the process of a capital raise of up to $5,000,000 that should enable it to make its first scheduled payments on the Loan and Security Agreement (entered into on April 9, 2018) of $1,000,000 on July 15, 2018 and $2,000,000 on October 31, 2018. This, along with the additional acquisitions of CrowdPay.US, Inc, and Omnisoft, Inc. should provide the company with the assets and operations it requires to continue as a going concern. However, there are no assurances that we will be able to consummate the above capital raise.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

  4  

 

 

Revenue and cost recognition

The Company recognizes revenue in accordance with FASB ASC 606,  Revenue From Contracts with Customers.

 

Revenue is accounted for gross as a principal versus net as an agent. Revenue is recognized on a gross basis since our company has the risks and rewards of ownership, latitude in selection of vendors and pricing, and bears all credit risk.

 

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 606. The Company’s current contracts meet these requirements for reporting revenue on a gross basis. The Company records a reduction in revenue for refunds, chargeback’s from credit card companies, and allowances based upon actual history and management’s evaluation of current facts and circumstances.

 

Reclassification

Certain amounts for the three months ended March 31, 2017 financial statements have been reclassified to conform to the presentation used in the three months ended March 31, 2018 Financial statements.

 

Recent Accounting Pronouncements

The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position. 

 

NOTE 3 - RELATED PARTY TRANSACTIONS

 

During the three months ended March 31, 2018, the Company received $30,000 from Mr. John Herzog. The advance was used for operating expenses, is unsecured, bears interest at 18% and is due on demand. Interest expense for the three months ended March 31, 2018, amounted to $296.

 

During the three months ended March 31, 2018, the Company received an advance of $1,000 from CrowdPay, Inc. Ronny Yakov is also the CEO of CrowdPay, Inc. The advance was used for operating expenses, is unsecured, non-interest bearing and due on demand.

 

NOTE 4 – COMMITMENT

 

On October 20, 2017, the Company entered into a new employment agreement with its founder and president for 7 years effective January 1, 2018 through December 31, 2024. The agreement provides for an annual salary of $375,000, fringe benefits ($2,500 monthly automobile allowance, any benefit plans of the Company and 4 weeks paid vacation), an incentive bonus of $200,000 based on the achievement of certain performance criteria.  

 

NOTE 5– SUBSEQUENT EVENTS

 

In accordance with ASC 855-10, Subsequent Events ¸ management has analyzed our operations from the balance sheet date through the date the financial statements were available to be issued.

 

Memorandum of Sale

 

On April 9, 2018, Securus365, Inc., a Delaware corporation (“ Securus ”), eVance Capital, Inc., a Delaware corporation (“ eVance Capital ”), and eVance Inc., a Delaware corporation (“ eVance ”, and collectively with Securus and eVance Capital, the “ Purchasers ”), each of which Purchaser is a newly formed wholly-owned subsidiary of The OLB Group, Inc., a Delaware corporation (the “ Company ”), entered into a Memorandum of Sale (the “ Memorandum of Sale ”) by and among the Purchasers and GACP Finance Co., LLC, a Delaware limited liability company (“ GACP ”), in its capacity as administrative agent and collateral agent to certain secured lenders of the Debtors (as defined below), pursuant to which the Purchasers acquired substantially all of the assets of the Debtors (the “ Asset Acquisition ”) through a foreclosure sale arranged by GACP under the Uniform Commercial Code of the State of New York (“ UCC ”) of the collateral of Excel Corporation (“ Excel ”) and its subsidiaries Payprotec Oregon, LLC, Excel Business Solutions, Inc. and eVance Processing, Inc. (Excel and such subsidiaries, collectively, the “ Debtors ”) under the Loan and Security Agreement, dated as of November 2, 2016, by and among GACP, the lenders thereunder and the Debtors and related loan documents, as amended (the “ Excel Loan and Security Agreement ”).

 

  5  

 

 

GACP exercised its post-default remedies and realized on the collateral securing the Debtors’ obligations under the Excel Loan and Security Agreement by conducting a public auction of certain assets of the Debtors on April 9, 2018 in accordance with the UCC. The Purchasers submitted the Memorandum of Sale at such auction, which constituted the Purchasers’ bid for substantially all of the assets of the Debtors (“ Acquired Assets ”), which bid was accepted by GACP on April 9, 2018 in connection with the simultaneous signing and closing (the “ Closing ”) of the transactions contemplated under the Memorandum of Sale and the Credit Agreement (defined below).

 

In consideration for the sale and transfer of the Acquired Assets at the Closing, the Purchasers assumed certain post-Closing obligations under assigned contracts and paid to GACP the sum of $12,500,000, through the deemed simultaneous financing of such purchase price to the Purchasers under the Credit Agreement. Pursuant to the Memorandum of Sale, the Purchasers purchased from GACP and accepted all of the Debtors’ right, title and interest in and to the Acquired Assets “as is”, “where is” and “with all faults” and without any representations or warranties, express or implied, of any nature whatsoever. Any representations made by the parties in the Memorandum of Sale did not survive the Closing, and there is no indemnification rights for either party’s breach. 

 

Credit Agreement

 

In order to finance the Asset Acquisition, GACP, as administrative agent and collateral agent (“ Agent ”), and as the initial sole lender thereunder, provided a term loan of $12,500,000 (the “ Term Loan ”) to the Purchasers, Omnisoft, Inc., a Delaware corporation (“ Omnisoft ”), and CrowdPay.us, Inc., a New York corporation (“ CrowdPay ” and, collectively with the Purchasers and Omnisoft, the “ Borrowers ”), each of Omnisoft and Crowdpay being affiliates of the Company’s majority stockholder, which obligations are guaranteed by the Company (collectively with the Borrowers, the “ Loan Parties ”), under the Loan and Security Agreement (the “ Credit Agreement ”), dated as of April 9, 2018, by and among the Loan Parties, the lenders from time to time party thereto as lenders (the “ Lenders ”) and the Agent.

 

The Term Loan matures in full on April 9, 2021, the third anniversary of the Closing. $1,000,000 of the principal amount under the Term Loan must be repaid on or prior to July 15, 2018, and an additional $2,000,000 in principal due on or prior to October 31, 2018 (in each case subject to earlier repayment under certain circumstances, including if a Loan Party consummates an equity financing), with the remaining principal due upon maturity. The Term Loan can be prepaid without penalty in part by the Loan Parties with ten days’ prior written notice to the Agent, and in full with thirty days’ prior written notice. The Term Loan is subject to an interest rate of 9.0% per annum, payable monthly in arrears.

 

The obligations of the Loan Parties under the Credit Agreement are secured by all of their respective assets and the Loan Parties pledged all of their assets as collateral for their obligations under the Credit Agreement. Additionally, the Company pledged its ownership interests in the Purchasers and any of its other subsidiaries that it may form or acquire from time to time.

 

The Credit Agreement includes customary representations, warranties and financial and other covenants of the Loan Parties for the benefit of the Lenders and the Agent. The obligations of the Loan Parties under the Credit Agreement are subject to customary events of default for a secured term loan. Each Loan Party is jointly and severally liable for the obligations under the Credit Agreement.

 

  6  

 

 

Warrants

 

Pursuant to and as additional consideration for the Term Loan under the Credit Agreement, on April 9, 2018 (the “ Issuance Date ”) the Company issued to GACP a Warrant (the “ Warrant ”) to purchase 1,200,000 shares of common stock of the Company (“ Warrant Shares ”) at an exercise price of $0.25 per share, subject to adjustment as set forth in the Warrant. The Warrant is exercisable by GACP at any time from the Issuance Date until the later of (i) the third (3 rd ) anniversary of the Issuance Date and (ii) the date on which all obligations under the Credit Agreement have been satisfied in full. The Warrant may be redeemed for $0.0001 per Warrant Share, at the sole discretion of the Company, at any time after the six (6) month anniversary of the Issuance Date if the closing sales price of the Company’s common stock equals or exceeds $5.00 per share on each of the 20 trading days within any 30 day trading day period ending on the third (3 rd ) trading day prior to the date on which the Company provides a notice of redemption. GACP has certain piggy-back registration rights as set forth in the Warrant with respect to the Warrant Shares to be issued upon exercise of the Warrant. After the six (6) month anniversary of the Issuance Date, GACP can exercise the Warrant using a “cashless exercise” feature to the extent that GACP exercises the Warrant for a number of Warrant Shares in excess of the number Warrant Shares that have been registered for resale under U.S. securities laws.

 

As additional consideration for the Term Loan under the Credit Agreement, on April 9, 2018 the Company also entered into a letter agreement (the “ Additional Warrants Agreement ”) with GACP, pursuant to which the Company agreed that if the Company at any time after the Closing and prior to the satisfaction of all outstanding obligations under the Credit Agreement requests for GACP to provide debt financing for the acquisition of a company or operating business by the Company or its subsidiaries, and GACP or its affiliates provide all of the debt financing for such acquisition, the Company will issue to GACP a warrant to purchase 200,000 shares of the Company’s common stock (an “ Additional Warrant ”) upon the closing of such debt-financing, with such Additional Warrant in substantially the same form as the Warrant, up to a total of four (4) Additional Warrants for four debt-financed acquisitions under the Additional Warrants Agreement. The exercise price of the Additional Warrants, if issued, will be $0.30 per share for the first Additional Warrant, $0.35 per share for the second Additional Warrant, $0.40 per share for the third Additional Warrant and $0.45 per share for the fourth Additional Warrant, with the number of shares and exercise price subject to adjustment as set forth in the Additional Warrants Agreement and the Additional Warrant.

 

Effective May 9, 2018, the Company entered into a share exchange agreement with Crowdpay.US, Inc., a New York corporation (“Crowdpay”), for which the Company will issue 87,500,000 shares of common stock for all of the authorized stock of Crowdpay. Crowdpay will become a wholly owned subsidiary of OLB. As of the date of this filing the shares have not yet been issued.

 

Effective May 9, 2018, the Company entered into a share exchange agreement with OMNISOFT, Inc., a Delaware corporation (“OMNISOFT”), for which the Company will issue 55,000,000 shares of common stock for all of the authorized stock of OMNISOFT. OMNISOFT will become a wholly owned subsidiary of OLB. As of the date of this filing the shares have not yet been issued.

 

Subsequent to March 31, 2018, the Company approved the issuance of 25,000 shares of common stock for services rendered. As of the date of this filing the shares have yet been issued.

   

Forward-Looking Statements

 

The information in this report contains forward-looking statements. All statements other than statements of historical fact made in report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

 

The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

 

  7  

 

 

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 19,825,364 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 March 31, 2018 compared to the Three Months Ended March 31, 2017

 

REVENUE

 

Revenue from our subscription program for the three months ended March 31, 2018 decreased $2,619 to $9,904 from $12,523 for the three months ended March 31, 2017. The decrease can be attributed to a decrease in the number of subscribers to our subscription program.

 

COST OF REVENUE

 

Cost of revenue for the three months ended March 31, 2018 was $4,097 compared to $5,469 for the three months ended March 31, 2017, a decrease of $1,372 or 25.1%. The decrease is due to a decrease in administrative fees as a result of fewer subscribers to our subscription program.

 

OFFICER COMPENSATION

 

Officer compensation for the three months ended March 31, 2018 was $93,750 compared to $68,750 for the three months ended March 31, 2017, an increase of $25,000 or 36.4%. The increase is due to an increase in salary for our CEO.

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

General and administrative expenses decreased $7,275 or 26.5%, to $20,203 for the three months ended March 31, 2018 from $27,478 for the three months ended March 31, 2017. A majority of G&A expense consists of professional fees and travel expense.

 

  8  

 

 

OTHER INCOME AND EXPENSE

 

Interest expense decreased from $7,529 for the three months ended March 31, 2017 to $296 for the three months ended March 31, 2018. All interest expense is from the related party loans (Note 3).

 

NET LOSS

 

The net loss increased by $14,714 from a loss of $93,728 for the three months ended March 31, 2017, to a loss of $108,442 for the three months ended March 31, 2018. The increase in net loss can be partially attributed to the increase in officer compensations.

 

LIQUIDITY AND CAPITAL RESOURCES

 

During the three months ended March 31, 2018, the Company used $31,227 of cash for operating activities, as compared to $15,239 cash used through the three months ended March 31, 2017.

 

Cash provided from financing activities during the three months ended March 31, 2018 was $31,000 as compared to $15,500 for the three months ended March 31, 2017.

 

Subsequent to the quarter ending March 31, 2018, the Company consummated a business acquisition that may enable us to continue as a going concern. As discussed in Note 5, the Company has created three new subsidiaries, acquired certain assets, including cash, and revenue generating operations that may enable the Company to alleviate the doubt about continuing as a going concern.  The Company is currently in the process of a capital raise of up to $5,000,000 that should enable it to make its first scheduled payments on the Loan and Security Agreement (entered into on April 9, 2018) of $1,000,000 on July 15, 2018 and $2,000,000 on October 31, 2018. This, along with the additional acquisitions of CrowdPay.US, Inc, and Omnisoft, Inc. should provide the company with the assets and operations it requires to continue as a going concern. However, there are no assurances that we will be able to consummate the above capital raise.

 

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 606. The Company’s current contracts meet these requirements for reporting revenue on a gross basis. The Company records a reduction in revenue for refunds, chargeback’s from credit card companies, and allowances based upon actual history and management’s evaluation of current facts and circumstances.

 

  9  

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

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 March 31, 2018 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 March 31, 2018.

 

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.

 

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

See disclosure in Note 5.

  

ITEM 6. EXHIBITS

 

Exhibit Number   Exhibit Description
     
31.1   Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
31.2   Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
32   Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
101   Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 formatted in Extensible Business Reporting Language (XBRL).

  

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: May 15, 2018 By: /s/ Ronny Yakov
  Name: Ronny Yakov
  Title:

Chief Executive Officer and
Interim Chief Financial Officer

(Principal Executive Officer,
Principal Financial and Accounting Officer)

 

 

 

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