OLB GROUP, INC.
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
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x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended December 31, 2009
OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
transition period from _______________ to ____________________
Commission
file number 000-52994
THE OLB
GROUP, INC.
(Exact
Name of Registrant as Specified in its Charter)
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Delaware
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13-4188568
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(State
or other jurisdiction of
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(I.R.S.
Employer Identification No.)
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incorporation
or organization)
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1120
Avenue of the Americas, 4
th
flr New York, NY 10036
(Address
of Principal Executive Offices with Zip Code)
Registrant’s
telephone number, including area code (212) 278-0900
Securities
registered pursuant to Section 12(b) of the Act:
None.
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, $.01 par value
Title of
Class
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
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Yes
o
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No
x
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Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15 (d) of the Act.
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Yes
o
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No
x
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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 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.
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Yes
x
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No
o
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Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K.
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o
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Indicate
by check mark if whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated file or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer
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o
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Accelerated
filer
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o
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Non-
accelerated filer
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o
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Smaller
reporting company
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x
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
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Yes
o
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No
x
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The
aggregate market value of the voting and non-voting common equity held by
non-affiliates, computed by reference to the average bid and asked price of such
common equity as of June 30, 2009, was approximately
$1,338,706.
As of
March 30, 2010, there were 71,943,192 shares of the issuer’s common
stock outstanding.
THE
OLB GROUP, INC.
TABLE
OF CONTENTS
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PART
I
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Page
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Item
1.
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Business
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4
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Item
1A.
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Risk
Factors
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11
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Item
1B.
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Unresolved
Staff Comments
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24
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Item
2.
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Property
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24
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Item
3.
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Legal
Proceedings
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25
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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25
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PART
II
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
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25
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Item
6.
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Selected
Financial Data
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27
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
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27
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Item
7A.
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Quantitative
and Qualitative Disclosure About Market Risk
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30
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Item
8.
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Consolidated
Financial Statements and Supplementary Data
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31
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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32
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Item
9A(T).
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Controls
and Procedures
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32
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Item
9B.
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Other
Information
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33
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PART
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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34
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Item
11.
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Executive
Compensation
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35
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
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37
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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38
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Item
14.
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Principal
Accountant Fees and Services
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38
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PART
IV
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Item
15.
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Exhibits,
and Financial Statement Schedules
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42
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Item
15(a).
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Index
to Consolidated Financial Statements and Financial Statement
Schedule
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Signatures
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43
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2
CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Some of
the statements of The OLB Group, Inc. included in this Report, including matters
discussed under the captions “Legal Processing” in Part I, Item 3 and
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part II, Item 7 are “forward-looking
statements.” These forward-looking statements generally are based on
our best estimates of future results, performances or achievements, based upon
current conditions and assumptions. Forward-looking statements may be identified
by the use of forward-looking terminology such as “may,” “can,” “could,”
“project,” “expect,” “believe,” “plan,” “predict,” “estimate,” “anticipate,”
“intend,” “continue,” “potential,” “would,” “should,” “aim,” “opportunity” or
similar terms, variations of those terms or the negative of those terms or other
variations of those terms or comparable words or expressions. These risks and
uncertainties include, but are not limited to:
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general
economic conditions in both foreign and domestic
markets;
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cyclical
factors affecting our industry;
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lack
of growth in our industry;
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Our
ability to comply with government
regulations;
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a
failure to manage our business effectively and profitably;
and
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Our
ability to sell both new and existing products and services at profitable
yet competitive prices.
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You
should carefully consider these risks, uncertainties and other information,
disclosures and discussions which contain cautionary statements identifying
important factors that could cause actual results to differ materially from
those provided in the forward-looking statements. The OLB Group, Inc.
undertakes no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
3
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Business
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History
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 26,901,963 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 $0.01 per
share, and 50,000,000 shares of preferred stock, par value $0.01 per share. We
currently have 71,943,192 shares of common stock issued and outstanding. No
shares of preferred stock are currently outstanding.
Our
Business
We are an
e-commerce service provider engaged in the development of software products and
other services designed to help businesses sell products over the
internet.
Our
Products
We
developed two software products:
ShopFast Direct Shopping
Database
(TM) (“ShopFast DSD”), and
ShopFast Profit
Center
(TM) (“ShopFast PC”). Each of these software products
enables the user of the software to create an internet website from which such
user can sell products located on a database maintained by us (the “OLB
Database”).
Throughout
this Form 10-K, our “client” refers to the person who purchases and uses either
ShopFast DSD or ShopFast PC. Whenever we refer to the “purchase” or “purchase
price” of ShopFast DSD or ShopFast PC, as with almost all other software on the
market, we are referring to the purchase of a license to use the
software.
Initially,
our business will be dependent on a limited number of suppliers engaged in
competitive businesses such as sales of books, music, video, and audio products
and we currently have only one agreement and arrangement with one supplier,
Baker & Taylor Fulfillment, Inc, (“B&T”), for the above products. The
Company will need to enter into additional agreements with other supply
companies in order to expand the lines of products available on the OLB
Database. If the Company is successful in negotiating such additional supply
agreements, of which there can be no assurance, the OLB Database, as
and if operations grow, could expand to eventually contain a “virtual inventory”
of over three million products, including computer and office supplies,
electronic products, sports apparel, compact discs, books, fine Belgian
chocolates, flowers, cosmetics, beauty products, and fragrances. We characterize
as “virtual” the inventory of the products to be contained on our OLB Database
because such products will be supplied by third-party suppliers, not us.
Throughout this Form 10-K, “supplier” means the person who provides the products
ordered from the OLB Database. We do not own the products found on our OLB
Database, and we do not carry any inventories of such items. We do not have a
warehouse or any warehouse employees. We will depend on suppliers to fulfill the
orders for any products purchased from the OLB Database.
As
further discussed below, ShopFast DSD is a collection of software programs that
are packaged together into what is known as a software suite. ShopFast DSD
enables a client to create a customized website, pursuant to any of our client’s
specifications, for the sale of products from the OLB Database. We will work
together with our client to customize such website to include our client’s
logos, desired design layout, and any other desired features.
4
ShopFast
PC is also a software suite. ShopFast PC enables our client to create on its own
a standard website pre-designed by us for the sale of products from the OLB
Database. Our client may choose from a selection of our pre-designed logos,
design layouts, and color schemes for the website. Further, our client may
personalize certain of the information on the website, by adding the client’s
name, slogan, and other information about the client.
Throughout
this Form 10-K, “Internet Storefront” means the individual website that is
created for the use of each of our clients using either ShopFast DSD or ShopFast
PC for the sale of products from our OLB Database. As an additional service
provided to our clients, we will host the Internet Storefronts. This means that
the website will be placed on our server, which is simply a computer connected
to the internet for the purpose of serving up web sites which people can access
from the internet. We will provide an internet address for the Internet
Storefront, which can be personalized by the client. For example, if the
client’s company name is “Rick’s Books”, then the internet address can be
personalized as http://rickbooks.shopfast.com.
With
either software program, once our client’s Internet Storefront is established,
our client can sell the products contained on our OLB Database to visitors to
that client’s Internet Storefront. Throughout this document, “client’s customer”
means the person who purchases products from our client’s Internet Storefront.
As further discussed below, our clients will earn a commission on sales made
from their Internet Storefronts, and we will retain any remaining profits. In
addition, both ShopFast DSD and ShopFast PC enable the client to create various
reports summarizing information such as sales, profits, and number of visitors
to the Internet Storefront.
As
additional services to our clients, we will process the orders made on the
Internet Storefronts. A typical order will be processed as follows: The client’s
customer will place the order on the Internet Storefront and pay for it by
providing his or her credit card information on the Internet Storefront. Upon
the placement of an order, we will automatically receive a copy of the order
electronically, and the funds from the credit card payment will be paid from the
credit card company directly to us. We will then purchase the ordered products
from the appropriate suppliers and arrange for them to be delivered directly by
the supplier to the client’s customer. We will also send an e-mail to the
client’s customer confirming that the order has been placed and providing the
approximate date that the order will be shipped. The supplier will thereafter
provide us an invoice for the products purchased, which we will pay in
accordance with its terms. We will also pay to our client a commission on the
products sold, which commission will be paid once a month with respect to all
products sold by such client during the preceding month. Any remaining profits
will be retained by us.
We intend
to formally launch the promotion of our ShopFast PC software beginning in the
second quarter of 2010 and our ShopFast DSD shortly thereafter, depending on the
availability of the funds available to the Company for such
purposes.
Potential
Markets
We intend
to generate revenues from the following sources:
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sales
of ShopFast DSD and ShopFast PC to our clients;
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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;
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sales
of the related services we provide to our clients, including maintenance
of the OLB Database and processing of orders made on our clients’ websites
for products from the OLB Database;
and
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profits
from sales of the products from the OLB Databases remaining after we pay
the product commissions to the
client.
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5
Since
ShopFast DSD will be customized for each client, we will negotiate with each
client the purchase price of the ShopFast DSD software, the related services we
provide, and the commission payable to our client on sales made by such client.
The purchase price of the ShopFast PC software and the related services we
provide will be standard for all our clients and not subject to negotiation. The
purchase price of the ShopFast PC software is expected to be between $19.95 and
$59.95. The price will be set as the product is introduced and may increase or
decrease in the future depending on, among other things, the reception of the
product, improvements to the product and any competing products that may be
introduced into the market place in the future. The continuing services we
provide, including maintenance of our OLB Database and the processing of orders
placed for products from our OLB Database, will be made available for an
additional monthly fee, ranging from a minimum of $9.95 to up to $49.95,
depending on the level of services requested by the client, which fee might also
be adjusted in the future based on marketplace conditions for such services. The
commission that we will pay to a client using ShopFast PC will be a percentage
of the gross revenues generated by such client with respect to each type of
product. The specific amount of such percentage, depending on the type and price
of the product sold, can range from 2.5% to 60%.
Growth
Through Acquisition
As part
of our business strategy, we intend to acquire complementary businesses. Our
management believes that we can achieve profitability if, in addition to
generating revenues based on sales of our software products, related services
provided to our clients and our profit from sales to customers by our clients,
we also acquire complementary businesses. The Company expects, based on the
prior experience of the Company’s predecessor that the Company may have a
negative cash flow for the first six to nine months after it commences
operations, but there can be no assurance that prior experience will be correct
and that such period may not be longer or shorter. There can be no assurance
that any such acquired businesses will ever be profitable, If such acquired
businesses were not profitable at the time of acquisition, the Company, if
management’s assessment of the business potential proved correct, would expect
such businesses to experience a negative cash flow for not less than from six to
nine months from acquisition, which could materially affect the operations of
the Company and cause it to continue to incur financial losses for an indefinite
period of time. The Company may not be able to make acquisitions in the future
and any acquisitions we do make may not be successful. Any such future
acquisitions may also have a material adverse effect upon our operating results,
particularly in periods immediately following the Consummation of those
transactions while the operations of the acquired businesses are in the process
of being integrated with and into our then current operations. The Company has
entered into discussion with several companies, and has been in contact with,
several potential targets for such future acquisitions. While the Company
intends to exert substantial efforts to acquire complementary businesses, in the
event the Company is not successful in acquiring complementary businesses, the
Company may determine that it is in the best interests of the Company to
commence to develop complementary products to its software products and/or
incorporate additional functionality into newer versions of its current
software, while still pursuing possible acquisitions.
The
Company intends to initially evaluate such potential targets for acquisition
based upon the concept of determining the cost of such acquisition based upon
the cost of developing and implementing the software, services and/or customer
base independently of such an acquisition. There can be no assurance that
Management’s evaluation will prove to be correct following such acquisition or
independent development.
In
connection with any such acquisition, the company anticipates that it will
acquire such target by a purchase price of company Stock or a combination of
stock and cash. In the event that a cash component is included, the company
anticipates that it will have to finance the cash portion of the purchase price.
There can be no assurance that the Company will be able to obtain such financing
on terms acceptable to the Company.
6
Industry
Overview
An
e-commerce service provider enables a business desiring to sell goods and
services on the internet, also known as an e-commerce seller, to utilize the
service provider’s established e-commerce resources and support services, thus
creating economies of scale and cost efficiencies throughout the entire
e-commerce process.
Infomercial
Sales
We
initially intend to market our products through the use of “infomercials.” The
Company’s largest competitor, as well as others, uses the “infomercial” as their
primary marketing format.
Selling
products through "Infomercials" (direct response television sales - "DRTV") can
serve as a profitable sales tool for appropriate products. According to Forbes
Magazine, an estimated sixty three percent (63%) of Americans over the age of
sixteen had purchased products after viewing an Infomercial
program.
A
company's startup situation hinges on the success of the initial products'
testing periods. These test periods may last for six months each, with positive
results being used to refine and enhance the product "show," and negative
results (a product that does not test well early on) leading to the early
abandonment of the product. Only successfully-tested product Infomercials will
be further refined and broadcast in a full-scale media campaign.
The
industry has made significant strides in overcoming negative public perception.
Major corporations such as Apple, Sony, and Gateway use the sales channel as
part of their overall marketing campaigns. Production quality has also improved
in the past few years, resulting in viewers who perceive infomercial and direct
response television as entertainment.
DRTV
remains subject to negative public perception, and it can be a challenging and
costly proposition. There remain incidents of DRTV production organizations
requiring the manufacturers or owners of the products to pay for not only the
cost of the goods, but also all of the production costs of a "test" infomercial,
including legal compliance, talent, equipment rentals, production crews,
location costs and other production fees and expenses, while declining to run
the infomercial.
As a
sales channel, DRTV is enjoying substantial growth. At the same time, consumers
are overwhelmed with the high number of direct response programs currently
airing, which viewers often perceive as annoying `paid advertising' programs.
Media buyers jockey for coveted airtimes that produce high returns. These
combined forces create a challenging environment for DRTV product developers. In
spite of the challenges, the DRTV sales channel can return excellent profits for
products that test well and meet the sales channel's tough requirements for
success.
Growth
rates for the electronic direct response industry (TV, radio and internet) have
been quite strong, driven by deregulation, the proliferation of cable channels
in the mid -1980's and the growth of the internet.
Infomercials
are aired on national cable networks and local broadcast stations in all 212
broadcast markets nationally. The programs use sophisticated motivational
techniques that drive viewers to immediately purchase the product through a
Call-To-Action (“CTA”), usually in the form of a toll-free telephone order
number. A typical presentation sequence in the program is: product introduction;
product demonstration; customer testimonials; followed by a Call-To-Action
(CTA). Quite often the viewer is provided with additional motivation to order
the product through the use of product up-sells (...'but
wait, there's
more'..).
The carefully crafted message cultivated by the
program is intended to develop the viewer's sense of
immediately
needing the product, causing the viewer to react
to the Call-To-Action. The desired result is the viewer's impulse buy of the
product.
7
DRTV can
be a cost-effective sales channel for delivering a product's message to a large
number of viewers. A 1 % response rate to the CTA is considered typical. The
total number of viewers watching the program, multiplied by multiple broadcast
markets airing the program, can generate substantial calls even at just a 1%
response rate. The channel closes a lower percentage of sales (generally 25%)
compared to traditional one-on-one sales techniques, but reaches a mass audience
that can allow tremendous economies of scale and high margin returns.
Advertisers are turning to DRTV because the payback is much faster than that of
traditional broadcast advertising.
Broadcast
markets in Europe, Latin America, and Asia also represent an opportunity for
DRTV sales, providing additional markets for extending the product's lifespan.
While still generating sales in national DRTV and retail sales channels, a
product can be tested and adapted for placement in international channels,
generally in the order of Canada, Australia, Great Britain, France, Germany,
Japan and China.
Infomercial
advertising campaigns can build brands inexpensively, while creating a pent up
demand for eventual retail rollout. The most costly expenditure in an
infomercial campaign is that of buying airtime. Paying for airtime has two
effects. Buying media airtime generates immediate sales from each airing of the
infomercial. Just as importantly, brand awareness is quickly built through the
airings, allowing the company to create a widely recognizable brand name for the
product and the company. The infomercial marketing arena is often used as a
product's introductory sales channel, effectively building brand awareness prior
to rolling the product out into retail channels. When brand-name identification
of a product is established through DRTV and other marketing methods, even
greater income can be generated through product sales at retail and in foreign
countries.
Infomercial
Distribution
The three
major types of media distribution are National Cable, Broadcast, and Satellite.
Distributors sell blocks of airtime for infomercials in 30-second, 60-second,
120-second, 2-minute, and 30-minute increments (actually 28.5 minutes). The
shorter time blocks are called 'short-form' and 'spots', the 30-minute blocks
are called 'long-form'. Generally, infomercial products with higher prices and
margins are appropriate for more expensive 30-minute blocks. A higher priced
product generally requires more time to explain the benefits to the customer. A
30-minute timeslot offers a greater opportunity to educate customers about a
product's benefits, and motivate that customer to place an order.
The
long-form category is highly competitive. Not only do products compete against
similar products in their categories, but each infomercial competes against all
other infomercials airing in the same timeframe, regardless of category. are two
new infomercials that began airing one-minute advertisements on stations
monitored by IMS.
Principal
Industry Factors
The
principal competitive factors in our market are brand recognition, selection,
personalized services, convenience, price, accessibility, customer service,
quality of search tools, quality of site content, reliability and speed of
fulfillment.
We
believe that our products will offer the following competitive advantages to
clients:
Flexibility:
Our flexible
platform will allow for more customized solutions for clients.
Categories:
We will provide
financial service companies with direct debit capability for their
customers.
Operating cost:
Low cost
resources, no warehouse, all fulfillment and customer service are
outsourced.
Experience:
We have processed
over 250,000 e-commerce orders for resellers in the past, during the period
during which we marketed our original ShopFast DSD Software.
Our
Strategy
E-commerce
is one of the fastest growing sales channels in the history of business, with
U.S. online revenues predicted to grow from $172B in 2005 to $329B in 2010,
according to Forrester Research. Consumer adoption of e-commerce continues at
such a rapid pace that its overall growth remains strong and far outpaces more
mature brick-and-mortar sales.
8
Because
of the rapid growth of internet shopping, both existing and new businesses must
consider establishing an on-line business presence to broaden their appeal to
potential customers. Additionally, a growing percentage of both existing
businesses and new businesses are exclusively focused online.
We will
be primarily targeting:
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Ecommerce
retailers
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Small
businesses
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Home
businesses
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New
businesses
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Entrepreneurs
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eBay
and similar web sites sellers
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Consumers
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We
believe that our business strategy offers the following advantages over
traditional e-commerce:
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Flexibility
to add new resellers to our existing scalable e-commerce platform and
resources: Our e-commerce platform consists of the hardware and software
needed to operate our e-commerce services. A reseller can be added to our
e-commerce platform and infrastructure by the installation of ShopFast PC
or ShopFast DSD on the reseller’s computer.
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Utilization
of a core technology platform across multiple markets: Internet
Storefronts can be customized to be targeted to specific markets, without
requiring the use of additional software or hardware other that required,
and previously described, in order for the reseller to access the
internet.
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Distributing
the cost of establishing supplier relationships over large numbers of
clients.
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Aggregating
supplier purchases to achieve volume discounts: Orders received for a
particular product from the various Internet Storefronts established by
our clients are automatically aggregated by our software programs. This
will enable us to purchase from suppliers enough quantities of particular
products to be entitled to volume discounts from the
suppliers.
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Aggregation
of customer data from all Internet Storefront to generate targeted
marketing programs; and Provision of a complete set of resources and
services which will create strategic relationships with resellers as we
become integral to their continued
success.
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Infomercial
Marketing of Our Products
We plan
to produce a 30 minute infomercial to promote this product, as well as short
form two minute commercials after completing the longer infomercial. We intend
to run the advertisements for a period of time and to use focus groups to
determine the prices at which we can obtain the highest level of reseller
orders
and then to
launch a full scale media campaign. If the ratio of media spending to product
orders is at least $1.50 return in orders on $1.00 spent on advertising, we
would continue such advertising. Otherwise, we would consider alternatives to
the advertising methods tried. After adjustments to the marketing plan and
getting a satisfactory return rate on the media expenditures, we intend to
launch a nationwide television distribution campaign.
Customers
The
company completed its final development of its ShopFast PC software and has
substantially completed its quality assurance process. In the fourth quarter of
2008, the Company began accepting a small number of paid subscribers in
connection with the evaluation and completion of its quality assurance process.
The Company plans to complete all phases of its quality assurance process and
expand marketing of its ShopFast PC software in the second quarter of 2010,
depending on the funds available to the Company for such marketing
efforts.
9
The
Company’s limited quality assurance process test marketing of the ShopFast PC
software has been conducted primarily through a telemarketing sales organization
wherein independent distributors establish their own network of
associates.
Competition
We will
compete with a variety of other companies, including traditional stores,
non-traditional retailers, such as television retailers and mail order
catalogues, and a myriad of various online retailers of different sizes and
financial capabilities offering both specialty and broad categories of products.
Additionally our competition will include large online retailers, such as
Amazon, Yahoo, eBay and half.com. Management believes our current principal
competitor in the e-commerce service provider space is Monster Commerce , which
markets its services primarily through infomercials.
Many of
our current and potential competitors, including those mentioned in the
preceding paragraph, have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing and
other resources than us.
See
“
Risk Factors--We are subject
to significant competition and may be unable to keep up with the technology and
pricing of our competition
,” for a more detailed discussion
of the competitive factors to which we are subject.
Intellectual
Property
The
Company does not have any registered trademarks. We have obtained the domain
name http://www.shopfast.com (“shopfast.com”) as well as http://www.shopfast.net
(“shopfast.net”) We also have obtained the domain name http://www.olb.com, which
will be utilized to provide information about the Company as well as information
about its products and services. This site will not be utilized for sales of
software and or product, but it is anticipated that links to such sites, when
appropriate, will be provided.
The
Company still maintains ownership of the domain name http://www.colorbank.com,
which was utilized in connection with its prior business operations. The Company
has no present plans for the utilization of this domain name.
The
company intends to file for registered trademarks for its products when funds
are available for that purpose. However, there can be no assurance that the
Company will be successful in obtaining any such trademarks.
The
company is also the sole owner of all the source code and development properties
of the ShopFast software.
Employees
As of
December 31, 2009, we had one full time employee and five part time employees,
all of whom, except for Ronny Yakov, our chief executive officer, are outsourced
as contractors to the Company. We have no employment contracts, other than with
our chief executive officer. Our employees are not affiliated with a union or
affected by labor contracts. We also engage consultants from time to time on an
independent contractor basis. Mr. Yakov is currently serving as our Chief
Financial Officer on an interim basis. The Company is currently identifying
candidates to serve as Chief Financial Officer. The candidate who is identified
and hired will become an employee devoting such time as is necessary to our
business for the performance of his duties.
The Company has signed a
five year employment agreement with Ronny Yakov, its President and Interim Chief
Financial Officer. The agreement pays Mr. Yakov $275,000 per year
plus $1,500 per month car allowance. The agreement expires February
28, 2013.
10
The
Company’s employee and contractor relations seem to be good. We cannot be
assured of being able to attract quality employees in the future. The
establishment of our business will be largely contingent on our ability to
attract and retain personnel for the management team. There is no assurance that
we can find suitable management personnel or will have the financial resources
to attract or retain such people, if found.
Regulation
At this
time, there are no federal or state certifications or other regulatory
requirements applicable to our products and we are not aware of any pending
federal or state legislation which would introduce regulatory requirements that
would negatively impact or impede the sales and distribution of our products in
the United States or elsewhere; however, our products and business practices may
be subject to review by industry self-regulatory agencies and consumer affairs
monitors. Actions resulting from such reviews could include, but not limited to,
cease and desist orders, fines and recalls.
Our
advertising is subject to review by the National Advertising Council (NAC) and
our advertisements could be subject to NAC recommendations for modification. The
U.S. Federal Trade Commission (FTC) and state and local consumer affairs bodies
oversee various aspects of our sales and marketing activities and customer
handling processes. If any of these agencies, or other agencies that have a
right to regulate our products, engage in reviews of our products or marketing
procedures we may be subject to various enforcement actions.
|
Risk
Factors
|
There
are numerous and varied risks, known and unknown, that may prevent us from
achieving our goals, including those described below. The risks described below
are not the only ones we will face. Additional risks not presently known to us
or that the Company currently deems immaterial may also impair our financial
performance and business operations. If any of these risks actually occurs, our
business, financial condition or results of operations may be materially
adversely affected. In such case, the trading price of our Common Stock could
decline, and you may lose all or part of your investment. Before making any
investment decision, you should also review and consider the other information
set forth in this report.
You
should carefully consider the following risk factors, in addition to the other
information presented in this Form 10-K, in evaluating us and our business. Any
of the following risks, as well as other risks and uncertainties, could harm our
business and financial results and cause the value of our securities to decline,
which in turn could cause you to lose all or part of your
investment.
Risks
Relating to Our Business – Going Concern Issues
We
have incurred and will continue to incur financial losses until we are able to
generate sufficient revenues from operations to offset such expenditures, and we
will require additional financing, which may not be available when needed. If
our business plans are not successful, we may not be able to continue operations
as a going concern and our stockholders may lose their entire investment in
us.
In 2008
and 2009, we incurred operating losses. The Company anticipates that it will
continue to incur losses for some time. The Company’s continued existence is
dependent on its ability to generate additional revenues and on obtaining
additional financing from its stockholders and external sources. Accordingly,
there can be no assurance that the Company will succeed in executing its plans
and have all the financing necessary for its operations.
We
incurred significant losses from operations, and as of December 31,
2009, have a working capital deficit of approximately
$85,214.
11
Our
auditors have indicated that our past losses from operations and our working
capital deficit raise substantial doubt as to our ability to continue as a going
concern. The accompanying financial statements do not include any adjustments
that might be necessary should we be unable to continue as a going
concern.
Our
ability to continue as a going concern is dependent upon our generating cash
flow sufficient to fund operations and reducing operating expenses. We expect to
incur significant up-front expenditures in connection with our e-commerce
operations, including increased expenditures relating to marketing and sales and
development of web sites for new clients, which will result in continuing
operating losses. While we currently expect to commence marketing our e-commerce
software and services in the second quarter of 2010, we anticipate that losses
will continue until we attract and retain a sufficient number of clients for our
products and services and are able to generate sufficient revenues from the
e-commerce websites of such clients to offset such expenditures. Historically,
we have not derived positive cash flow from a web site until it has been in
operation for six to nine months. Our business plans may not be successful in
addressing these issues. If we cannot continue as a going concern, our
stockholders may lose their entire investment in us.
Until we
receive sufficient revenues from operations, if ever, we will endeavor to fund
our working capital requirements by obtaining loans from Ronny Yakov, who is our
largest shareholder, and third parties. Mr. Yakov is under no obligation to
advance any additional sums of money to the Company and, additionally, there can
be no assurance that we will be successful in obtaining such funds from third
parties. We cannot assure you that we will generate revenues or positive cash
flow or succeed in obtaining the financing necessary for our operations when
needed and on acceptable terms, or at all. Our failure to obtain additional
financing when needed will have a material adverse effect on our business,
financial condition and prospects. If we cannot obtain such additional
financing, our stockholders may lose their entire investment in us. We may have
to limit operations during the period that we are looking for capital if we can
not obtain interim working capital loans. We may incur losses in future periods,
which could reduce investor confidence and cause our share price to
decline.
We expect
to increase our sales and marketing expenses, research and development expenses
and general and administrative expenses, and we cannot be certain that our
revenues will grow at a rate sufficient to cover these costs, if at all.
Accordingly, we may be unable to operate profitably, even if we develop
operations and generate revenues. The Company expects, based on prior
experience, that the Company may have a negative cash flow for the first six to
nine months after it commences marketing efforts, which are planned to commence
during the second quarter of 2010, but there can be no assurance that prior
experience will be correct and that such period may not be longer or shorter. We
will be dependent on a limited number of suppliers, and we currently have only
one Supplier agreement and arrangement.
We
anticipate that our business will be dependent on a limited number of suppliers
engaged in competitive businesses such as sales of books, music, video, and
audio products. We currently have only one agreement and arrangement with one
supplier, Baker & Taylor Fulfillment, Inc, (“B&T”), for the above
products. The Company will need to enter into additional agreements with other
supply companies in order to expand the lines of products available on the OLB
Database. We anticipate that, so long as we are processing orders by credit
card, such additional agreements will be obtainable, although the terms of any
such agreements are not expected to offer the Company direct credit or any other
benefit other than that made available to other new customers of such entities
with no current track record with such supplier.. Should we encounter the loss
of a primary supplier, or a decline in the economic prospects or activity of
such supplier, we might need to limit the listing of a product, or line of
products, from the OLB Database. We also may also need to increase the delivery
times for such products, resulting in losses of sales, which events could
materially and adversely affect our financial condition and operating results
and, consequently, our stockholders may lose their entire investment in
us.
We will
be dependent on third parties for fulfillment over whom we have only limited or
no control.
We do not
carry any inventories and do not have any warehouse employees or facilities. We
will be dependent on our suppliers to fulfill customer orders and ship
merchandise directly to consumers on a timely and competitive
basis.
12
While we
have only limited control over the fulfillment and shipping procedures of our
suppliers, we assume the risk of product delivery upon shipment. Poor
performance by our suppliers would adversely affect our business and
reputation.
Our
business also depends on the ability of our suppliers to provide products at
competitive prices in sufficient quantities and of acceptable quality. We cannot
assure that you our suppliers will continue to sell merchandise on favorable
terms or that we will be able to establish new, or extend current, relationships
to ensure acquisition and delivery of merchandise in a timely and efficient
manner and on acceptable commercial terms.
We expect
that our suppliers, similar to B&T, will limit the circumstances under which
we can return products for other than erroneously shipped products, damaged
products, defective products. For other types of returns, we expect a time limit
similar to the 60 days imposed by B&T, as well as a “re-stocking” type
charge for certain categories of returns. In addition, a penalty for excessive
returns which, in the case of B&T, will be a an increase in the return
processing fee to 10% of the price charged by B&T for the remainder of the
term of the agreement can be expected.
These
type of agreements customarily impose a high rate of interest for failure to pay
invoices timely (18% for B&T), provide no right to maintain an open account
balance with the supplier, do not guarantee that products covered by the
contract will always be in stock, and prices will be subject to change with
little or no notice.
As, when
and if, the Company increases the level of business it conducts with such
suppliers, it is possible, but not assured, that the Company may be able to
negotiate more favorable business terms.
We
will assume certain risks of our suppliers, including the risk of loss on
payment disputes.
Typically,
a client’s customer will place the order on the Internet Storefront and pay for
it by credit card on the Internet Storefront. Upon the placement of an order, we
will automatically receive an electronic copy of the order, and we will receive
the credit card funds directly from the credit card company. We will then
purchase the ordered products from a supplier and arrange for direct delivery
from the supplier to the client’s customer. The supplier will thereafter invoice
us for the products purchased, which we will pay when due. We will also pay to
our client a commission on the products sold, commission will be paid once a
month with respect to all products sold by such client during the preceding
month. We will retain any remaining profits, after payment of client
commissions
.
In the
event of a customer dispute it is possible that a credit card company may charge
back the purchase price of a product while we have paid the supplier for the
products. The Company will have a potential for loss on such amounts if the
dispute is not resolved to the customer’s satisfaction or the credit card
company otherwise reverses any such charge back.
We hope
to enter into additional agreements with our suppliers which will require them,
as in the case with B&T, to pay us specified percentages (by product line)
of total product sales offered by us over the Internet. We will recognize
revenues on product sales when the product is shipped to the client’s customer
by our supplier. We will recognize the amount due to a supplier (i.e., total
product sales less our specified percentage) in cost of sales. In order for us
to adopt this accounting policy, we will assume the risk of loss on product
shipments and bear the credit risk with respect to product sales. An
unanticipated delay in shipping, or substantial shipments of defective goods
and/or returns could result in our absorbing the loss. If product related losses
are material, our business financial condition and operating results could
likely be adversely affected.
In the
case of B&T, we are obligated to utilize it as our primary supplier for
goods within the categories specified in the agreement, as will more likely than
not be the case with other primary suppliers we may enter into agreements with.
In the event of limitations on product availability from a primary supplier,
there exists a risk that orders can be lost pending an alternate source of
supply. We will endeavor to have agreements in place with back-up suppliers in
the event that a primary supplier runs into stock and or other fulfillment
problems, but no assurance can be given that back-up suppliers will always be
obtainable for all offered products.
13
High
returns of the Company’s ShopFast PC Software could lower profit margins of the
Company.
We plan
to initiate a “money back guarantee policy” for our ShopFast PC individual and
small business customers, who we refer to as “resellers,” which will permit
resellers to return this product to us within 30 days if not satisfied, which is
a common return period in the industry. A materially larger number of returns
could lower our margins.
E-commerce
is still an evolving market, with business and security risks, and we cannot
assure you of the market acceptance we require in order to become
profitable.
The
business of selling goods over the Internet is relatively new and is still
rapidly evolving. Demand for our products and services could be negatively
affected by:
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•
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inadequate
development of Internet resources;
|
|
•
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security
and privacy concerns; and
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•
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inconsistent
service quality.
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If we are
unable to acquire users for our services, our business will be adversely
impacted, and our stockholders may lose their entire investment.
The need
to transmit confidential information securely, such as credit card and other
personal information, over the Internet has been a significant barrier to
e-commerce. We will rely on encryption and authentication technology licensed
from third parties to provide the security and authentication necessary to
effect secure transmission of confidential information, such as customer credit
card numbers. We cannot assure you that future advances in computer
capabilities, new discoveries in the field of cryptography or other events or
developments will not result in a compromise or breach of the algorithms used by
us to protect customer transaction data. Any publicized compromise of security
could deter people from using the web for e-commerce transactions. Such security
concerns could reduce the e-commerce market, force us to incur significant cost
to protect ourselves from the threat of problems caused by such security
breaches, and thereby materially and adversely affect our business, financial
condition and operating results.
We
are subject to certain global business operation risks.
The
internet allows for potential clients and their customers to be located
world-wide. Sales of our products and sales to customers by our clients may be
subject to different laws and regulations in effect in such jurisdictions which
could impede our growth. The Company, in conjunction with its suppliers, will
develop policies for where orders for products shipment destinations by
customers will be accepted in order to minimize risk exposure to the Company.
Any negative impact changes in trade regulation could have an effect on the
areas in which the Company can successfully maintain and/or develop its client
base and a client can develop its customer base.
We
are dependent on our clients to operate and promote their
storefronts.
Our
future success will depend upon on our clients’ properly operating the ShopFast
Suite system they are utilizing and to promote their storefront. The failure of
the clients to do so will have a material adverse effect on all aspects of the
business of the Company.
14
We
are subject to significant competition and may be unable to keep up with the
technology and pricing of our competition.
Online
retail shopping is rapidly evolving and intensely competitive. We expect
competition in the online commerce market to intensify in the future. Barriers
to entry are minimal, and current and new competitors can launch new sites at a
relatively low cost. In addition, the retail shopping industry is intensely
competitive. We currently or potentially compete with a variety of other
companies, including traditional stores, non-traditional retailers, such as
television retailers and mail order catalogues, and other online retailers.
Competitive pressures created by any one of the foregoing, or by our competitors
collectively, could have a material adverse effect on us. Our competition
includes a myriad of various online retailers of different sizes and financial
capabilities offering both specialty and broad categories of products and, in
addition, large internet retailers such as Amazon, Yahoo, eBay and
half.com.
The
options generally available to a retailer desiring to sell goods or services on
the internet normally require a large up-front investment, lengthy development
cycle and recurring maintenance and update costs for which we plan to provide a
cost effective and efficient alternative to our clients. Clients who purchase
and use our ShopFast DSD and ShopFast PC will not have to invest in hardware,
software or staffing beyond that which is normally required for access to the
internet and the web. The equipment and services required includes, an internet
ready computer equipped with an operating system that fully supports Internet
Explorer Version 5.0 or higher, an internet service provider with high speed
service (although dial-up, while slower will operate) and a printer. Instead,
other than the basic equipment listed above, they will be able to access our
existing resources and will be able to use ShopFast DSD or ShopFast PC, as case
may be, without having to purchase additional software or hardware. While our
ShopFast DSD and ShopFast PC has been designed to be easily installed and
operated by persons not having computer expertise and to offer the a quick and
direct way for any business or individual to begin selling products over the
Internet, we cannot assure you that we will be able to compete with our
competitors.
We
believe that the principal competitive factors in our market are brand
recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, quality of site
content, reliability and speed of fulfillment. Many of our current and potential
competitors, including those mentioned in the preceding paragraph, have longer
operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources than us. In
addition, other on-line retailers may be acquired by, receive investments from,
or enter into other commercial relationships with larger, well-established and
well-financed companies as use of the Internet and other on-line services
increases. Certain of our competitors may be able to secure merchandise from
manufacturers and/or suppliers on more favorable terms, devote greater resources
to marketing and promotional campaigns, adopt more aggressive pricing or
inventory availability policies and devote substantially more resources to web
site and systems development than we do. Increased competition may result in
reduced operating margins, loss of market share and a diminished brand
franchise. We cannot assure you that we will be able to compete successfully
against current and future competitors. Competitive pressures faced by us may
have a material adverse effect on business, financial condition and results of
operations.
We
are dependent upon our proprietary technology and are subject to the risk of
third party infringement claims.
Our
success and ability to compete is dependent in significant part upon our
proprietary software technology. We rely upon a combination of trade secret,
copyright and trademark laws, nondisclosure and other contractual agreements and
technical measures to protect our proprietary rights. Currently we have no
patents or trademarks on file to protect our intellectual property. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy aspects of our products or to obtain and use information that we regard as
proprietary. We cannot assure that the steps taken by us to protect our
proprietary technology will prevent misappropriation of such technology, and
such protections may not preclude competitors from developing products with
functionality or features similar to our products. In addition, effective
copyright and trade secret protection may be unavailable or limited in certain
foreign countries. Such royalty or licensing agreements, if required, may not be
available on terms acceptable to us or at all. In the event of a successful
claim of product infringement against us and our failure or inability to develop
a non-infringing technology or license the infringed or similar technology our
business, results or financial condition could be materially and adversely
affected..
15
Failure
of our hardware systems or system suppliers could have a material adverse effect
on our business.
We will
depend on third party communications providers to enable internet users to
access our resellers' web sites and the ShopFast DSD website which we intend to
establish when the ShopFast DSB becomes ready for sale. These web sites could
experience disruptions or interruptions in service due to failures by these
providers. In addition, end-users depend on Internet service providers, online
service providers and other web site operators for access to these web sites.
Each of these groups has experienced significant outages in the past and could
experience outages, delays and other difficulties due to system failures
unrelated to our systems. Material delays and system failures would adversely
affect our operations and could have material adverse effect on our business,
prospects and financial condition.
Our
ability to successfully receive and fulfill orders and provide high-quality
customer service largely depends on the efficient and uninterrupted operation of
our computer and communications hardware systems linking us to our suppliers who
are responsible for fulfilling such orders. We depend on such systems for
receiving orders for the products included in our OLB Database and communicating
with our suppliers, clients, and customers of our clients. We depend on our
computer hardware systems throughout processing of an order and the related
payments, and the failure of such systems will have an adverse effect on our
ability to process an order efficiently
Our
systems are vulnerable to damage or interruptions from fire, flood, power loss,
telecommunications failures, break-ins and similar events. We presently do not
have redundant systems and do not have a formal disaster recovery plan. We carry
limited business interruption insurance to compensate us for losses, which may
be insufficient to cover all the damages. An event of the magnitude of September
11, 2001, could severely affect our operations and have a material adverse
effect on our business, financial condition and operating results.
Our
network resources may be vulnerable to computer viruses, break-ins and similar
disruptions from unauthorized tampering with our computer systems, leading to
material interruptions, delays or cessation in service to resellers and
customers. Inappropriate use of the internet by third parties could also
potentially jeopardize the security of confidential information stored in the
computer systems of our resellers.
We
are dependent on an increased network capacity for growth and will need
additional capital to expand it.
Our
current hardware and software systems will enable us to process such orders for
a maximum of 20,000 clients. In order to process orders for more than 20,000
clients, the Company will need to acquire additional hardware and software
systems.
Our
operations will depend upon the capacity, reliability and security of our
network resources. We currently have limited network capacity and will be
required as we grow to continue to expand our network resources to accommodate
increased numbers of users and the amounts of information they may wish to
access. Expansion of our network resources will require substantial financial,
operational and management resources. We cannot assure that you we will be able
to expand our network resources to meet potential demand on a timely basis, at a
commercially reasonable cost, or at all. Our failure to expand network resources
on a timely basis would have a material adverse effect on our business,
financial condition and results of operations.
16
We
have changed the focus of our business and are subject to many of the risks
associated with a new business.
We, by
way of our predecessor company, commenced e-commerce operations in 1997, and
such predecessor discontinued its focus on the digital media services business
in 1999, which was wound down and fully discontinued in 2001. Thereafter, the
focus became the development and implementation of our initial introduction of
ShopFast software. In 2000 we completed the original version of our ShopFast DSD
software. In fiscal 2001 and 2002 the Company lacked the funds to further
develop the software. In January 2003, we revised our e-commerce business plan
by undertaking the redesign and redevelopment of our products and changing our
marketing strategy. However, during fiscal 2003 and 2004, we were also unable to
expend funds for the development of the software as the result of the inability
of our merger partner to provide the Company with the promised funding in
accordance with the Merger Agreement. Such redesign of our products was made for
the purpose of incorporating into our previously existing products current
technologies and software that is intended to make the products easier to use.
In January, 2006, to aid us in redesigning and developing our ShopFast PC and
ShopFast DSD products, we retained six freelance software developers, some of
which are operating in India. Such software developers are responsible for
ensuring that the features of our software products work properly, resolving any
problems in the software, and developing any new features that we desire to add.
These software developers are paid on an hourly fee basis for their services. No
written agreements have been entered into with any of such software
developers.
In
addition, to marketing to existing businesses as we had in the past, our new
business plan contemplates selling our newly developed ShopFast PC product to
individuals and small businesses wishing to launch e-commerce businesses. We
plan to use television infomercials and other advertising venues to market our
product.
We have
limited experience in developing and commercializing new products and services
delivered over the Internet. There is limited information available concerning
the potential market acceptance of our products and services. Although we had
processed approximately 250,000 orders for the purchase of products or services
over the Internet in the past from 1999 to 2002, in connection with our original
version of the ShopFast DSD software, such experience is limited compared to
that of major internet retailers such as Amazon.com and Ebay.com.
Accordingly,
we are subject to all of the risks, expenses, delays, problems and difficulties
frequently encountered in the establishment of a new enterprise in an emerging
and rapidly evolving industry characterized by an increasing number of new
Internet products and services.
The
effective execution of our business will be largely dependent upon our ability
to:
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obtain
adequate financing;
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·
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successively
complete the development and testing of our redesigned
products;
|
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·
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achieve
significant market acceptance for our products and
services;
|
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·
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expand
our resources and increase system capacity;
and
|
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·
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hire
and retain skilled management, technical, marketing and other
personnel.
|
We cannot
assure you that we will be able to execute our business successfully, or that we
will not encounter unanticipated expenses, problems or technical difficulties
will result in material delays in its implementation. If we fail to implement
our business plan effectively, our business, financial condition and prospects
will be materially and adversely affected.
Our
failure to finance operations would have a material effect on our business
plan.
We cannot
assure you that any delay or modification of our plans would not adversely
affect our business, financial condition and results of
operations. If the Company does not develop a source additional
financing the Company will continue to be dependent on possible additional
financing from Ronny Yakov, our chief executive officer and principal
stockholder who has provided financing in the past, but he has no binding
commitment to continue such financing. We may not be able to obtain financing
from other sources or, if obtained, such financing may not be on terms favorable
to us .
17
Possible
partnering with a third party for advertising and marketing, since we have a
limited financial resources, could have a material adverse effect on our
potential revenues.
We would
consider partnering with a third party to finance the advertising and marketing
of our products and with whom we would share revenues, which would result in the
Company receiving a materially lower portion of the potential revenues from
operations. The Company has had a preliminary telephone conversation with
Advantage Direct of New York to explore possibilities. This conversation was
limited to an inquiry as to whether Advantage Direct would have any general
interest in partnering with respect to the Shopfast DSD and Shopfast PC
products. The Company has not to date furnished a business plan nor any other
information on the Company or its products to Advantage Direct. There can be no
assurance that such a partnering arrangement would be available to us if we
sought such an arrangement.
We
are dependent on our Chief Executive Officer, the loss of whom could have a
material adverse effect on us.
Our
future success depends in significant part upon the continued service of Ronny
Yakov, our Chairman and Chief Executive Officer. Mr. Yakov has outsourced the
development of our product and the future marketing of the product to a small
team of developers and personnel. Our future success depends on our ability to
attract and retain highly qualified management, technical, sales and marketing
personnel. Competition for such personnel is intense, and we have, at times in
the past, experienced difficulty in recruiting and retaining qualified
personnel. We do not carry key man insurance for Mr. Yakov.
We
do not have an experienced chief financial officer.
The
Company does not presently have an experienced chief financial officer and Mr.
Yakov, the Company’s sole director, officer and principal shareholder, is
currently serving as the Company’s Chief Executive Officer, President, Secretary
and Interim Chief Financial Officer and therefore may be subject to potential
conflicts of interest. There are no independent directors of the Company and the
Company does not have either an audit committee or a compensation
committee.
We
could be subject to product liability claims.
We may be
subject to product liability claims if people or property are harmed by the
products sold by third party resellers in connection with ShopFast PC and/or
ShopFast DSD. Some of the products sold may expose us to product liability
claims relating to personal injury, death, or property damage if caused by such
products. Our agreements with our customers, whom we refer to as ShopFast
business partners, will not typically contain provisions designed to limit our
exposure to potential product liability claims. Further, any limitation of
liability provisions contained in such agreements may not be effective under the
laws of certain jurisdictions. Although we have not experienced any material
product liability claims to date, there can be no assurance that we will not be
subject to such claims. We currently do not have insurance coverage against
product liability and/or errors and omissions claims and there can be no
assurance that such insurance will be available to us on commercially reasonable
terms or at all. A successful product liability claim of significant magnitude
brought against us would have a material adverse effect on our business,
prospects and financial condition.
18
Our
business is seasonal, and quarterly operating results can be expected to
fluctuate significantly.
Our
revenues and operating results may vary significantly from quarter to quarter
due to a number of factors. Many of these factors are outside our control and
include:
|
·
|
seasonal
fluctuations in consumer purchasing
patterns;
|
|
·
|
timing
of, response to and quantity of ShopFast DSD business clients and ShopFast
PC resellers;
|
|
·
|
changes
in the growth rate of internet
usage;
|
|
·
|
actions
of our competitors;
|
|
·
|
the
timing and amount of costs relating to the expansion of our
operations;
|
|
·
|
general
economic and market conditions; system failures, security breaches or
Internet downtime; difficulty in upgrading our information technology
systems and resources the costs of acquisitions and risks of integration
of acquired businesses.
|
Our
revenue for the foreseeable future will remain primarily dependent on online
user traffic levels, online sales of merchandise appearing on the websites of
ShopFast DSD business partners and ShopFast PC resellers. Such future revenues
are difficult to forecast. Any shortfall in revenues in relation to our expenses
would have a material adverse effect on our business, prospects and financial
condition. Moreover, many of our expenses are fixed in the short term and
determined based on our investment plans and estimates of future revenues. We
expect to incur significant new expenses in further developing our technology
and service offerings, as well as in advertising and promotion to attract and
retain consumers and merchants, before generating associated revenues. We may be
unable to adjust our expenditures quickly enough to compensate for any
unexpected revenue shortfall. For these or other reasons, our financial results
in future quarters may fall below the expectations of management or investors
and the price of, and long-term demand for, our shares could
decline.
Our
limited operating history in the e-commerce market makes it difficult to
ascertain the effects of seasonality on our business. If seasonal and cyclical
patterns emerge in Internet consumer purchasing, our results of operations from
quarter to quarter will be less comparable. We expect sales to fluctuate in a
manner similar to that of the retail brick and mortar sales industry and,
accordingly, believe that our sales will peak during our fiscal fourth
quarter.
Investors
should not rely on quarter-to-quarter comparisons of our results of operations
as indicative of future performance. It is possible that, in future periods, our
results of operations may not meet expectations.
Government
regulation and legal uncertainties may damage our business.
We are
subject to the same foreign and domestic laws as other companies conducting
business on and off the Internet. Today, there are still relatively few laws
specifically directed towards online services. However, due to the increasing
popularity and use of the Internet and online services, many laws relating to
the Internet are currently being debated at all levels of government and it is
possible that such laws and regulations will be adopted. These laws and
regulations could cover issues such as user privacy, freedom of expression,
pricing, fraud, content and quality of products and services, taxation,
advertising, intellectual property rights, and information security. It is not
clear how existing laws governing issues such as property ownership, copyrights
and other intellectual property issues, taxation, libel and defamation,
obscenity, and personal privacy apply to online businesses. The vast majority of
these laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies. Those laws that do reference the
Internet, such as the U.S. Digital Millennium Copyright Act, have begun to be
interpreted by the courts, but their applicability and scope remain somewhat
uncertain.
19
Accordingly,
the laws and regulations applicable to the Internet and our business in the
jurisdictions where we expect to operate are evolving. Governments may adopt new
laws and regulations governing the Internet and the conduct of business on the
Internet that could increase our costs of doing business or limit the
attractiveness of online shopping. Additionally, consumer protection and safety
laws applicable to products included in our OLB Database and sold in connection
with ShopFast PC or ShopFast DSD may differ from product to product or merchant
to merchant, and some products or merchants may be subject to more extensive
governmental regulations than others. These laws and regulations could expose us
to substantial compliance costs and liability. In response to these laws and
regulations, whether proposed or in effect, as well as public opinion, we may
choose to limit the types of merchants or products we will include in our OLB
Database, which could, in turn, decrease the desirability of our service and
reduce our revenues.
Imposition
of sales and other taxes may damage our business.
The
application of indirect taxes (such as sales and use tax, value added tax, or
VAT, goods and services tax, business tax, and gross receipt tax) to e-commerce
businesses such as our company and our clients is a complex and evolving issue.
Many of the fundamental statutes and regulations that impose these taxes were
established before the growth of the Internet and e-commerce. In many cases, it
is not clear how existing statutes apply to the Internet or e-commerce. In
addition, some jurisdictions have implemented or may implement laws specifically
addressing the Internet or some aspect of e-commerce. The application of
existing, new, or future laws could have adverse effects on our
business.
Several
proposals have been made at the U.S., state and local level that would impose
additional taxes on the sale of goods and services through the Internet. These
proposals, if adopted, could substantially impair the growth of e-commerce, and
could diminish our opportunity to derive financial benefit from our activities.
The U.S. federal government recently enacted legislation extending the
moratorium on states and other local authorities imposing access or
discriminatory taxes on the Internet. This moratorium does not prohibit federal,
state, or local authorities from collecting taxes on our income or from
collecting taxes that are due under existing tax rules. The imposition of
Internet usage taxes or enhanced enforcement of sales tax laws could make online
shopping less attractive to consumers, which could have an adverse affect our
business, financial condition and operating results.
Our
market may undergo rapid technological change and any inability to meet the
changing needs of our industry might render our products obsolete and could harm
our financial performance.
The
markets in which we compete are characterized by rapidly changing technology,
evolving industry standards, frequent new service announcements, introductions
and enhancements, and changing consumer demands. We may not be able to keep up
with these rapid changes. As a result, our future success depends on our ability
to adapt to rapidly changing technologies, to respond to evolving industry
standards and to improve the performance, features and reliability of our
service. In addition, the widespread adoption of new Internet, networking or
telecommunications technologies or other technological changes may require us to
incur substantial expenditures to modify or adapt our service and resources,
which could harm our financial performance and liquidity.
The
rapid evolution of our industry makes it difficult for investors to evaluate our
business prospects, and may result in significant declines in our share
price.
Internet
commerce has grown rapidly in recent years and consumer usage patterns have
continually evolved. During this period, many businesses, including shopping
services, related to Internet commerce have failed. Because Internet commerce is
a young industry, we may need to frequently change websites and other aspects of
our business operations. Some of the special risks we face in our rapidly
evolving industry are:
|
·
|
difficulties
in forecasting trends that may affect our
operations,
|
|
·
|
challenges
in attracting and retaining consumers and
merchants;
|
|
·
|
significant
dependence on a small number of revenue
sources;
|
|
·
|
evolving
industry demands that require us to adapt the prices at we which offer our
software products and related services from time to time;
and
|
|
·
|
adverse
technological changes and regulatory
developments.
|
20
Our
ShopFast software is designed to, as business develops, offer quick execution
and creation of an online store with a potential of millions of products
aggregated from different suppliers and fulfillment sources to the network.
However, we may be unable to keep up with the technological developments of our
competitors. If we are unable to overcome these risks and difficulties as we
encounter them, our business, financial condition and results of operations may
be adversely affected.
Our
growth may be dependent on our ability to complete acquisitions and integrate
operations of acquired businesses.
The
evaluation of, and the acquisitions of other businesses with an established
history of profitability or which our management believes will be profitable
within two quarters of its acquisition. We may not be able to make acquisitions
in the future and any acquisitions we do make may not be successful.
Furthermore, future acquisitions may have a material adverse effect upon our
operating results, particularly in periods immediately following the
consummation of those transactions while the operations of the acquired
businesses are in the process of being integrated with and into our then current
operations. While the Company intends to exert substantial efforts to acquire
complementary businesses, in the event the Company is not successful in
acquiring complementary businesses, the Company may determine that it is in the
best interests of the Company to commence to develop complementary products to
its software products and/or incorporate additional functionality into newer
versions of its current software, while still pursuing possible
acquisitions.
As part
of our business strategy, we intend to acquire complementary businesses. Our
management believes that we can achieve profitability if, in addition to
generating revenues based on sales of our software products, we also acquire
complementary businesses. The Company expects, based on prior experience, that
the Company may have a negative cash flow for the first six to nine months after
it commences operations, but there can be no assurance that prior experience
will be correct and that such period may not be longer or shorter. There can be
no assurance that any such acquired businesses will be profitable, If such
acquired businesses were not profitable at the time of acquisition, the Company
would expect such businesses to experience a negative cash flow for from six to
nine months from acquisition, which could materially affect the operations of
the Company and cause it to continue to incur financial losses for an indefinite
period of time. The Company has had discussions with entities regarding the
potential acquisition of businesses or assets, but has not entered into any
binding agreements to consummate such potential transactions, but has entered
into non-disclosure agreements to allow the Company to conduct basic reviews of
the business operations and/or assets of such entities, each predicated on
Company’s agreement not to identify such entities prior to the time a decision
has been made by the Company to proceed beyond its initial
discussions.
The
Company believes that businesses in the areas of (i) e-commerce product sales
that market products other than those then offered (or successfully offered) by
the Company in its OLB database and (ii) in the area of e-commerce, but which
successfully have in place software continuation programs and (iii) other
e-commerce business meeting the profitability criteria, would be businesses that
would be complementary to the Company’s present business. The term “continuation
programs” refers to a software program for which the customer (and possibly each
end user) pays a continuing monthly subscription fee.
We may
not be able to successfully integrate the acquired company’s operations or
personnel, or realize the anticipated benefits of the acquisition. Our ability
to integrate acquisitions may be adversely affected by many factors, including
the relatively large size of a business and the allocation of our limited
management resources among various integration efforts.
21
In
connection with the acquisitions of businesses in the future, we may decide to
consolidate the operations of any acquired business with our existing operations
or make other changes with respect to the acquired business, which could result
in special charges or other expenses. Our results of operations also may be
adversely affected in the future by expenses we incur in making acquisitions, by
amortization of acquisition-related intangible assets with definite lives and by
additional depreciation expense attributable to acquired assets. Any of the
businesses we acquire may also have liabilities or adverse operating issues,
including some that we fail to discover before the acquisition, as indemnity for
such liabilities typically are limited. Additionally, our ability to make any
future acquisitions may depend upon obtaining additional financing. We may not
be able to obtain additional financing on acceptable terms or at all. To the
extent that we seek to acquire other businesses in exchange for our common
stock, fluctuations in our stock price could have a material adverse effect on
our ability to complete acquisitions.
Risks
Relating to Our Securities
We
are controlled by our principal shareholder who has the power to direct all
corporate decisions.
Ronny
Yakov, our sole director and sole officer (Chief Executive Officer, President,
Secretary and Interim Chief Financial Officer), beneficially owns approximately
63% of our outstanding common stock. Accordingly, he is in a position to control
all actions taken at a meeting of the Board of Directors and/or at a meeting of
shareholders. By virtue of such potential vote he can determine the future
actions taken by the Company and also has the ability to delay or prevent a
change of control, even if such a change of control would benefit our other
shareholders.
There
is a limited trading market for our securities.
Although
our common stock is quoted in the OTC Bulletin Board, there has been a limited
trading market for our securities. There can be no assurance that an active
trading market in our securities will develop.
The
market price of our securities may be highly volatile or may decline regardless
of our operating performance.
The
market prices of the securities of Internet companies have been volatile, and
have been known to decline rapidly. Broad market and industry conditions and
trends may cause fluctuations in the market price of our securities, regardless
of our actual operating performance. Additional factors that could cause
fluctuation in the price of our shares include, among other things:
|
·
|
actual
or anticipated variations in quarterly operating results; changes in
financial estimates by us or by any securities analysts who may cover our
shares;
|
|
·
|
conditions
or trends affecting our merchants or other
providers;
|
|
·
|
changes
in the market valuations of other online commerce
companies;
|
|
·
|
announcements
by us or our competitors of significant acquisitions, strategic
partnerships or divestitures;
|
|
·
|
announcements
concerning the commencement, progress or resolution of investigations or
regulatory scrutiny of our operations or lawsuits filed or other claims
alleged against us;
|
|
·
|
capital
commitments;
|
|
·
|
introduction
of new products and service offerings by us or our
competitors;
|
|
·
|
entry
of new competitors into our market;
and
|
|
·
|
additions
or departures of key personnel.
|
22
In the
past, securities class action litigation have often been brought against
companies following periods of volatility in the market prices of their
securities. Such litigation could result in significant costs and divert
management attention and resources, which could seriously harm our business and
operating results.
We
may not be able to attract the attention of major brokerage firms, which could
have a material adverse impact on the market value of our common
stock.
Security
analysts of major brokerage firms may not provide coverage of our common stock
since there is no incentive to brokerage firms to recommend the purchase of our
common stock. The absence of such coverage limits the likelihood that an active
market will develop for our common stock. It also will likely make it more
difficult to attract new investors at times when we require additional
capital.
We
have never paid cash dividends on our common stock, and we do not anticipate
paying any cash dividends in the foreseeable future.
We have
never paid cash dividends on our common stock and we currently intend to retain
any future earnings to fund the development and growth of our business.
Accordingly, investors must rely on sales of their shares after price
appreciation, which may never occur, as the only way to realize any future gains
on their investment. Investors seeking cash dividends should not purchase our
securities.
Our
common stock is considered a ‘‘penny stock’’ and may be difficult to
sell.
The
Securities and Exchange Commission has adopted regulations which generally
define a ‘‘penny stock’’ to be an equity security that has a market price of
less than $5.00 per share or an exercise price of less than $5.00 per share,
subject to specific exemptions. This designation requires any broker or dealer
selling these securities to disclose certain information concerning the
transaction, obtain a written agreement from the purchaser and determine that
the purchaser is reasonably suitable to purchase the securities. These rules may
restrict the ability of brokers or dealers to sell our common stock and may
affect the ability of investors to sell their shares.
Our
future sales of common stock by management and other stockholders may have an
adverse effect on the then prevailing market price of our common
stock.
In the
event a public market for our common stock is sustained in the future, sales of
our common stock may be made by holders of our public float (believed to be
25,735,366 shares) or by holders of restricted securities in compliance with the
provisions of Rule 144 of the Securities Act of 1933. In general, under Rule
144, a non-affiliated person who has satisfied a six-month holding period in a
fully reporting company under the Securities Exchange Act of 1934, as amended,
may, sell their restricted Common Stock without volume limitation, so long as
the issuer is current with all reports under the Exchange Act in order for there
to be adequate common public information. Affiliated persons may also sell their
common shares held for at least six months, but affiliated persons will be
required to meet certain other requirements, including manner of sale, notice
requirements and volume limitations. Non-affiliated persons who hold their
common shares for at least one year will be able to sell their common stock
without the need for there to be current public information in the hands of the
public. Future sales of shares of our public float or by restricted common stock
made in compliance with Rule 144 may have an adverse effect on the then
prevailing market price, if any, of our common stock.
23
Concentration
of ownership and exercise of control
Ownership
interest in our common stock is concentrated in a small group and may conflict
with our other future stockholders who may be unable to influence management and
exercise control over our business
.
As of the
date hereof, our executive officers and directors own 63% of the issued and
outstanding shares of our common stock. Our current stockholders will continue
to exert significant influence over our management and policies to:
|
·
|
elect
or defeat the election of our
directors;
|
|
·
|
amend
or prevent amendment of our certificate of incorporation or
bylaws;
|
|
·
|
effect
or prevent a merger, sale of assets or other corporate transaction;
and
|
|
·
|
control
the outcome of any other matter submitted to the shareholders for
vote
|
Accordingly,
our other stockholders may be unable to influence management and exercise
control over our business.
Future
designation and issuance of preferred stock
The Board
of Directors of the Company can authorize the issuance of shares of the
Company’s preferred stock, from time to time, in the future. In connection
therewith, the Board of Directors can designate terms of the preferred stock for
each such issuance, that could have a materially adverse affect on the dividend
rights and/or voting rights of the Common Shareholders
.
Potential
for significant dilution from future capital financings
In the
event that the Company should determine to raise additional funds through the
conduction of a capital financing, the shares issued in connection with such
capital financing could result in a substantial dilution to the then current
Common Shareholders
.
There
is very limited trading market for our securities
A very
limited trading market exists for our securities and no significant market will
develop until our shares are dispersed more widely. Any purchasers of shares
from us directly and transferees of the shares held by our current stockholders
may find it difficult to dispose of their shares.
|
Unresolved
Staff Comments
|
We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
|
Property
|
We
currently share office space at 1120 Avenue of the Americas, New York, NY and
anticipate that the office will be sufficient for the foreseeable future. We pay
monthly rent, which varies based upon the time we physically utilize the office
space and the cost of the office services consumed. During the past 12 months we
have paid a high of $290 per month and a low of $140 per month. We have the
right to expand or minimize our use of the lease space in accordance with our
needs.
The
Company believes the facilities occupied are adequate for the purposes for which
they are currently used and are well maintained.
24
|
Legal
Proceedings
|
We are
not currently a party to any legal proceedings and are not aware of any pending
or threatened proceedings against us.
|
Submission
of Matters to a Vote of Security
Holders
|
No
matters were submitted to a vote of security holders during the fourth quarter
of fiscal 2009.
|
Market for
Registrant
’
s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities
|
Our
common stock is currently quoted over-the-counter on the Bulletin Board under
the symbol "OLBG:OB." Prior to February 28, 2008 our common stock was traded in
the pink sheets.
|
Year
|
Quarter
|
High
Bid
|
Low
Bid
|
|||||||
|
2006
|
March
31
|
$
|
0.58
|
$
|
0.07
|
|||||
|
2006
|
June
30
|
$
|
0.13
|
$
|
0.05
|
|||||
|
2006
|
September
30
|
$
|
0.07
|
$
|
0.05
|
|||||
|
2006
|
December
31
|
$
|
0.13
|
$
|
0.03
|
|||||
|
2007
|
March
30
|
$
|
0.34
|
$
|
0.08
|
|||||
|
2007
|
June
30
|
$
|
0.25
|
$
|
0.14
|
|||||
|
2007
|
September
30
|
$
|
0.18
|
$
|
0.07
|
|||||
|
2007
|
December
31
|
$
|
0.10
|
$
|
0.09
|
|||||
|
2008
|
March
30
|
$
|
0.22
|
$
|
0.
07
|
|||||
|
2008
|
June
30
|
$
|
0.03
|
$
|
0.
09
|
|||||
|
2008
|
September
30
|
$
|
0.03
|
$
|
0.005
|
|||||
|
2008
|
December
31
|
$
|
0.07
|
$
|
0.005
|
|||||
|
2009
|
March
30
|
$
|
0.04
|
$
|
0.04
|
|||||
|
2009
|
June
30
|
$
|
0.08
|
$
|
0.05
|
|||||
|
2009
|
September
30
|
$
|
0.10
|
$
|
0.09
|
|||||
|
2009
|
December
31
|
$
|
0.05
|
$
|
0.02
|
|||||
The
closing sales price on March 23, 2010 was $0.04 per share. All Quotations
provided herein reflect inter-dealer prices, without retail mark-up, mark-down
or commissions.
Our
common stock is very thinly traded and the prices quoted above should not be
used as a determinant of the actual worth of our common stock per share price at
any given time.
In the
event a public market for our common stock is sustained in the future, sales of
our common stock may be made by holders of our public float (believed to be
25,735,366 shares) or by holders of restricted securities in compliance with the
provisions of Rule 144 of the Securities Act of 1933. In general, under Rule
144, a non-affiliated person who has satisfied a six-month holding period in a
fully reporting company under the Securities Exchange Act of 1934, as amended,
may, sell their restricted Common Stock without volume limitation, so long as
the issuer is current with all reports under the Exchange Act in order for there
to be adequate common public information. Affiliated persons may also sell their
common shares held for at least six months, but affiliated persons will be
required to meet certain other requirements, including manner of sale, notice
requirements and volume limitations. Non-affiliated persons who hold their
common shares for at least one year will be able to sell their common stock
without the need for there to be current public information in the hands of the
public. Future sales of shares of our public float or by restricted common stock
made in compliance with Rule 144 may have an adverse effect on the then
prevailing market price, if any, of our common stock.
The
Company has no outstanding preferred stock, options or warrants.
25
At March
30, 2010 there were approximately 127 holders of record of our common stock,
although we believe that there are other persons who are beneficial owners of
our common stock held in street name. The transfer agent and registrar for our
common stock is Transfer Online, Inc., 317 SW Alder Street, 2nd Floor Portland,
OR 97204. Their telephone number is (503) 227-2950
Dividend
Policy
We have
never paid any cash dividends and intend, for the foreseeable future, to retain
any future earnings for the development of our business. Our Board of Directors
will determine our future dividend policy on the basis of various factors,
including our results of operations, financial condition, capital requirements
and investment opportunities.
Recent
Issuance of Unregistered Securities
During
the year ended December 31, 2009, we made the sales or issuances of unregistered
securities listed in the table below.
|
Date
of Sale
|
Title
of Security
|
Number
Sold
|
Consideration
Received and Description of Underwriting or Other Discounts to Market
Price or Convertible Security, Afforded to Purchasers
|
Exemption
from Registration Claimed
|
If
Option, Warrant or
Convertible
Security,
terms
of exercise or
conversion
|
|||||
|
Feb
2009
|
Common
Stock
|
1,000,000
Shares
|
For
services rendered; no other consideration; no commissions
paid
|
Section
4(2) – Issued to a vendor of services to the Company The issuee is a
sophisticated investor, who received the shares with a restrictive legend
in connection with payment for services rendered to the Company and is
able to fend for itself.
|
||||||
|
Dec
2009
|
Common
Stock
|
8,438,160
Shares
|
In
conversion of accrued but unpaid salary and unpaid loans; no other
consideration received; no commissions paid.
|
Section
4(2) – Issued to an officer of the Company in conversion of accrued but
unpaid salary and unpaid loans. The issuee is a sophisticated investor,
who received the shares with a restrictive legend in connection conversion
of accrued but unpaid salary and unpaid loans and is able to fend for
himself.
|
||||||
|
Dec
2009
|
Common
Stock
|
5,722,200
Shares
|
In
conversion of company debt assumed by an officer; no other consideration
received; no commissions paid.
|
Section
4(2) – Issued to an officer of the Company in conversion of accrued but
unpaid salary and unpaid loans. The issuee is a sophisticated investor,
who received the shares with a restrictive legend in connection conversion
of accrued but unpaid salary and unpaid loans and is able to fend for
himself.
|
26
Recent
Purchases of Securities
In 2009
and 2008 there were no repurchases of our common stock.
|
Selected
Financial data
|
We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
Results
of Operations
Fiscal
Year 2009 compared to Fiscal Year 2008
REVENUE
Revenue from operations for the year
ended December 31, 2009 increased $217,078 to $290,159 from $73,081 for the year
ended December 31, 2008. The increase is mainly attributed to the company's fees
for the sales of health-related discount benefit plans as earned as part of the
ShopFast program.
GROSS
PROFIT
Gross profit from operations for the
year ended December 31, 2009 increased $64,396 to $77,017 from $12,621 for the
year ended December 31, 2008. The increase is mainly attributed to the company's
fees for the sales of health-related discount benefit plans as earned as part of
the ShopFast program.
GENERAL
AND ADMINISTRATIVE EXPENSES
General
and administrative ("G&A") expenses decreased by $91,560 from $217,410 for
the year ended December 31, 2008 to $125,850 for the year ended December 31,
2009. The decrease in G&A expenses was the result of a decrease in
professional fees and services.
PROVISION
FOR INCOME TAXES
Up to
this date, the Company has not had taxable income as it has incurred losses for
tax purposes. The tax asset generated by the tax losses and any temporary
differences has been fully reserved.
NET
LOSS
The
net loss decreased by $159,706, from a loss of $482,775 for the year ended
December 31, 2008, to a loss of $323,069 for the year ended December 31,
2009. This decrease in net loss was the combined result of the
increase in gross profit and decrease in G&A expenses.
Financial
Condition, Liquidity and Capital Resources
During
the year ended December 31, 2009, the Company used $43,082 of cash
for operating activities, as compared to $67,986 cash used through the fiscal
year ended December 31, 2008. The decrease in the use of cash for operating
activities was a result of a decrease in consulting fees and other general
expenses.
27
Cash
provided from financing activities during the year ended December 31, 2009 was
$42,967 as compared to $66,323 through fiscal year ended December 31, 2008. The
decrease in cash required for financing is due to the increase in
revenue.
Our
financial statements as of December 31, 2009 have been prepared under the
assumption that we will continue as a going concern through December 31, 2010.
Our independent registered public accounting firm has issued their report dated
March 30, 2010 that included an explanatory paragraph expressing substantial
doubt in our ability to continue as a going concern without additional capital
becoming available. Our ability to continue as a going concern ultimately is
dependent on our ability to generate a profit which is dependent upon our
ability to obtain additional equity or debt financing, attain further operating
efficiencies and, ultimately, to achieve profitable operations. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
We
anticipate that our future liquidity requirements will require a need to obtain
additional financing. The Company’s primary sources of funding to date consists
of loans from its Chief Executive Officer and principal stockholder, Ronny
Yakov. Although Mr. Yakov has provided financing in the past, he has no binding
commitment to continue such financing. We may not be able to obtain such
additional financing or, if obtained, such financing may not be available and/or
not be on terms favorable to us.
PLAN
OF OPERATION
We are
engaged in developing eCommerce software. Our plan of operation within the next
twelve months is to utilize our cash balances to continue research and
development of our software and to commence marketing of our
software. We believe that our current cash and investment balances
will not be sufficient to support development activity and general and
administrative expenses for the next twelve months. Management estimates that it
will require additional cash resources during 2010, based upon its current
operating plan and condition. We will be investigating additional financing
alternatives, including equity and/or debt financing. There is no assurance that
capital in any form would be available to us, and if available, on terms and
conditions that are acceptable. If we are unable to obtain sufficient funds
during the next twelve months, we may be forced to reduce the size of our
organization, which could have a material adverse impact on, or cause us to
curtail and/or cease the development of our products.
We
launched limited quality control test marketing of the software component of our
ShopFast PC product during fiscal 2008. In the second quarter of fiscal 2010 we
plan to commence full marketing of the ShopFast PC product and we plan to
produce a 30 minute infomercial to promote this product, as well as short form
two minute commercials after completing the longer infomercial, depending on the
funds available to the Company for such purposes. We intend to run the
advertisements for a period of time and to use focus groups to determine the
prices at which we can obtain the highest level of reseller orders
and then to launch a
full scale media campaign. If the ratio of media spending to product orders is
at least $1.50 return in orders on $1.00 spent on advertising, we would continue
such advertising. Otherwise, we would consider alternatives to the advertising
methods tried. After adjustments to the marketing plan and getting a
satisfactory return rate on the media expenditures, we intend to launch a
nationwide television distribution campaign.
Over the
next twelve months, we do not expect to purchase or sell any significant
equipment. We are currently redesigning ShopFast PC so that the Internet
Storefront can be created by a client having limited computer expertise without
our assistance. In previous versions of ShopFast DSD, the Internet Storefront
would have had to have been created by an administrator employed by us. We are
redesigning ShopFast PC so that the client can create the Internet Storefront on
the client’s own, in the following five steps:
Step 1:
Choose the categories
of items to be sold on the store
Step 2:
Design the store by
choosing layouts, fonts, colors and a logo
Step 3:
Personalize the store
by adding descriptive text
Step 4:
Account information to
facilitate payments for the store subscription as well as payment of
commissions
Step 5:
Final store
confirmation and immediate store generation
28
If we
successfully complete the limited quality control evaluation marketing of our
ShopFast PC product, we are planning to develop or acquire additional products
to complement our e-commerce products. We anticipate that we
will also need to make expenditures in the following areas: to expand our
existing ecommerce platform and replace some of the existing hardware and
servers to service the volume of transactions we anticipate and to add more
marketing and administrative personnel, although our initial plan is outsource
significant services to third party providers. The additional products to be
developed and/or acquired have not yet been identified, but are expected to be
the result of requests by clients and/or their customers for additional
functionality, services, payment methods and/or product
availability.
We are
currently in the final stages of our quality assurance phase for our
re-developed ShopFast DSD software, which is based on a different design
platform than the prior versions, allowing it to operate faster and under all
computer operating systems that can fully support Internet Explorer 5.0 or
higher. ShopFast DSD will have be a customized product to the needs of the
particular clients. The immediately prior paragraph is also applicable to the
successful testing of our re-developed ShopFast DSD product.
Future
Commitments
The
Company has signed a five year employment agreement with Ronny Yakov, its
President and Interim Chief Financial Officer. The agreement pays Mr.
Yakov $275,000 per year salary plus $1,500 per month car
allowance. The agreement expires February 28, 2013.
Off-Balance
Sheet Arrangements
We do not
have any off balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, revenues, results of
operations, liquidity or capital expenditures.
Critical
Accounting Policies
The
following is a discussion of the accounting policies the Company believes are
critical to its operations:
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 require 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
Recognition
The
Company had limited revenues during fiscal 2009 while conducting its limited
quality control evaluation of its ShopFast PC software. Revenues will
be recognized when title and risk of loss transfers to the customer and the
earnings process is complete. In general, title passes to our customers upon the
customer's receipt of the merchandise. Revenue is accounted for in accordance
with the Revenue Recognition topic of the FASB ASC 605, reporting revenue 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. Our company records all
shipping and handling fees billed to customers as revenues, and related costs as
cost of goods sold, when incurred, in accordance with the Revenue Recognition
topic of the FASB ASC 605, accounting for shipping and handling fees and
costs.
The Company also 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.
29
Allowance
for Doubtful Accounts
Currently
we have no accounts receivable. We are required to make judgments based on
historical experience and future expectations, as to the realizability of our
accounts receivable. We make these assessments based on the following factors:
(a) historical experience, (b) customer concentrations, customer credit
worthiness, (d) current economic conditions, and (e) changes in customer payment
terms.
Research
and Development Costs
In the
past, the Company has incurred significant software development costs in
connection with its products. In accordance with the Software topic of the FASB
ASC 985, costs should be capitalized once technical feasibility is achieved. In
the case of the Company this would be when the product is commercially viable
(“commercial feasibility”). The Company’s management has taken the position that
commercial feasibility is reached very late in the development process and
therefore had not capitalized any development costs in regard to their
products.
Income
Taxes
In
accordance with the Income Tax topic of the FASB ASC 740, detailed guidance is
provided for the financial statement recognition, measurement and disclosure of
uncertain tax positions recognized in the financial statements. Tax positions
must meet a “more-likely-than-not” recognition threshold. During the year ended
December 31, 2009, we recognized no adjustments for uncertain tax
benefits.
We
recognize interest and penalties, if any, related to uncertain tax positions in
selling, general and administrative expenses. No interest and penalties related
to uncertain tax positions were accrued at December 31, 2009.
Income
taxes are computed using the asset and liability method of accounting. Under the
asset and liability method, a deferred tax asset or liability is recognized for
estimated future tax effects attributable to temporary differences and
carryforwards. The measurement of deferred income tax assets is adjusted by a
valuation allowance, if necessary, to recognize future tax benefits only to the
extent, based on available evidence; it is more likely than not such benefits
will be realized. Our deferred tax assets were fully reserved at December 31,
2009 and December 31, 2008.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
|
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 are not required to provide the information under this
item.
30
|
Financial
Statements and Supplementary Data
|
The
OLB Group, Inc.
FINANCIAL
STATEMENTS
December
31, 2009 and 2008
The
OLB Group, Inc.
TABLE
OF CONTENTS
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
Balance
Sheets
|
F-2
|
|
Statements
of Operations
|
F-3
|
|
Statements
of Stockholders’ Deficit
|
F-4
|
|
Statements
of Cash Flows
|
F-5
|
|
Notes
to the Financial Statements
|
F-6
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
The OLB
Group, Inc.
New York,
New York
We have
audited the accompanying balance sheets of The OLB Group, Inc. as of December
31, 2009 and 2008, and the related statements of operations, stockholders’
equity (deficit) and cash flows for each of the two years in the period ended
December 31, 2009. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of The OLB Group, Inc. as of December
31, 2009 and 2008, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 2009, in conformity with U.S.
generally accepted accounting principles.
We were
not engaged to examine management's assertion about the effectiveness of The OLB
Group, Inc.'s internal control over financial reporting as of December 31, 2009
included in “Management’s Report on Internal Control Over Financial Reporting”
and, accordingly, we do not express an opinion thereon.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered recurring losses from operations
and has a working capital deficit. This raises substantial doubt
about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also
described in Note 9. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ HJ & Associates,
LLC
HJ &
Associates, LLC
Salt Lake
City, Utah
March 30,
2010
F-1
The
OLB Group, Inc.
ASSETS
|
December
31,
|
December
31,
|
|||||||
|
2009
|
2008
|
|||||||
|
CURRENT
ASSETS
|
||||||||
|
Cash
and cash equivalents
|
$ | 555 | $ | 670 | ||||
|
Total
Current Assets
|
555 | 670 | ||||||
|
OTHER
ASSETS
|
||||||||
|
Internet
domain
|
4,965 | 4,965 | ||||||
|
TOTAL
ASSETS
|
$ | 5,520 | $ | 5,635 | ||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 85,769 | $ | 202,497 | ||||
|
Loan
payable - officer
|
- | 1,473 | ||||||
|
Accrued
salary
|
- | 125,000 | ||||||
|
Judgment
payable with accrued interest
|
- | 181,863 | ||||||
|
Total
Current Liabilities
|
85,769 | 510,833 | ||||||
|
TOTAL
LIABILITIES
|
85,769 | 510,833 | ||||||
|
STOCKHOLDERS’
EQUITY (DEFICIT)
|
||||||||
|
Preferred
stock, $0.01 par value, 50,000,000 shares authorized,
|
||||||||
|
no
shares outstanding
|
- | - | ||||||
|
Common
stock, $0.01 par value; 200,000,000 shares authorized,
|
||||||||
|
71,943,192
and 56,782,832 shares issued and outstanding, respectively
|
719,434 | 567,830 | ||||||
|
Additional
paid-in capital
|
11,069,735 | 10,473,321 | ||||||
|
Accumulated
deficit
|
(11,869,418 | ) | (11,546,349 | ) | ||||
|
Total
Stockholders’ Equity(Deficit)
|
(80,249 | ) | (505,198 | ) | ||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 5,520 | $ | 5,635 | ||||
The
accompanying notes are an integral part of these financial
statements.
F-2
The
OLB Group, Inc.
|
For
the Years Ended
|
||||||||
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Net
revenues
|
$ | 290,159 | $ | 73,081 | ||||
|
Cost
of sales
|
213,142 | 60,460 | ||||||
|
Gross
profit
|
77,017 | 12,621 | ||||||
|
OPERATING
EXPENSES
|
||||||||
|
Officers
salary
|
275,000 | 268,750 | ||||||
|
General
and administrative
|
125,850 | 217,410 | ||||||
|
Loss
from operations
|
323,833 | 473,539 | ||||||
|
OTHER
INCOME (EXPENSE)
|
||||||||
|
Interest
expense
|
(9,236 | ) | (9,236 | ) | ||||
|
Gain
on forgiveness of debt
|
10,000 | - | ||||||
|
Total
Other Income
|
764 | (9,236 | ) | |||||
|
NET
LOSS
|
$ | (323,069 | ) | $ | (482,775 | ) | ||
|
BASIC
LOSS PER SHARE
|
$ | (0.01 | ) | $ | (0.01 | ) | ||
|
BASIC
WEIGHTED AVERAGE SHARES
|
57,665,463 | 44,194,716 | ||||||
The
accompanying notes are an integral part of these financial
statements.
F-3
The
OLB Group, Inc.
Statements
of Stockholders’ Equity (Deficit)
|
Additional
|
||||||||||||||
|
Common
Stock
|
Paid
In
|
Accumulated
|
||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
|||||||||||
|
Balance
at December 31, 2007
|
43,691,067
|
$
|
436,912
|
$
|
10,370,639
|
$
|
(11,063,574)
|
|||||||
|
Issuance
of common stock for services
|
100,000
|
1,000
|
24,000
|
|||||||||||
|
Issuance
of common stock
|
||||||||||||||
|
to
convert accrued salaries and loans to equity
|
491,765
|
4,918
|
78,682
|
|||||||||||
|
Issuance
of common stock
|
||||||||||||||
|
to
convert accrued salaries and loans to equity
|
12,500,000
|
125,000
|
||||||||||||
|
Net
loss for the year ended December 31, 2008
|
(482,775)
|
|||||||||||||
|
Balance
at December 31, 2008
|
56,782,832
|
$
|
567,830
|
$
|
10,473,321
|
$
|
(11,546,349)
|
|||||||
|
Issuance
of common stock for services
|
1,000,000
|
10,000
|
30,000
|
|||||||||||
|
Issuance
of common stock
|
||||||||||||||
|
to
convert accrued salaries and loans to equity
|
8,438,160
|
84,382
|
337,526
|
|||||||||||
|
Issuance
of common stock
|
||||||||||||||
|
to
convert debt assumed by officer
|
5,722,200
|
57,222
|
228,888
|
|||||||||||
|
Net
loss for the year ended December 31, 2009
|
(323,069)
|
|||||||||||||
|
Balance
at December 31, 2009
|
71,943,192
|
$
|
719,434
|
$
|
11,069,735
|
$
|
(11,869,418)
|
|||||||
The
accompanying notes are an integral part of these financial
statements.
F-4
The
OLB Group, Inc.
|
For
the Years Ended
|
||||||||
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
|
Net
loss
|
$ | (323,069 | ) | $ | (482,775 | ) | ||
|
Adjustments
to reconcile net cash used in operating activities
|
||||||||
|
Stock
for services
|
40,000 | 25,000 | ||||||
|
Changes
in assets and liabilities:
|
||||||||
|
Decrease
in prepaid assets
|
- | 95,833 | ||||||
|
Increase
in accounts payable and accrued expense
|
239,987 | 293,956 | ||||||
|
Net
Cash Used in Operating Activities
|
(43,082 | ) | (67,986 | ) | ||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
- | - | ||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
|
Repayment
of loan- officer
|
(70,078 | ) | (23,100 | ) | ||||
|
Proceeds
from loan - officer
|
113,045 | 89,423 | ||||||
|
Net
Cash Provided by Financing Activities
|
42,967 | 66,323 | ||||||
|
NET
CHANGE IN CASH
|
(115 | ) | (1,663 | ) | ||||
|
CASH
– BEGINNING OF YEAR
|
670 | 2,333 | ||||||
|
CASH
– END OF YEAR
|
$ | 555 | $ | 670 | ||||
|
CASH
PAID FOR
|
||||||||
|
Interest
|
$ | - | $ | - | ||||
|
Taxes
|
$ | 932 | $ | 932 | ||||
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH ACTIVITIES
|
||||||||
|
Stock
issued in conversion of accrued expenses & other debt
|
$ | 708,018 | $ | 208,600 | ||||
The
accompanying notes are an integral part of these financial
statements.
F-5
The
OLB Group, Inc.
December
31, 2009 and 2008
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
The
company is authorized to issue 200,000,000 shares of common stock, par value
$0.01 per share, and 50,000,000 shares of preferred stock, par value $0.01 per
share. We currently have 71,943,192 shares of common stock issued and
outstanding. No shares of preferred stock are currently outstanding. Our fiscal
year end date is December 31.
During
the year ended December 31, 2009, the Company adopted the following accounting
pronouncements which had no impact on the financial statements or results of
operations
|
|
On
July 1, 2009, the FASB issued the FASB Accounting Standards
Codification (the “Codification”). The Codification became the single
source of authoritative nongovernmental U.S. GAAP, superseding existing
FASB, American Institute of Certified Public Accountants (“AICPA”),
Emerging Issues Task Force (“EITF”) and related literature. The
Codification eliminates the previous US GAAP hierarchy and establishes one
level of authoritative GAAP. All other literature is considered
non-authoritative. However, rules and interpretive releases of the
Securities Exchange Commission (“SEC”) issued under the authority of
federal securities laws will continue to be sources of authoritative GAAP
for SEC registrants. The Codification was effective for interim and annual
periods ending after September 15, 2009. The Company adopted the
Codification for the quarter ending September 30, 2009. There
was no impact to the financial results as this change is disclosure-only
in nature.
|
|
|
In
October 2009, the FASB issued ASU 2009-13,
Multiple-Deliverable Revenue
Arrangemen
ts
, which amends FASB
Accounting Standards Codification (“ASC”) Topic 605,
Revenue Recognition,
and ASU 2009-14,
Certain Arrangemen
ts
That Include Software
Elemen
ts
, which amends
FASB ASC Topic 985,
Software
. ASU 2009-13
requires entities to allocate revenue in an arrangement using estimated
selling prices of the delivered goods and services based on a selling
price hierarchy.
|
F-6
The
OLB Group, Inc.
Notes to
the Financial Statements
December
31, 2009 and 2008
Income
Taxes
Income
taxes are computed using the asset and liability method of accounting. Under the
asset and liability method, a deferred tax asset or liability is recognized for
estimated future tax effects attributable to temporary differences and
carryforwards. The measurement of deferred income tax assets is adjusted by a
valuation allowance, if necessary, to recognize future tax benefits only to the
extent, based on available evidence; it is more likely than not such benefits
will be realized. The Company’s deferred tax assets were fully reserved at
December 31, 2009 and December 31, 2008.
The
Company accounts for its income taxes using the Income Tax topic of the FASB ASC
740, which requires the recognition of deferred tax liabilities and assets for
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to
reverse.
F-7
The
OLB Group, Inc.
Notes to
the Financial Statements
December
31, 2009 and 2008
Cash
and Cash Equivalents
The
Company considers all highly liquid investments purchased with an original
maturity date of three months or less from the date of purchase to be a cash
equivalent.
Concentration
of credit risk
Financial
instruments which potentially subject the Company to concentration of credit
risk consist of cash deposits. The Company maintains cash with
various major financial institutions. The Company performs periodic
evaluations of the relative credit standing of these institutions. To
reduce risk, the Company performs credit evaluations of its customers and
maintains reserves for potential credit losses.
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.
Property
and Equipment
Property
and equipment are stated at cost. Depreciation and amortization are
provided utilizing the straight-line method over the related asset’s estimated
useful life. Assets under capital leases and leasehold improvements
are amortized over the shorter of the lease term or the estimated useful life of
the improvement.
The
Company adopted FASB ASC 350-40, Internal Use Software, which requires the
capitalization of internal use software and other related costs under certain
circumstances. The Company is implementing a direct shopping
database. External direct costs of materials and services and payroll
costs of employees working solely on the application development stage of the
project will be capitalized as required. To date we have not capitalized any
software development costs.
Maintenance
and repairs are charged to expense as incurred; renewals and improvements that
extend the useful life of the assets are capitalized. Upon retirement
or disposal, the asset cost and the related accumulated depreciation and
amortization are eliminated from the respective accounts and a resulting gain or
loss, if any, is included in the results of operations.
These
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amounts of the assets may not be
recoverable. Furthermore, the assets are evaluated for continuing
value and proper useful lives by comparison to expected future cash
projections.
F-8
The
OLB Group, Inc.
Notes to
the Financial Statements
December
31, 2009 and 2008
Revenue
and cost recognition
Revenues
will be recognized when title and risk of loss transfers to the customer and the
earnings process is complete. In general, title passes to our customers upon the
customer's receipt of the merchandise. Revenue is accounted for in accordance
with the Revenue Recognition topic of the FASB ASC 605, reporting revenue 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. Our company records all
shipping and handling fees billed to customers as revenues, and related costs as
cost of goods sold, when incurred.
The
Company recognizes revenue when persuasive evidence of an arrangement exists,
services have been rendered, the sales price is fixed or determinable, and
collection is reasonably assured.
As a
rule, a majority of revenue for The Company is recognized when actual collection
of cash occurs. This is true for License revenue paid in full, Advanced
Solutions revenue and Subscription revenue. Our License revenue on payment plans
allows for customers to pay over time in installments and is recognized upon
delivery of the product at the present value of the installment payment
stream.
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 meets 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.
Commissions
The
Company will pay commissions for its sales of third-party products. Commissions
are recognized as products are sold and services performed and the Company has
accomplished all activities necessary to complete the earnings
process.
Marketing
Fees and Materials
The
Company markets certain of its products through a telemarketing sales
organization whereby independent distributors establish their own network of
associates. The independent distributors pay the Company a fee to become
marketing representatives on behalf of the Company. In exchange, the
representatives receive access, on an annual basis, to various marketing and
promotional materials and tools as well as access to customized management
reports; accordingly revenue from marketing fees is recognized over an annual
period. The Company also earns ancillary revenue from the sale of
marketing materials which is recognized when the materials are provided to the
representatives.
F-9
The
OLB Group, Inc.
Notes to
the Financial Statements
December
31, 2009 and 2008
Stock-based
Compensation
The
Company recognizes in the financial statements compensation related to all
stock-based awards, including stock options,based on their estimated grant-date
fair value. The Company has estimated expected forfeitures and is
recognizingcompensation expense only for those awards expected to vest. All
compensation is recognized by the time the award vests.
We
account for equity instruments issued in exchange for the receipt of goods or
services from non-employees. Costs aremeasured at the fair market value of
the consideration received or the fair value of the equity instruments
issued, whichever ismore reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earlier of the date on which there first exists a firm commitment for
performance by the provider of goods or services or on the date
performance is complete. The Company recognizes the fair value of the
equity instruments issued that result in an asset or expense being recorded by
the company, in the same period(s) and in the same manner, as if the
Company has paid cash for the goods or services.
Net Loss per Share
Basic net
loss per share is computed by dividing net loss by the weighted average number
of common shares outstanding.
As of
December 31, 2009 an officer and director of the company assumed $286,110 in
company accounts payable and other accruals. Refer to note 6 for further
detail.
In 1999
the Company adopted the 1999 Stock Option Plan (the "Plan"). Pursuant
to the Plan, designated employees, including officers and directors of the
Company and certain outside consultants, will be entitled to receive qualified
and nonqualified stock options to purchase up to 500,000 shares of common
stock.
Under the
terms of the Plan, the minimum exercise price of options granted cannot be less
than 100% of the fair market value of the common stock of the Company on the
option grant date. Options granted under the Plan generally expire
ten years after the option grant date. For incentive stock options
granted to such persons who would be deemed to have in excess of a 10% ownership
interest in the Company, the option price shall not be less than 110% of such
fair market value for all options granted, and the options expire five years
after the option grant date.
The
company has 50,000,000 preferred shares authorized at the par value of $0.01.
There were no preferred shares outstanding at December 31, 2009 and
2008.
There
were no options outstanding at December 31, 2009 or December 31,
2008.
F-10
The
OLB Group, Inc.
Notes to
the Financial Statements
December
31, 2009 and 2008
During
2008, the Company issued 100,000 shares of common stock for services at $0.25
per share.
On March
31, 2008, the Company issued 491,765 shares of common stock in conversion of
$83,600 of accrued salaries and related party loans. Shares were valued at
$0.17, which approximated the market value of the shares on the day of exchange.
On December 31, 2008, the Company issued 12,500,000 shares of common stock in
conversion of $125,000 of accrued salaries and related party loans. Shares were
valued at $0.01. On the date of the exchange the average market value
of a common share was $0.05.
On
February 28, 2009, the Company issued 1,000,000 shares of common stock in
exchange for services valued at $0.04 per share.
On
December 31, 2009, the Company issued 8,438,160 shares of common stock in
conversion of $421,908 of accrued salaries and related party loans. Shares were
valued at $0.05, which approximated the market value of the shares on the day of
exchange. On December 31, 2009, the Company issued 5,722,200 shares of common
stock in conversion of $286,110 of company debt that was assumed by an officer.
Shares were valued at $0.05, which approximated the market value of the shares
on the day of exchange.
In 2008,
the Company converted $208,600 of accrued salary and loans owed to the Company’s
President into 12,991,765 shares of common stock.
In
February 2008, the Company renewed the employment agreement with its founder and
President that expires on February 28, 2013. The agreement provides
for an annual salary of $275,000, fringe benefits and an incentive bonus based
on achievement of certain performance targets. The agreement also
includes a covenant not to compete with the Company for a period of one year
after employment ceases.
On
December 31, 2009, the Company issued 8,438,160 shares of common stock in
conversion of $421,908 of accrued salaries and related party loans. Shares were
valued at $0.05. On December 31, 2009, the Company issued 5,722,200 shares of
common stock in conversion of $286,110 of company debt that was assumed by an
officer. Shares were valued at $0.05.
There
were no warrants issued and outstanding as of December 31, 3009 and
2008.
Deferred
taxes are provided on a liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carry forwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
F-11
The
OLB Group, Inc.
Notes to
the Financial Statements
December
31, 2009 and 2008
Net
deferred tax assets consist of the following components as of December
31:
|
2009
|
2008
|
|||||||
|
Deferred
tax assets:
|
||||||||
|
NOL
carryover
|
$
|
773,837
|
$
|
1,586,100
|
||||
|
Accrued
expenses
|
-
|
48,800
|
||||||
|
Deferred
tax liabilities:
|
||||||||
|
None
|
-
|
-
|
||||||
|
Valuation
allowance
|
(773,837
|
)
|
(1,634,900
|
)
|
||||
|
Net
deferred tax asset
|
$
|
-
|
$
|
-
|
||||
The
income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate to pretax income from continuing
operations for the years ended December 31, 2009 and 2008 due to the
following:
|
2009
|
2008
|
|||||||
|
Book
income (loss)
|
$
|
(125,997)
|
$
|
(188,282)
|
||||
|
Stock
for services/options expense
|
162,813
|
9,750
|
||||||
|
Meals
and entertainment
|
4,106
|
3,889
|
||||||
|
Accrued
Salary
|
-
|
48,750
|
||||||
|
NOL
Utilization
|
-
|
-
|
||||||
|
Valuation
allowance
|
(40,922)
|
(125,893)
|
||||||
|
$
|
-
|
$
|
-
|
|||||
At
December 31, 2009, the Company had net operating loss carry forwards of
approximately $1,900,000 that may be offset against future taxable income from
the year 2010 through 2027. No tax benefit has been reported in the
December 31, 2009 or December 31, 2008 financial statements since the potential
tax benefit is offset by a valuation allowance of the same amount.
Due to
the change in ownership provisions of the Tax Reform Act of 1986, net operating
loss carry forwards for Federal income tax reporting purposes are subject to
annual limitations. Should a change in ownership occur, net operating
loss carry forwards may be limited as to use in future years.
Topic
740 provides guidance on the accounting for uncertainty in income taxes
recognized in a company's financial statements. Topic 740 requires a company to
determine whether it is more likely than not that a tax position will be
sustained upon examination based upon the technical merits of the position. If
the more-likely-than-not threshold is met, a company must measure the tax
position to determine the amount to recognize in the financial
statements.
At the
adoption date of January 1, 2007, the Company had no unrecognized tax benefit
which would affect the effective tax rate if recognized.
The
Company includes interest and penalties arising from the underpayment of income
taxes in the consolidated statements of operations in the provision for income
taxes. As of December 31, 2009, the Company had no accrued interest or penalties
related to uncertain tax positions.
The
Company files income tax returns in the U.S. federal jurisdiction and in the
state of New York. With few exceptions, the Company is no longer subject to U.S.
federal, state and local, or non-U.S. income tax examinations by tax authorities
for years before 2006.
F-12
The
OLB Group, Inc.
Notes to
the Financial Statements
December
31, 2009 and 2008
The
financial statements are presented on the basis that the Company is a going
concern. A going concern contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business over a
reasonable length of time. The Company has incurred significant
losses from operations, and has a working capital deficit of approximately
$85,214, which together raises substantial doubt about its ability to continue
as a going concern. Management is presently pursuing equity financing
and investment opportunities with investment bankers and private investors. The
ability of the Company to achieve its operating goals and to obtain such
additional finances, however, is uncertain. The financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result from the outcome of this uncertainty.
The
Company anticipates that it will continue to incur losses for some time. The
Company’s continued existence is dependent on its ability to generate additional
revenues and on obtaining additional financing from its stockholders and
external sources. Accordingly, there can be no assurance that the
Company will succeed in executing its plans and have all the financing necessary
for its operations. These matters raise substantial doubt about the
Company’s ability to continue as a going concern. The accompanying
financial statements do not include any adjustments that might be necessary
should the Company be unable to continue as a going concern.
In
February 2010 the Company received $175,000, less $88,113 in attorney fees, as
settlement of a lawsuit that was filed in a previous year. The proceedings were
initiated due to non performance of a consulting agreement between the Company
and the plaintiff. With receipt of the settlement all further legal action has
been dismissed.
F-13
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
There are
not and have not been any disagreements between us and our accountants on any
matter of accounting principles, practices or financial statement
disclosure.
|
Management’s
Report Disclosure Controls and
Procedures
|
We
maintain disclosure controls and procedures that are designed to ensure (1) that
information required to be disclosed by us in the reports we file or submit
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is
recorded, processed, summarized, and reported within the time periods specified
in the Securities and Exchange Commission’s (“SEC”) rules and forms, and (2)
that this information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost benefit relationship of
possible controls and procedures.
There
have been no material changes in internal control over financial reporting that
occurred during the fourth fiscal quarter that have materially affected, or are
reasonably likely to materially affect the Company’s internal control over
financial reporting. We cannot assure you, however, that our system
of disclosure controls and procedures will always achieve its stated goals under
all future conditions, no matter how remote.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial
reporting is a process designed by, or under the supervision of, the Chief
Executive Officer and Chief Financial Officer 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.
Prior to
the filing date of this annual report, under the supervision and review of our
Chief Executive Officer and Interim Chief Financial Officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this
report. Based on that evaluation, our Chief Executive Officer and our
Interim Chief Financial Officer have concluded that our disclosure controls and
procedures are not effective in alerting them in a timely manner to material
information regarding us that is required to be included in our periodic reports
to the SEC.
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 date:
Due to
the size of the Company we lack the personnel to maintain an adequate level of
separation of duties, and have also failed in the timely recording of certain
transactions.
Our
evaluation of internal control over financial reporting includes using the COSO
framework, an integrated framework for the evaluation of internal controls
issued by the Committee of Sponsoring Organizations of the Treadway Commission,
to identify the risks and control objectives related to the evaluation of our
control environment.
This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation requirements by the Company’s
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management’s
report in this annual report.
|
Other
Information
|
None.
|
Directors,
Executive Officers and Corporate
Governance
|
Directors
and Executive Officers
Directors
and Executive Officers
The
following table sets forth the names, ages, and titles of our executive officers
and directors.
|
Name
|
Age
|
Position
|
||
|
Ronny
Yakov
|
51
|
Chairman,
Chief Executive Officer, President, Interim Chief Financial Officer,
Secretary and Director
|
Ronny Yakov
founded OLB.com,
our predecessor in 1993, and has served as our Chief Executive Officer,
President and as a director from inception until the present. In November, 2007
he took on the additional office of Interim Chief Financial Officer. In
February, 2008 he took on the additional office of Secretary. He has been the
sole director since 2003. During the period that the Company was subject to the
Merger Agreement with MetaSource Group, Inc. (2002-2004), Mr. Yakov served as an
officer and director of only the Company and was never an officer or a director
of MSGR. OLB.com grew in sales from approximately $200,000 in 1993 to
approximately $3.2 million in 1997. Mr. Yakov has over 20 years of experience in
the graphic arts industry. Prior to founding OLB.com, Mr. Yakov owned design and
production studios in Israel.
All
directors hold office until the next annual meeting of stockholders of the
Company and until their successors are elected and qualified. Officers hold
office until the first meeting of directors following the annual meeting of
stockholders and until their successors are elected and qualified, subject to
earlier removal by the Board of Directors.
No
officer or director has, during the past five years, been involved in (a) any
bankruptcy petition filed by or against any business of which such person was a
general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time, (b) any conviction in a criminal proceeding
or being subject to a pending criminal proceeding (excluding traffic violations
and other minor offenses), (c) any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities or (d)
a finding by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
Due to
the early stage nature of our business, we do not have an audit committee, nor
have our board of directors deemed it necessary to have an audit committee
financial expert. Insofar that we are not a listed security, we are not required
to have an audit committee. Within the next 12 months, however, we
expect to have several committees in place, including a compensation, budget and
audit committee. At such time, we intend to have a member of the
Board of Directors that meets the qualifications for an audit committee
financial expert.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities
Exchange Act of 1934 requires our executive officers and directors and persons
who own more than 10% of our common stock to file with the Securities and
Exchange Commission initial statements of beneficial ownership, reports of
changes in ownership and annual reports concerning their ownership of our common
stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive
officers, directors and greater than 10% shareholders are required by the SEC
regulations to furnish us with copies of all Section 16(a) reports that they
file.
Based solely on our review of the
copies of such forms received by us, or written representations from certain
reporting persons, we believe that during fiscal year ended December 31, 2009,
all filing requirements applicable to our officers, directors and greater than
10% percent beneficial owners were complied with.
Code
of Ethics
The Board
of Directors has adopted a Code of Ethics applicable to the Company’s principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, which is designed to
promote honest and ethical conduct; full, fair, accurate, timely and
understandable disclosure; and compliance with applicable laws, rules and
regulations. A copy of the Code of Ethics will be provided to
any person without charge upon written request to the Company at its executive
offices, 1120 Avenue of the Americas, 4th floor, New York,
NY 10036.
|
Executive
Compensation
|
The
following summary compensation table sets forth the aggregate compensation we
paid or accrued to our Chief Executive Officer during the fiscal years ended
December 31, 2006, 2007, 2008 and 2009. No other officer received
compensation in excess of $100,000.
Summary
Compensation Table
|
Name
and Principal Position
|
Year
|
Salary
($)
(1)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other Compensation
($)
(2)
|
Total
|
||||||||||||||||||||||||||||
|
Ronny
|
2009
|
$
|
275,000
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
18,000
|
$
|
293,000
|
||||||||||||||||||||
|
Yakov,
President
and Interim Chief Financial Officer
|
2008
|
275,000
|
0
|
0
|
0
|
0
|
0
|
18,000
|
293,000
|
||||||||||||||||||||||||||||
|
2007
|
250,000
|
0
|
0
|
0
|
0
|
0
|
18,000
|
268,000
|
|||||||||||||||||||||||||||||
|
2006
|
250,000
|
0
|
0
|
0
|
0
|
0
|
18,000
|
268,000
|
|||||||||||||||||||||||||||||
(1)
Accrued but not paid and converted to stock on a quarterly
or semi-annual basis.
(2) Car
allowance
Employment
Agreements
In
February 2004, we entered into an employment agreement with our founder,
Chairman and Chief Executive Officer that expires on February 28, 2009. The
agreement provides for an annual salary of $250,000 plus fringe benefits ($1,500
monthly automobile allowance, any benefit plans of the company and 2 weeks paid
vacation) and an annual incentive bonus of $75,000 based on achievement of
certain performance targets (which targets have never been achieved). The
agreement also includes a covenant not to compete with the Company for a period
of one year after employment ceases.
The
initial employment agreement also includes provision for the grant to Ronny
Yakov of options if certain performance criteria are met, the last remaining of
which for 20,000 shares of Common Stock would have been exercisable on March 1,
2008, exercisable at $0.70 per share, if the performance criteria had been met.
Based on the performance of the Company no stock options were issued, or will be
issued, in connection with the employment agreement, as the performance criteria
had not been met. On February 20, 2008 the company extended the employment
agreement with its founder and president for another 5 years commencing April 1,
2008 that expires on February 28, 2013. The agreement provides for an annual
salary of $275,000 plus the above mentioned fringe benefits and an
incentive bonus of $100,000 based on the achievement of certain performance
criteria. The extended employment agreement does not provide for stock options.
The extended employment agreement also includes a covenant not to compete with
the Company for a period of one (1) year after employment ceases.
Outstanding
Equity Awards at Fiscal Year-End
There are
no stock options issued and outstanding to our employees, officers or
directors.
In 1999
the Company's predecessor adopted the 1999 Stock Option Plan (the "Plan").
Pursuant to the Plan, designated employees, including officers and directors of
the Company and certain outside consultants, will be entitled to receive
qualified and nonqualified stock options to purchase up to 500,000 shares of
common stock.
Under the
terms of the Plan, the minimum exercise price of options granted cannot be less
than 100% of the fair market value of the common stock of the Company on the
option grant date. Options granted under the Plan generally expire ten years
after the option grant date. For incentive stock options granted to such persons
who would be deemed to have in excess of a 10% ownership interest in the
Company, the option price shall not be less than 110% of such fair market value
for all options granted, and the options expire five years after the option
grant date.
Neither
the Company nor its predecessor have issued any options under the Plan at any
time to date.
Director
Compensation
Our
directors do not receive fixed compensation for their services as
directors. Directors are reimbursed for their reasonable
out-of-pocket expenses incurred in connection with their duties.
Indemnification
of Directors and Officers
Section
145 (“Section 145”) of the Delaware General Corporation Law, as amended (the
“DGCL”), permits indemnification of directors, officers, agents and controlling
persons of a corporation under certain conditions and subject to certain
limitations. Section 145 empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director,
officer or agent of the corporation or another enterprise if serving at the
request of the corporation. Depending on the character of the proceeding, a
corporation may indemnify against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In the case of an action by or in the right of the
corporation, no indemnification may be made with respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145
further provides that to the extent a present or former director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys’ fees)
actually and reasonably incurred by such person in connection
therewith.
In
accordance with Section 145, the Registrant’s Bylaws provide that the Registrant
shall indemnify its officers and directors, and any employee who serves as an
officer or director of any corporation at the Registrant’s request. According to
Article X of the Bylaws, directors and officers as well as employees and
individuals may be indemnified against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation as a
derivative action) if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
The
following table sets forth, as of December 31, 2009, information regarding
the beneficial ownership of each class of our voting securities by: (i) our
officers and directors; (ii) all of our officers and directors as a group; and
(iii) each person known by us to beneficially own 5% or more of any class of our
outstanding voting securities. Generally, a person is deemed to be a “beneficial
owner” of a security if that person has or shares the power to dispose or to
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which the person has the right to acquire
beneficial ownership within 60 days. At December 31, 2009, 71,973,192
shares of our common stock were outstanding.
|
Amount
and Nature of Beneficial Ownership (1)(2)
|
||||||||||||
|
Name
and Address of
Beneficial
Shareholder
|
Common
Stock
|
Percentage
of
Ownership
(1)(2)
|
Percentage
of Voting Power
(1)(2)
|
|||||||||
|
Ronny
Yakov
c/o
1120 Avenue of the Americas, 4
th
flr
New
York, NY 10036
|
45,595,166
|
63
|
%
|
63
|
%
|
|||||||
|
All
members and officers as a group (1 member)
|
45,595,166
|
63
|
%
|
63
|
%
|
|||||||
|
(1)
|
Beneficial
ownership is determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, and is generally determined by voting
powers and/or investment powers with respect to securities. Unless
otherwise noted, all of such shares of common stock listed above are owned
of record by each individual named as beneficial owner and such individual
has sole voting and dispositive power with respect to the shares of common
stock owned by each of them. Such person or entity’s percentage of
ownership is determined by assuming that any options or convertible
securities held by such person or entity, which are exercisable within
sixty (60) days from the date hereof, have been exercised or converted as
the case may be, but not for the purposes of determining the number of
outstanding shares held by any other named beneficial
owner.
|
|
(2)
|
Excludes
562,660 shares of common stock owned by Mr. Yakov’s mother, Batya Yakov,
any beneficial ownership of which is disclaimed by Mr.
Yakov
|
|
Certain
Relationships and Related Transactions, and Director
Independence
|
In March
2008, the Company converted accrued salary and loans from the company’s
President totaling $83,600 into 491,765 shares of common stock at a price of
$0.17.
In
December 2008, the Company converted accrued salary and loans from the company’s
President totaling $125,000 into 12,500,000 shares of common stock at a price of
$0.02.
On
December 31, 2009, the Company issued 8,438,160 shares of common stock in
conversion of $421,908 of accrued salaries and related party loans. Shares were
valued at $0.05. On December 31, 2009, the Company issued 5,722,200 shares of
common stock in conversion of $286,110 of company debt that was assumed by an
officer. Shares were valued at $0.05.
The
conversion price was arbitrarily determined by us and Mr. Yakov and does not
bear any relationship to assets, earnings, book value or other objective
criteria of value. In addition, no investment banker, appraiser or other
independent third party was consulted concerning the conversion price for the
shares or the fairness of the conversion price.
Director
Independence
Our board
of directors has determined that none of our directors are “independent” as that
term is defined by the National Association of Securities Dealers Automated
Quotations (“NASDAQ”). See “Lack of Committees” for the NASDAQ
definition of “Independent Director.”
|
Principal
Accountant Fees and Services
|
Audit
Fees
Audit
fees billed to the Company by HJ & Associates, LLC (‘‘HJ’’) for its audit of
the Company’s financial statements included in this Form 10-K, for its review of
the financial statements included in the Company’s Quarterly Reports on Form
10-Q, and its review of financial statement included in the Company’s filing on
Form 8-K/A filed with the Securities and Exchange Commission for 2009 and 2008
totaled
$16,000
and $17,420, respectively.
Audit-Related
There
were no audit- related fees billed to the Company by HJ for the years ended
December 31, 2009 and 2008.
Tax
Fees
Tax fees
billed to the Company by HJ for its tax returns for the years ended December 31,
2009 and 2008 were $1,269 and $2,917, respectively.
Other
No other
fees were billed to the Company by HJ for all other non-audit or tax services
rendered to the Company for the years ended December 31, 2009 and
2008.
Audit
Committee Pre-Approval Policies
As of
this filing date, OLB has no Audit Committee. Therefore it has not
adopted a procedure under which all fees charged by M&P must be pre-approved
by the Board of Directors, subject to certain permitted statutory de minimus
exceptions.
Lack
of Committees
Our
company has no standing nominating and compensation committees of our board of
directors or committees performing similar functions. We currently lack an audit
committee of our board of directors. We are currently seeking to nominate and
appoint to the board two independent directors and to form an audit committee
consisting of the two independent directors. It is our goal that at least, one
of the two independent directors would be deemed a “financial expert” within the
meaning of Sarbanes-Oxley Act of 2002, as amended. An “independent director” is
defined in Rule 4200(a)(14) of the NASDAQ’s listing standards to mean a person
other than an officer or employee of the company or any other individual having
a relationship which, in the opinion of our board of directors, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director. The following persons should not be considered
independent:
|
·
|
A
director who is employed by the company or any of its affiliates for the
current year or any of the past three
years;
|
|
·
|
A
director who accepts any compensation from the company or any of its
affiliates in excess of $60,000 during the previous fiscal year other than
compensation for Board service, benefits under a tax qualified retirement
plan, or non discretionary
compensation;
|
|
·
|
A
director who is a member of the immediate family of an individual who is,
or has been in any of the past three years, employed by the company or any
of its affiliates as an executive officer. Immediate family includes a
person’s spouse, parents, children, siblings, mother-in-law,
father-in-law, sister-in-law, brother-in-law, son-in-law, daughter-in-law,
and anyone who resides in such person’s
home;
|
|
·
|
A
director who is a partner in, or a controlling shareholder or an executive
officer of, any for-profit business organization to which the company
made, or from which the company received, payments (other than those
arising solely from investments in the company’s securities) that exceed
5% of the company’s or business organizations consolidated gross revenues
for that year, or $200,000, whichever is more, in any of the past three
years;
|
|
|
|
·
|
A
director who is employed as an executive of another entity where any of
the Company’s executives serve on that entity’s compensation
committee.
|
The term
“Financial Expert” is defined as a person who has the following attributes: an
understanding of generally accepted accounting principles and financial
statements; has the ability to assess the general application of such principles
in connection with the accounting for estimates, accruals and reserves;
experience preparing, auditing, analyzing or evaluating financial statements
that present a breadth and level of complexity of accounting issues that are
generally comparable to the breadth and complexity of issues that can reasonably
be expected to be raised by the company’s financial statements, or experience
actively supervising one or more persons engaged in such activities; an
understanding of internal controls and procedures for financial reporting; and
an understanding of audit committee functions.
Under the
National Association of Securities Dealers Automated Quotations definition, an
“independent director means a person other than an officer or employee of the
Company or its subsidiaries or any other individuals having a relationship that,
in the opinion of the Company’s board of directors, would interfere with the
exercise of independent judgment in carrying out the responsibilities of the
director. The board’s discretion in determining director independence is not
completely unfettered. Further, under the NASDAQ definition, an independent
director is a person who (1) is not currently (or whose immediate family members
are not currently), and has not been over the past three years (or whose
immediate family members have not been over the past three years), employed by
the company; (2) has not (or whose immediate family members have not) been paid
more than $60,000 during the current or past three fiscal years; (3)
has not (or whose immediately family has not) been a partner in or controlling
shareholder or executive officer of an organization which the company made, or
from which the company received, payments in excess of the greater of $200,000
or 5% of that organizations consolidated gross revenues, in any of the most
recent three fiscal years; (4) has not (or whose immediate family members have
not), over the past three years been employed as an executive officer of a
company in which an executive officer of Ace has served on that company’s
compensation committee; or (5) is not currently (or whose immediate family
members are not currently), and has not been over the past three years (or whose
immediate family members have not been over the past three years) a partner of
the Company’s outside auditor.
|
·
|
annually
reviewing and reassessing the adequacy of the committee’s formal
charter;
|
|
·
|
reviewing
the annual audited financial statements with our management and the
independent auditors and the adequacy of our internal accounting
controls;
|
|
·
|
reviewing
analyses prepared by our management and independent auditors concerning
significant financial reporting issues and judgments made in connection
with the preparation of our financial
statements;
|
|
·
|
being
directly responsible for the appointment, compensation and oversight of
our independent auditor, which shall report directly to the audit
committee, including resolution of disagreements between management and
the auditors regarding financial reporting for the purpose of preparing or
issuing an audit report or related
work;
|
|
·
|
reviewing
the independence of the independent
auditors;
|
|
·
|
reviewing
our auditing and accounting principles and practices with the independent
auditors and reviewing major changes to our auditing and accounting
principles and practices as suggested by the independent auditor or its
management;
|
|
|
|
·
|
reviewing
all related party transactions on an ongoing basis for potential conflict
of interest situations; and annually reviewing and reassessing the
adequacy of the committee’s formal
charter;
|
|
·
|
reviewing
the annual audited financial statements with our management and the
independent auditors and the adequacy of our internal accounting
controls;
|
|
·
|
reviewing
analyses prepared by our management and independent auditors concerning
significant financial reporting issues and judgments made in connection
with the preparation of our financial
statements;
|
|
·
|
being
directly responsible for the appointment, compensation and oversight of
our independent auditor, which shall report directly to the audit
committee, including resolution of disagreements between management and
the auditors regarding financial reporting for the purpose of preparing or
issuing an audit report or related work;
and
|
|
·
|
all
responsibilities given to the audit committee by virtue of the
Sarbanes-Oxley Act of 2002, which was signed into law by President George
W. Bush on July 30, 2002.
|
We can
provide no assurances that our board’s efforts to select two persons to serve as
independent directors and on the proposed audit committee will be successful. In
the event an audit committee is established, its first responsibility would be
to adopt a written charter. Such charter would be expected to include, among
other things:
|
Exhibits
|
|
Exhibit
|
||
|
Number
|
Description
|
|
|
2.1
|
Certificate
of Incorporation (1)
|
|
|
2.2
|
Bylaws
(1)
|
|
|
2.3
|
Certificate
of Merger between The OLB Group, Inc. and OLB.com (On-Line Business)
(1)
|
|
|
3.1
|
Common
Stock Certificate(1)
|
|
|
3.2
|
Warrant
Agreement, issued by The OLB Group, Inc. to Ronny Yakov
(1)
|
|
|
8.1
|
Legal
opinion respecting write off of certain debts (1)
|
|
|
10.1
|
Employment
Agreement effective March 1, 2004 between The OLB Group, Inc. and Ronny
Yakov (1)
|
|
|
10.2
|
Fulfillment
and Distribution Agreement, dated January 19, 2006, between the OLB Group,
Inc. and Baker & Taylor Fulfillment, Inc. (1)
|
|
|
10.3
|
Settlement
and Merger Agreement dated as September 27, 2004, between OLB.com (on-Line
Business) and MetaSource Group, Inc. (1)
|
|
|
11
|
Statement
re: Computation of per share earnings *
|
|
|
14.1
|
Code
of Ethics and Code of Conduct (2)
|
|
|
31.1
|
Rule
13a-14(a) Certification – Chief Executive Officer and Interim Chief
Financial Officer *
|
|
|
32.1
|
Section
1350 Certification – Chief Executive Officer and Interim Chief Financial
Officer *
|
|
(1)
Incorporated by reference to Registrant’s Registration Statement on Form 10-SB
as filed with the Commission on December 21, 2007.
(2)
Incorporated by reference to Registrant’s Registration Statement on Form 10-KSB
as filed with the Commission on April 7, 2008.
* Filed
herewith.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
The
OLB Group, Inc.
|
||
|
BY:
|
/s/
Ronny Yakov
|
|
|
Ronny
Yakov
|
||
|
President
and Interim Chief Financial Officer
|
||
|
Date: March
30, 2010
|
||
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant in the capacities and on the dates
indicated.
|
Signature
|
Title
|
Date
|
||
|
/s/
Ronny Yakov
|
President
and Treasurer Director Interim Chief Financial Officer
|
March
30, 2010
|
||
|
Ronny
Yakov
|
(Chief
Executive Officer and Principal Financial Officer)
|
|||
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertyItem 3. Legal ProceedingsItem 4. Submission Of Matters To A Vote Of Security HoldersPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataNote 1 - BackgroundNote 2 - Recent Accounting PronouncementsNote 3 - Summary Of Significant Accounting PoliciesNote 4 - Accounts Payable and Accrued ExpensesNote 5 - Stockholders EquityNote 6 - Related Party TransactionsNote 7 WarrantsNote 8 Income TaxesNote 9 Going ConcernNote 10 Subsequent EventsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. (t). Management S Report Disclosure Controls and ProceduresItem 9A. (t)Item 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesItem 15. Exhibits