UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period endedFebruary 29, 2012 | |
[ ] | Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to __________ | |
Commission File Number:333-143901 |
SupportSave Solutions, Inc.
(Exact name of Registrant as specified in its charter)
Nevada | 98-0534639 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
3400 Cahuenga Blvd. W., Ste 114 Los Angeles, CA 90068 |
(Address of principal executive offices) |
248-430-4300 |
(Registrant’s telephone number) |
_______________________________________________________________ |
(Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days
[ ] Yes [X] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
[ ] Large accelerated filer Accelerated filer | [ ] Non-accelerated filer |
[X] Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:18,225,173 common shares as of February 29, 2012.
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Page | |
PART I – FINANCIAL INFORMATION
| ||
Item 1: | Financial Statements | 3 |
Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 6 |
Item 4: | Controls and Procedures | 6 |
PART II – OTHER INFORMATION �� | ||
Item 1: | Legal Proceedings | 6 |
Item 1A: | Risk Factors | 8 |
Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 8 |
Item 3: | Defaults Upon Senior Securities | 8 |
Item 4: | Mine Safety Disclosures | 8 |
Item 5: | Other Information | 8 |
Item 6: | Exhibits | 8 |
2 |
PART I - FINANCIAL INFORMATION
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended February 29, 2012 are not necessarily indicative of the results that can be expected for the full year.
3 |
SUPPORTSAVE SOLUTIONS, INC.
(A NEVADA CORPORATION)
AS OFFEBRUARY 29, 2012 AND MAY 31, 2011 (UNAUDITED)
Feb 29, 2012 | May 31, 2011 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 79,889 | $ | 275,716 | ||||
Investment in marketable securities | — | 900 | ||||||
Accounts receivable - trade | 386,505 | 390,424 | ||||||
Note receivable - related party | -0- | 100,000 | ||||||
Note receivable | 21,000 | -0- | ||||||
Accrued interest receivable | -0- | 8,186 | ||||||
Prepaid expenses | 3,000 | -0- | ||||||
TOTAL CURRENT ASSETS | 490,394 | 775,226 | ||||||
PROPERTY AND EQUIPMENT, NET | 698,494 | 738,336 | ||||||
TOTAL PROPERTY AND EQUIPMENT | 698,494 | 738,336 | ||||||
OTHER ASSETS | ||||||||
Security deposits | 65,596 | 64,208 | ||||||
Websites | 2,595,280 | -0- | ||||||
Deferred tax asset | 298,000 | 485,000 | ||||||
TOTAL OTHER ASSETS | 2,958,876 | 549,208 | ||||||
TOTAL ASSETS | $ | 4,147,764 | $ | 2,062,770 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | -0- | $ | 189,124 | ||||
Accrued expenses | 73,606 | 55,865 | ||||||
Treasury stock payable | 300,000 | 700,000 | ||||||
Deferred income taxes | 97,000 | 97,000 | ||||||
Loan payable - officer | 800 | 800 | ||||||
TOTAL CURRENT LIABILITIES | 471,406 | 1,042,789 | ||||||
LONG TERM LIABILITIES | ||||||||
Note payable | 1,685,000 | -0- | ||||||
TOTAL LONG TERM LIABILITIES | 1,685,000 | -0- | ||||||
TOTAL LIABILITIES | 2,156,406 | 1,042,789 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock, $.00001 par value, 100,000,000 shares authorized, 18,225,173 and 26,232,280 shares issued and outstanding at February 29, 2012 and May 31, 2011, respectively | 182 | 262 | ||||||
Preferred stock, $.00001 par value, 100,000,000 shares authorized, 0 shares issued and outstanding | -0- | -0- | ||||||
Additional paid-in-capital | 2,514,468 | 2,875,916 | ||||||
Treasury stock | (14,614 | ) | (1,003,029 | ) | ||||
Cumulative translation adjustment | (87,007 | ) | (83,175 | ) | ||||
Unrealized gain (loss) on investments | (20,013 | ) | (19,113 | ) | ||||
Retained earnings (deficit) | (401,658 | ) | (750,880 | ) | ||||
TOTAL STOCKHOLDERS' EQUITY | 1,991,358 | 1,019,981 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 4,147,764 | $ | 2,062,770 |
F-1 |
SUPPORTSAVE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 (UNAUDITED)
2012 | 2011 | |||||||
REVENUE | ||||||||
Sales | $ | 1,143,538 | $ | 770,893 | ||||
Less returns and allowances | -0- | (15,902 | ) | |||||
TOTAL REVENUE | 1,143,538 | 754,991 | ||||||
EXPENSES | ||||||||
Wages and benefits | 561,532 | 601,413 | ||||||
Rent | 59,667 | 76,793 | ||||||
Telephone, internet and utilities | 66,728 | 41,057 | ||||||
Commissions | 13,820 | 42,695 | ||||||
Selling, general and administrative | 294,431 | 112,400 | ||||||
TOTAL EXPENSES | 996,178 | 874,358 | ||||||
OPERATING INCOME (LOSS) | 147,360 | (119,367 | ) | |||||
OTHER INCOME (EXPENSE) | ||||||||
Interest income | 1,092 | (42 | ) | |||||
Other income | 22,286 | -0- | ||||||
Bad debt expense | -0- | (110,000 | ) | |||||
Settlement expense | (10,235 | ) | (32,000 | ) | ||||
TOTAL OTHER INCOME (EXPENSE) | 13,143 | (142,042 | ) | |||||
NET INCOME (LOSS) BEFORE PROVISION FOR FEDERAL INCOME TAX (BENEFIT) | 160,503 | (261,409 | ) | |||||
PROVISION FOR FEDERAL INCOME TAX (BENEFIT) | 56,000 | (91,000 | ) | |||||
NET INCOME (LOSS) | $ | 104,503 | $ | (170,409 | ) | |||
NET INCOME (LOSS) PER SHARE: | ||||||||
BASIC AND DILUTED | $ | 0.01 | $ | (0.01 | ) | |||
WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||
BASIC AND DILUTED | 17,164,617 | 15,186,031 |
F-2 |
SUPPORTSAVE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 (UNAUDITED)
2012 | 2011 | |||||||
REVENUE | ||||||||
Sales | $ | 2,954,214 | $ | 2,093,904 | ||||
Less returns and allowances | (2,651 | ) | (25,616 | ) | ||||
TOTAL REVENUE | 2,951,563 | 2,068,288 | ||||||
EXPENSES | ||||||||
Wages and benefits | 1,363,838 | 1,988,461 | ||||||
Rent | 180,763 | 132,004 | ||||||
Advertising | 32,182 | 54,939 | ||||||
Telephone, internet and utilities | 140,906 | 118,647 | ||||||
Commissions | 39,536 | 96,729 | ||||||
Depreciation | 54,278 | 52,912 | ||||||
Selling, general and administrative | 613,475 | 207,858 | ||||||
TOTAL EXPENSES | 2,424,978 | 2,651,550 | ||||||
OPERATING INCOME (LOSS) | 526,585 | (583,262 | ) | |||||
OTHER INCOME (EXPENSE) | �� | |||||||
Interest income | 5,081 | 11,386 | ||||||
Other income | 22,288 | 204 | ||||||
Bad debt expense | -0- | (110,000 | ) | |||||
Settlement expense | (12,735 | ) | (32,000 | ) | ||||
Gains/(losses) on sales of investments | (2 | ) | -0- | |||||
Gains/(losses) on sales of assets | (4,995 | ) | -0- | |||||
TOTAL OTHER INCOME (EXPENSE) | 9,637 | (130,410 | ) | |||||
NET INCOME (LOSS) BEFORE PROVISION FOR FEDERAL INCOME TAX (BENEFIT) | 536,222 | (713,672 | ) | |||||
PROVISION FOR FEDERAL INCOME TAX (BENEFIT) | 187,000 | (249,000 | ) | |||||
NET INCOME (LOSS) | $ | 349,222 | $ | (464,672 | ) | |||
NET INCOME (LOSS) PER SHARE: | ||||||||
BASIC AND DILUTED | $ | 0.02 | $ | (0.03 | ) | |||
WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||
BASIC AND DILUTED | 18,452,805 | 14,993,531 |
F-3 |
SUPPORTSAVE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 (UNAUDITED)
2012 | 2011 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) for the period | $ | 349,222 | $ | (464,672 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation | 54,277 | 52,912 | ||||||
Stock based compensation expense | -0- | 397,442 | ||||||
Bad Debt Expense | -0- | 110,000 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable - trade | 3,919 | 31,092 | ||||||
Accounts receivable - other | -0- | 15,441 | ||||||
Accrued interest receivable | 8,186 | (2,980 | ) | |||||
Prepaid expenses | (3,000 | ) | -0- | |||||
Deferred tax asset | 187,000 | (249,000 | ) | |||||
Accounts payable | (182,230 | ) | (15,338 | ) | ||||
Accrued expenses | 10,845 | (21,558 | ) | |||||
TOTAL ADJUSTMENTS | 78,997 | 318,011 | ||||||
NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES | 428,219 | (146,661 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (14,435 | ) | (585,438 | ) | ||||
Purchases of website assets | (115,000 | ) | -0- | |||||
Security deposit | (1,389 | ) | (2,188 | ) | ||||
Increase in note receivable | (21,000 | ) | -0- | |||||
Increase in note receivable - related party | 100,000 | (50,000 | ) | |||||
NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES | (51,824 | ) | (637,626 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payments on treasury stock | (410,683 | ) | -0- | |||||
Investment in closely held company | (135,950 | ) | -0- | |||||
Gain/(Loss) on investments | (900 | ) | -0- | |||||
Net borrowings on note payable | (20,858 | ) | -0- | |||||
Proceeds from note receivable | -0- | 100,000 | ||||||
Currency translation adjustment | (3,831 | ) | (17,515 | ) | ||||
NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES | (572,222 | ) | 82,485 | |||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (195,827 | ) | (701,802 | ) | ||||
CASH AND CASH EQUIVALENTS - BEGINNING | 275,716 | 1,588,056 | ||||||
CASH AND CASH EQUIVALENTS - ENDING | $ | 79,889 | $ | 886,254 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | $ | -0- | $ | -0- | ||||
Cash paid for income taxes | $ | -0- | $ | -0- |
F-4 |
SUPPORTSAVE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2012
NOTE 1: NATURE OF BUSINESS
SupportSave Solutions, Inc. was incorporated in Nevada on May 2, 2007, and provides offshore business process outsourcing, or BPO, services from an outsourcing center through its wholly-owned subsidiary of the same name, which was incorporated in the Philippines on October 17, 2006 and operates in the Philippines. Both the parent and its subsidiary are hereinafter referred to as "the Company".
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. We believe that the disclosures are adequate to make the financial information presented not misleading. These condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended May 31, 2011. All adjustments were of a normal recurring nature unless otherwise disclosed. In the opinion of management, all adjustments necessary for a fair statement of the results of operations for the interim period have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year.
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company uses the accrual basis of accounting and has adopted a May 31 fiscal year end.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of the parent company and its wholly-owned Philippines subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
SupportSave considers all highly liquid investments with maturities of 3 months or less to be cash equivalents.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided by straight-line and accelerated methods, over the estimated useful lives of the assets, ranging from 39 years for leasehold improvements and 5 to 7 years for furniture and equipment. Normal expenditures for repairs and maintenance are charged to operations as incurred.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Advertising Costs
The Company follows the policy of expensing advertising costs as they are incurred. Advertising expenses for the nine months ended February 29, 2012 and February 28, 2011 were $32,182 and $54,939 respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
F-5 |
SUPPORTSAVE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2012
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company uses an asset and liability approach to financial accounting and reporting for income taxes. The difference between the financial statements and tax bases of assets and liabilities is determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the periods in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce the deferred tax assets to the amount that will more likely than not be realized. Income tax expense is the current tax payable or refundable for the period, plus or minus the net change in the deferred tax assets and liabilities.
Foreign Currency Translation
The functional currency of the Company is the United States Dollar. The financial statements of the Company’s Philippine operations are translated to U.S. dollars using the period exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transaction occurs. Net gains and losses resulting from foreign exchange translations are included in the statements of operations and changes in stockholders’ equity as other comprehensive income (loss).
Currency Hedging Transactions
The Company's operating expenses consist primarily of salaries, payroll taxes and employee benefit costs paid to the professionals that the Company employs in the Philippines. Since employee related costs are paid in the local currency, the Company is exposed to the risk of foreign currency fluctuations. In an effort to try to minimize the downside risk of fluctuating currency rates, the Company has entered into foreign exchange forward contracts from time to time. Any gains or losses from the settled and outstanding forward contracts are recorded as other income/expense in the statement of operations.
Impairment of Long-Lived Assets
The Company reviews its major assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an asset is considered impaired, then impairment will be recognized in an amount determined by the excess of the carrying amount of the asset over its fair value.
Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, investments in marketable securities, accounts receivable – trade and other, notes receivable, interest receivable, accounts payable, accrued expenses, loan payable – officer and deferred revenue. The carrying amounts of financial instruments are considered by management to be their estimated fair values due to their short-term maturities. Securities that are publicly traded are valued at their fair market value based as of the balance sheet date presented.
Basic Income Per Share
Basic income per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of February 29, 2012.
F-6 |
SUPPORTSAVE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2012
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Treasury Stock
Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. Gains and losses on the subsequent reissuance of shares are credited or charged to additional paid in capital using the average-cost method.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with SFAS No. 123 and 123 (R) (ASC 718). To date, the Company has not adopted a stock option plan and has not granted any stock options. The Company did not issue any shares of common stock to employees during the nine months ended February 29, 2012 and February 28, 2011, respectively.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 3: PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of February 29, 2012 and May 31, 2011:
February 29, 2012 | May 31, 2011 | |||||||
Office furniture and equipment | $ | 287,010 | $ | 272,574 | ||||
Software | 13,699 | 13,699 | ||||||
Leasehold improvements | 636,936 | 636,937 | ||||||
Sub-total | 937,645 | 923,210 | ||||||
Less: Accumulated depreciation | (239,151 | ) | (184,874 | ) | ||||
Total Property and Equipment | $ | 698,494 | $ | 738,336 |
Depreciation expense was $54,277 and $52,912 for the nine months ended February 29, 2012 and February 28, 2011, respectively.
NOTE 4: NOTES RECEIVABLE
On May 11, 2009, the Company sold its office building for $260,000 on a note receivable. The Company received $50,000 down and the remainder is payable in 23 monthly interest only installments of $1,225 beginning June 11, 2009, with a balloon payment of the remaining principal and all accrued interest due on May 11, 2011. The note bears interest at 7% per annum and is secured by the real property. On January 28, 2011, the Company settled the note receivable for $100,000. The Company has written off the remaining $110,000 balance as bad debt at May 31, 2011.
F-7 |
SUPPORTSAVE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2012
NOTE 5: NOTES RECEIVABLE – THIRD PARTY
On December 14, 2011, the Company entered into a Note Receivable for $20,000 with First Atlantic Holdings LLC.
The Note is to be repaid at $21,000. On January 20, 2012 the Company wired $20,000 to First Atlantic Holdings LLC. This note has not been repaid as of February 29, 2012.
NOTE 6: NOTE RECEIVABLE – RELATED PARTY
During the year ended May 31, 2010, the Company loaned $50,000 to a related party to fund an investment in a film project. The loan was due on June 14, 2011 and at that time a total balloon payment of $55,000 was due that will satisfy the principal and accrued interest. On June 2, 2010, the Company loaned an additional $50,000 to the related party and amended the terms of the initial loan. On September, 6 2011 the Company loaned an additional $62,500 to the related party. The total note receivable of $162,500 plus 6.66 % interest was fully repaid in December 2011.
NOTE 7: MARKETABLE SECURITIES
Marketable securities are shown on the balance sheet. The first-in, first-out (FIFO) method is used to determine the cost of each security at the time of sale. We consider our investment portfolio and marketable equity investments available-for-sale. Accordingly, these investments are recorded at fair market value. As of February 29, 2012, an unrealized loss of $20,013 has been recorded. Cost and market value of equitable securities at May 31, 2011 and February 29, 2012 are as follows:
Cost | Gross Unrealized Loss | Market Value | ||||||||||
Equities/Options, February 29, 2012 | $ | 20,013 | $ | (20,013 | ) | $ | 0 | |||||
Equities/Options, May 31, 2011 | $ | 20,013 | $ | (19,113 | ) | $ | 900 |
NOTE 8: ACCRUED EXPENSES
Accrued expenses consisted of the following as of February 29, 2012 and May 31, 2011:
February 29, 2012 | May 31, 2011 | |||||||
Accrued wages and taxes | $ | 22,846 | $ | 33,954 | ||||
Accrued professional fees | 0 | 21,911 | ||||||
Accrued miscellaneous | 50,757 | 0 | ||||||
Total Accrued expenses | $ | 73,603 | $ | 55,865 |
F-8 |
SUPPORTSAVE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2012
NOTE 9: LOAN PAYABLE – OTHER
On October 25, 2011, the Company borrowed $50,000 in the form of a short term loan with $51,500 to be paid in January 2012. This loan was fully repaid in January 2012.
NOTE 10: NOTE PAYABLE
On February 17, 2012, we entered into an Asset Purchase Agreement (the "Agreement") with Global Services Corporation, a Republic of Seychelles corporation ("GSC") for the acquisition of certain assets in exchange for cash and a promissory note. GCS owns and operates a remote technical support business and we have agreed to purchase selected assets in association with that business from GCS that we believe will complement our own business model. The acquired assets consist of intellectual property, namely the websites www.techbuddha.com and www.virtualpcdoctor.com, customer lists, contracts, service records and goodwill.
We have also agreed to assume certain liabilities associated with the contracts and customer support agreements we acquired in the transaction.
The total purchase price consists of $1,170,000 and 1,656,834 shares of our common stock. We have agreed to deliver $30,000 at execution of the Agreement, $100,000 at closing and the balance in the form of a promissory note. The no-interest promissory note will provide for monthly installment payments at a rate of $57,000 that will commence on March 15, 2012 and continue until paid in full.
In addition, GCS agreed to not engage any in business that competes with a remote technical support business for a period of 3 years.
NOTE 11: COMMON STOCK
The Company has 100,000,000 shares of $0.00001 par value common stock authorized.
On January 1, 2010, the Company sold 875,000 shares of its common stock in a private offering at $0.60 per share for total cash of $525,000. 275,387 of those shares came from the treasury.
The Company purchased back 20,500 shares for a total cost of $9,017 during year ended May 31, 2010 and returned them to treasury.
On April 12, 2011, the Company sold 3,000,000 shares of its common stock in a private offering at $0.05 per share for a total cash value of $150,000. The Company collected $94,700 and recorded the balance of $55,300 as a stock
subscription receivable. The Company determined the balance of $55,300 to be uncollectable at May 31, 2011 and wrote off the balance against additional paid-in capital.
On May 26, 2011, the Company sold 650,000 shares of its common stock in a private offering at $0.10 per share for a total cash value of $65,000.
The Company issued shares at various times to employees for services rendered. During the years ended May 31, 2011 and 2010, 1,682,499 and 373,333 shares were issued to employees for total value of $758,246 and $280,000, respectively. The shares were valued at the market price on the grant date.
In April and May 2011, the Company issued 6,396,250 anti-dilution shares of common stock to two officers under the terms of their employment agreements. The share issuances were recorded at par value.
During the year ended May 31, 2011, the Company entered into two agreements to purchase back stock into treasury.
F-9 |
SUPPORTSAVE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2012
NOTE 11: COMMON STOCK (CONTINUED)
The Company agreed to purchase back 833,333 shares of common stock for a total cost of $500,000 in accordance with a settlement agreement with a shareholder. The Company paid $200,000 and recorded the remaining $300,000 as a payable as of May 31, 2011, which remains payable at February 29, 2012.
The Company also agreed to purchase back 6,835,425 shares of common stock for a total cost of $500,000 in accordance with a settlement agreement with a departing officer of the Company. The Company paid $100,000 and recorded the remaining $400,000 as a payable as of May 31, 2011. The remaining $400,000 payable was paid during the three months ending August 31, 2011.
The company retired 7,078,539 of treasury stock during the three months ended August 31, 2011 that had previously been acquired for $645,868.
The Company also agreed to purchase back 650,000 shares of common stock from a shareholder, as well as 213,813 shares of common stock from Philippine employees as part of the Company’s stock buyback program. The program was completed during the three months ended November 30, 2011.
NOTE 12: OPERATING LEASE
The Company operates out of a leased facility in Cebu, Philippines. The lease began on December 1, 2007, and is for 5 years at the current rate of approximately $1,900 per month. On August 15, 2010, the Company signed a lease in Los Angeles for approximately $1,200 per month for a term of twelve months. On May 18, 2011, the Company board voted to close the Los Angeles facility effective that day.
In March 2010, the Company signed a new lease for a facility in Cebu, Philippines. The lease begins on July 30, 2010, and is for 5 years at the rate of approximately $10,650 per month plus utilities. The lease contains a rent-free fit-out period from March 30 to July 29, 2010. The lease also contains an option for additional 5 years upon mutual agreement of the parties.
Minimum annual rents for all leases for the next five years are as follows:
Period Through: | Amount: | |||
August 31, 2012 | $ | 137,034 | ||
2013 | 144,253 | |||
2014 | 151,648 | |||
2015 | 104,450 | |||
Total | $ | 537,427 |
NOTE 13: MAJOR CUSTOMERS
Sales to one customer amounted to 27% and 32% of net sales in the nine months ended February 29, 2012 and February 28, 2011, respectively.
F-10 |
SUPPORTSAVE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2012
NOTE 14: INCOME TAXES
The provision for Federal income tax consists of the following for the nine months ended February 29, 2011 and 2011
2012 | 2011 | |||||||
Federal income tax expense (benefit) attributable to: | ||||||||
Current operations | $ | (187,000) | $ | (249,000) | ||||
Less: valuation allowance | 0 | 0 | ||||||
Net provision (benefit) for Federal income taxes | $ | (187,000) | $ | (249,000) |
The cumulative tax effect at the expected rate of 35% of significant items comprising our net deferred tax asset is as follows:
February 29, 2012 | May 31, 2011 | |||||||
Deferred tax asset attributable to: | ||||||||
Net operating loss carryover | $ | 298,000 | $ | 485,000 | ||||
Less: valuation allowance | 0 | 0 | ||||||
Net deferred tax asset (liability) | $ | 298,000 | $ | 485,000 |
NOTE 15: LITIGATION
On June 27, 2011 Mr. Joseph Duryea, former President, filed a complaint (“the Complaint”) against the Company in the United States District Court for the District of Nevada (Case No. 2: 11-cv-01054-GMN CWH) alleging breach of contract, breach of the covenant of good faith and fair dealing, tortious breach of contract, and fraud (“the Litigation”) in relation to an employment agreement (“the Employment Agreement”) the Company entered into with him on January 15, 2010.
On September 15, 2011 the Company entered into a settlement agreement (“the Settlement Agreement”) with Mr. Duryea to resolve the above Litigation. Under the terms of the Settlement Agreement, the Company agreed to pay Mr. Duryea a total of $85,000 (“the Settlement Funds”). Of this total amount, the Company agreed to pay $45,000 upon execution of the Settlement Agreement and the remaining $40,000 was to be paid in four equal installments, payable on or before the following dates: October 15, 2011, November 15, 2011, December 15, 2011, and January 15, 2012. An outstanding balance of $20,000 remains payable as of November 30, 2011. The remaining $20,000 has been paid in $10,000 installments on December 15, 2011 and on January 15, 2012.
NOTE 16: SUBSEQUENT EVENTS
None
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Overview
We provide offshore business process outsourcing, or “BPO,” services which we deliver primarily to U.S.-based clients from our facilities in the Philippines. BPO services involves contracting with an external organization to take primary responsibility for providing a business process or function, such as customer management, transcription and captioning, processing services, human resources, procurement, logistics support, finance and accounting, engineering, facilities management, information technology and training. These customer care services and solutions are provided by our skilled customer service representatives to small and mid-sized companies in the healthcare, communication, business services, financial services, publishing, and travel and entertainment industries.
During the current reporting period, we entered into an Asset Purchase Agreement (the “Agreement”) with Global Services Corporation, a Republic of Seychelles corporation (“GSC”) for the acquisition of certain assets in exchange for cash and a promissory note. GCS owns and operates a remote technical support business and we have agreed to purchase selected assets in association with that business from GCS that we believe will complement our own business model. The acquired assets consist of intellectual property, namely the websites www.techbuddha.com and www.virtualpcdoctor.com, customer lists, contracts, service records and goodwill.
We have also agreed to assume certain liabilities associated with the contracts and customer support agreements we acquired in the transaction.
The total purchase price consists of $1,170,000 and 1,656,834 shares of our common stock. We have agreed to deliver $30,000 at execution of the Agreement, $100,000 at closing and the balance in the form of a promissory note. The no-interest promissory note will provide for monthly installment payments at a rate of $57,000 that will commence on March 15, 2012 and continue until paid in full.
In addition, GCS agreed to not engage any in business that competes with a remote technical support business for a period of 3 years.
Results of Operations for the three and nine months ended February 29, 2012 and 2010
To become more profitable and competitive, we have to attract more clients, sell our services and generate more revenues.
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Our revenue reported for the three months ended February 29, 2012 was $1,143,538 compared with $754,991 for the three months ended February 28, 2011. Our revenue reported for the nine months ended February 29, 2012 was $2,951,563 compared with $2,068,288 for the nine months ended February 28, 2011. Our revenue generated for all periods was mainly attributable to the sale of our BPO services. The increase in revenues for the three and nine months ended February 29, 2012 from the same periods in 2011 is attributable to acquiring additional larger clients.
Our operating expenses for the three months ended February 29, 2012 was $996,178, compared with $874,358 for the same period ended February 28, 2011. The increase in our operating expenses for the three months ended February 29, 2012 compared with February 28, 2011 is mainly attributable to a an increase in our selling, general and administrative expenses.
Our operating expenses for the nine months ended February 29, 2012 was $2,424,978 compared with $2,651,550 for the same period ended February 28, 2011. The decrease in our operating expenses for the nine months ended February 29, 2012 compared with February 28, 2011 is mainly attributable to a decrease in wages and benefits.
We had net other income of $13,143 for the three months ended February 29, 2012, compared with net other expense of $142,042 for the three months ended February 28, 2011. The increase in other income is attributable to gain on the investment in the film project. The expense in 2011 related primarily to bad debt expense and a settlement expense.
We had net other income of $9,637for the nine months ended February 29, 2012, compared with other expense of $130,410 for the nine months ended February 28, 2011. The increase in other income is mainly attributable to gain on the investment in the film project. The expense in 2011 related primarily to bad debt expense and a settlement expense.
We had a net income of $104,503 for the three months ended February 29, 2012, compared with net loss of $170,409 for the three months ended February 28, 2011. We had a net income of $349,222 for the nine months ended February 29, 2012, compared with net loss of $464,672 for the nine months ended February 28, 2011.
Liquidity and Capital Resources
As at February 29, 2012, we had $490,394 in current assets and $471,406 in current liabilities. On February 28, 2011, we had a working capital surplus of $18,988.
Operating activities provided $428,219 in cash for the nine months ended February 29, 2012. Our net income of $349,222 was the primary reason for our positive operating cash flow.
Cash flows used by investing activities during the nine months ended February 29, 2012 was $51,824 mainly for the purchase of website assets as described in Note 10.
Cash flows used by financing activities during the nine months ended February 29, 2012 were $572,222 mainly as a result of repurchase of treasury stock.
Currently, our primary source of liquidity is cash flows provided by our operations. We will not require additional capital to execute our plan, unless we expand into additional facilities or grow through the acquisition of complementary businesses. Our current cash flows from operations are sufficient to meet our working capital requirements over the next 12 months.
Research and Development
We will not be conducting any product research or development during the next 12 months.
Off Balance Sheet Arrangements
As of February 29, 2012, there were no off balance sheet arrangements.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
A smaller reporting company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
We evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of February 29, 2012. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Chris Johns. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of February 29, 2012, our disclosure controls and procedures are effective. There have been no changes in our internal controls over financial reporting during the quarter ended February 29, 2012.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
PART II – OTHER INFORMATION
Loomis Bankruptcy
On or about January 6, 2011, a complaint was filed against us in the United States Bankruptcy Court for the District of Arizona (Case No. 2:10-Bk-01885) by Joseph Charles Loomis (the “Debtor”). The Debtor is the subject of a Chapter 11 bankruptcy case. The complaint alleges that on January 26, 2010, after the commencement of his bankruptcy case, the Debtor made a payment of $500,000 to us without prior bankruptcy court approval and that the entire payment is subject to being ordered immediately returned to the bankruptcy estate. The payment was made pursuant to a written Stock Subscription Agreement executed between us and the Debtor or about January 1, 2010 whereby the Debtor agreed to purchase 833,333 shares of our common stock (the “Stock Sale”).
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On February 28, 2011, the United States Bankruptcy Court approved a settlement agreement (the “Settlement Agreement”) between us and the Debtor. Under the Settlement Agreement, we are required to pay the Debtor $200,000 within 48 hours of entry of the order by the Bankruptcy Court approving the Settlement Agreement. In exchange for the above-referenced payment, the Debtor will return to us 333,332 shares of our common stock purchased as part of the Stock Sale.
Further under the Settlement Agreement, the Debtor shall be permitted to sell his remaining shares of stock acquired in the Stock Sale for a price of not less than $0.35 per share. At the expiration of 180 days from the date of entry of an order by the Bankruptcy Court approving the Settlement Agreement, we will buy back all of the remaining shares of stock sold by means of the Stock Sale for an amount such that the Debtor is reimbursed in the total amount of $500,000 as a result of the above transactions. In exchange, the Debtor will return to us all remaining shares of our common stock in his possession acquired on account of the Stock Sale.
On September 9, 2011 we entered in to an Amendment to Settlement Agreement (“Amendment”) with the Debtor in which he agreed to forbear his right to submit the judgment to the court. In addition, commencing as of April 1, 2011, we agree to make forbearance payments to Debtor on a monthly basis in the amount of 8% of the sum of $300,000 or $2,000 per month with each forbearance payment due and payable on the first business day of each month. Under this Amendment and within 48 hours of approval of this Amendment by the Bankruptcy Court, we shall pay the Debtor the past due forbearance payments (for the months of April, May, June, July and August) in the total amount of $10,000.
The remaining principal balance in the amount of $300,000 was due and payable to the Debtor on or before April 1, 2012. This amount remains outstanding.
Duryea Action
On June 27, 2011, Mr. Joseph Duryea, our former President, filed a complaint (the “Complaint”) against us in the United States District Court for the District of Nevada (Case No. 2:11-cv-01054-GMN CWH) alleging breach of contract, breach of the covenant of good faith and fair dealing, tortious breach of contract, and fraud (the “Litigation”) in relation to an employment agreement (the “Employment Agreement”) we entered into with him on January 15, 2010.
On September 15, 2011, we entered into a settlement agreement (the “Settlement Agreement”) with Mr. Duryea to resolve the above Litigation. Under the terms of the Settlement Agreement, we agreed to pay Mr. Duryea a total of $85,000 (the “Settlement Funds”). Of this total amount, we agreed to pay $45,000 upon execution of the Settlement Agreement and the remaining $40,000 shall be paid in four equal installments. An outstanding balance of $20,000 remained payable as of November 30, 2011. The remaining $20,000 has been paid in $10,000 installments on December 15, 2011 and on January 15, 2012.
Further under the Settlement Agreement, we agreed as follows:
▪ We agreed that any failure on our part to make timely installment payments will make the entire remaining balance of the Settlement Funds immediately due and payable and we consented to the immediate entry of judgment against us for the amount of the remaining balance of the Settlement Funds, subject to pre-judgment interest from the date of the filing of the Complaint forward.
▪ We agreed to make our best effort to correct SEC filings and any other sites to record that Mr. Duryea in fact resigned from his former position with us as President, as opposed to the company’s previous allegation that he had been “terminated.”
The Settlement Agreement provides for a mutual release of claims and a non-disparagement clause. Upon payment of the Settlement Funds, the Litigation will be dismissed. The parties acknowledged, however, that Mr. Duryea’s additional stock rights, as described in his Employment Agreement, as a stockholder of our company will remain intact.
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A smaller reporting company is not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
None
(1) Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 22, 2012.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SupportSave Solutions, Inc. | |
Date: | April 23, 2012 |
By:/s/ Christopher Johns Christopher Johns Title:Chief Executive Officer and Director |
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