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SAVY > SEC Filings for SAVY > Form 10-Q on 14-Nov-2012All Recent SEC Filings

Show all filings for SAVEDAILY INC

Form 10-Q for SAVEDAILY INC


14-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (I) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words "may," "would," "could," "should," "expects," "projects," "anticipates," "believes," "estimates," "plans," "intends," "targets" or similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, international gold prices, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.

Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q.

Plan of Operation

SaveDaily.com, Inc ("SaveDaily") developed (over the course of eight years) and owns a proprietary financial services platform, the most recent version being in production for about three years, helping financial intermediaries succeed in bringing suitable and affordable investment services to everyday savers and investors. In the view of SaveDaily management, the mass market demographic is in need of affordable access to the relationships and investment strategies typically reserved only for affluent investors. SaveDaily was founded to provide persons of all income levels the information and tools necessary to invest and self manage their short and long term investment goals.

The everyday saver is often under-served because the acquisition and maintenance of their accounts are often unprofitable or only marginally profitable for financial institutions and brokerage houses. SaveDaily's proven proprietary technology is a low cost, private label solution for these financial institutions designed specifically to serve the mass market - commonly referred to as the small investor and mass affluent investor, making up 90% of the investing population. Our private label platform offers mutual funds and any daily-valued product investments for both qualified and non-qualified account types.

The SaveDaily platform provides straight-through processing, record keeping and all-electronic money movement. With a complete end-to-end technological infrastructure solution, the financial services, defined contribution, and asset management market users gain a feature-rich, low cost, efficient, easy to use, and easy to deploy servicing platform. This open architecture, omnibus trading platform is flexible and unencumbered by laborious manual processes. Management believes that by remaining mutual fund, bank and clearing firm agnostic, SaveDaily's platform is well positioned in our market. SaveDaily delivers mutual funds as its feature set, and at a price point our partners need to provide superior services to their investor clients at increased profit levels. Leveraging its scalable, all-electronic, sub-accounting and money movement platform, SaveDaily believes that it currently offers the industry's lowest cost, private-labeled, investment solutions to large banks, community banks, credit unions, and broker dealers. By helping these entities bring their investors private-labeled solutions, delivered under their respective brands, and leveraging virtually any third party money manager(s), investors in our service sets enjoy access to advisory services generally not readily available to this investor class.

By using our platform products, business partners of SaveDaily gain the ability to attract new customers, retain existing customers, lower servicing costs, and derive new revenue streams by incorporating a customizable mutual fund investing solution into their existing offerings. SaveDaily enables partner organizations to accelerate time-to-market by providing turn-key solutions and a robust Applications Programming Interface that supports tight integration between SaveDaily's investor platform and their existing infrastructure, at any back-office or consumer touch point.

By utilizing SaveDaily's proprietary platform products clients are able to initiate brokerage services with consumer-direct offerings, augment existing programs with financial advisors, more efficiently oversee portfolio management of trust funds, 401(k) Plans, 403(b) Plans, Safe Harbor IRA Rollovers, and provide for managed fund accounts. SaveDaily offers a full-service record keeping facility, providing participants with daily valuations and full-featured web access, all while maintaining compliance with pre-determined mutual fund models or approved product lists. All tax reporting, performance reporting, confirmation, and statement delivery is to be provided by SaveDaily directly to investors, or integrated into existing partner operations, for a seamless flow of regulated information to the investors

The Company

SaveDaily, Inc., formerly Nine Mile Software, Inc., a Nevada Corporation, conducts its business through its wholly owned subsidiary, SaveDaily.com, Inc., a California corporation incorporated on May 27, 1999. References herein to "SaveDaily", unless otherwise note, refer to SaveDaily.com, Inc., the operating entity. SaveDaily produces and supports proprietary record keeping and workflow software solutions in the financial services industry that market products and services to everyday savers and investors. Mass market and mass affluent savers and investors typically have investable assets of less than $100,000 and generally make up the bulk of the retail client services by the banking industry, the qualified and defined benefits industry, and the debit card industry - all of which are target markets.

SaveDaily has had a history of losses and does not yet operate at break even cash flow. Since its inception, SaveDaily has received more than $14 million in equity from private sources. Over a course of eight years, working in conjunction with key firms within the financial services industry, SaveDaily developed a series of proprietary components into a fully integrated platform of technology solutions. We currently have 15 employees.

Our solutions, though continuing to evolve and be refined, are mature. We have been actively marketing these solutions since about 2008. Through various online portals, SaveDaily offers investments and record-keeping services directly to clients via our website located at www.savedaily.com, as well as indirectly to clients of business partners through a variety of white-labeled interfaces deployed with financial institution partners supporting investment accounts of all tax types. SaveDaily's solutions operate successfully in our defined markets, enabling clients to find educational information, investment and account type wizards, and open and transact mutual fund investments in individual, joint, custodial, IRA (Individual Retirement Account) , ESA,(Educational Saving Account), and HSA Health Saving Account) accounts.

SaveDaily has formed strategic alliances to provide investment services to ethnically, religiously, and socio-economically focused communities, including African-American, Latino-American, and economically underserved and un-banked communities. In these communities, SaveDaily provides managed accounts of all tax types in conjunction with our strategic partners, who are themselves focused in these market places.

SaveDaily has partnered with UMB Bank, N.A. to provide Safe Harbor Automatic Rollover IRAs to terminated participants of qualified retirement plans, and has entered into over 1,500 agreements with retirement plan sponsors to handle their Safe Harbor Automatic Rollover IRAs.

SaveDaily also partners with third party administrators (TPAs) to create and offer a 401K/Qualified plan record-keeping platform aimed at TPAs, payroll associations and financial advisors. The platform was created to be private labeled by distribution partners, with SaveDaily providing record-keeping, trading, settlement and customer support.

SaveDaily launched an HSA investment sub-account product in 2007. This product is designed to link with existing banks and other entities that provide or manage direct deposit account support for HSAs. In September 2007, SaveDaily was selected as the investment solution for the largest HSA provider in the country, which began deployment of the company's solution to its client base in October 2008.

Results of Operations and Liquidity and Capital Resources

Net Sales of Services ("Revenue")

The Company has two primary sources of revenue: membership fees that are account based and calculated based on a fixed fee for a specified time period and/or the amount of assets under management (AUM) for a particular account; and money management fees, including distribution, marketing and advisory fees.

Revenue for the three months ended September 30, 2012 increased $480,100 to $705,800 or 212.7% compared to $225,700 for the three months ended September, 2011 and included as a result of a management policy change, $430,200 in set-up fees.

Revenue Summary:                       Three Months Ended Sept 30,            Nine Months Ended Sept 30,
                                        2012                 2011               2012                2011
Regularly recurring revenue:
 Fixed fees                        $      178,700       $      170,700     $       527,800       $   532,300
 Assets under management fees              78,900               55,000             229,300           140,200
  Total membership fees                   257,600              225,700             757,100           672,500
 Money management fees                     18,000                    -              56,900            12,200
 Partner integration fees                       -                    -              20,500                 -
  Total regularly recurring
revenue                                   275,600              225,700             834,500           684,700
Non-regularly recurring revenue:
 Safe harbor set-up fees                  430,200                    -             430,200                 -
 Team America                                   -                    -             184,300                 -
  Total non-regularly recurring
revenue                                   430,200                    -             614,500                 -
  Total revenue                    $      705,800       $      225,700     $     1,449,000       $   684,700

For the three months ended September 30, 2012 total regularly recurring revenue increased $49,900 to $275,600 or 22.1% compared to $225,700 for the three months ended September 30, 2011. Membership fees increased $31,900 to $257,600 or 14.1% compared to $225,700 for the three months ended September 30, 2011. Fixed fee revenue increased $8,000 in 2012 to $178,700 or 4.7% and AUM-based fees increased $23,900 to $78,900 or 43.5% compared to $170,700 and $55,000 for the three months ended September 30, 2011, respectively. AUM-based fee increased as the company's assets under management as of September 30, 2012 grew to approximately $181 million or 43.7% from approximately $126 million as of September 30, 2011. Money management fees increased to $18,000 for the three months ended September 30, 2012. The Company did not recognize any money management fees for the three months ended September 30, 2011. As a percentage of revenue, membership fees were 93.5% (64.9% fixed fee and 28.6% AUM-based) and money management fees were 6.5%, compared to 100.0% (75.6% fixed fee and 24.4% AUM-based) for the three months ended September 30, 2011.

Revenue for the nine months ended September 30, 2012 increased $764,300 to $1,449,000 or 111.6% compared to $684,700 for the nine months ended September 30, 2011 and included non-regularly recurring revenue of $430,200 in set-up fees to existing members discussed above and a one-time amount of $184,300 for Team America. Team America was a 401-K for a defunct company that acted as an employer group. We had three roles; (1) make initial distributions per instructions from the Trustee; (2) rollover prescribed amounts of assets into traditional IRAs per instructions from the Trustee, and (3) hold monies to ultimately be distributed or rolled per the findings of the litigation. We carried out all instructions per Trustee and the matter was closed. Upon the completion of our obligations we were entitled to additional fees.

Total regularly recurring revenue for the nine months ended September 30, 2012 increased $149,800 to $834,500 or 21.9% compared to $684,700 for the nine months ended September 30, 2011. Membership fees increased $84,600 to $757,100 or 12.6% compared to $672,500 for the nine months ended September 30, 2011. Fixed fee revenue decreased $4,500 to $527,800 or 0.8% and AUM-based fees increased $89,100 to $229,300 or 63.6% compared to $532,300 and $140,200 for the nine months ended September 30, 2011, respectively. Fixed fee revenue decreased as one of the company's legacy customers has experienced a steady decline in accounts. AUM-based fees increased as the company's assets under management as of September30, 2012 grew to approximately $181 million or 43.7% from approximately $126 million as of September 30, 2011. Money management fees increased $44,700 to $56,900 or 366.4% compared to $12,200 for the nine months ended September 30, 2011. We also recognized $20,500 in partner integration fees for the nine months ended September 30, 2012. As a percentage of revenue, membership fees were 90.7% (63.2% fixed fee and 27.5% AUM-based), money management fees were 6.8% and partner integration fees were 2.5%, compared to 98.2% (77.7% fixed fee and 20.5% AUM-based) and 1.8% for the nine months ended September 30, 2011, respectively There were no partner integration fees for the nine months ended September 30, 2011.

Costs Applicable to Sales of Services

Costs applicable to sales of services consist primarily of trust account fees and bank service charges, data center hosting costs, and compensation expenses for customer support personnel.

For the three months ended September 30, 2012 these costs increased $33,900 to $58,200 or 139.5% compared to $24,300 for the three months ended September 30, 2011. The increase resulted primarily from data center hosting costs related to the Company's recent move to an off-site hosting location to significantly improve both processing response times and data site security.

For the nine months ended September 30, 2012 these costs increased $44,800 to $121,400 or 58.5% compared to $76,600 for the nine months ended September 30, 2011. The increase resulted primarily from the data center hosting costs referred to above and to a lesser extent the increase in trust account and bank service charges resulting from increased customer account activity.

Operating Expenses

For the three months ended September 30, 2012 operating expenses decreased $7,553,100 to $1,20,900 or 87.1% compared to $8,674,000 for the three months ended September 30, 2011. Equity compensation accounted for $6,304,600 of the decrease. The remaining $1,248,500 decrease was due to lower professional fees of $877,600, lower sales and marketing expenses of $472,600, partially offset by higher compensation expenses of $32,300, higher dues and subscriptions expenses of $22,700 and higher printing and reproduction expenses of $13,800. All other operating expenses combined increased by $52,900.

For the nine months ended September 30, 2012 operating expenses decreased $6,374,000 to $3,050,600 or 67.6% compared to $9,424,600 for the nine months ended September 30, 2011. Equity compensation accounted for $6,090,800 of the decrease. The remaining $283,200 decrease was due to lower professional fees of $487,600, lower sales and marketing expenses of $462,100 partially offset by higher compensation expenses of $444,100, higher printing and reproduction expenses $38,800, higher travel and entertainment expenses of $38, 100, higher insurance costs of $30,900, higher expenses for dues and subscriptions of $29,100 and higher licenses and filing fees of $24,300. All other operating expenses combined increased $61,200.

Other Income/Expense

Interest expense, net

For the three months ended September 30, 2012 interest expense, net decreased $8,800 to $4,700 compared to $13,500 for the three months ended September 30, 2011. As discussed in Note 3-Liqudity the Company was not required to accrue interest on $1,700,000 of its long-term convertible debt.

For the nine months ended September 30, 2012 interest expense, net increased $863,300 to $863,800 compared to $500 for the nine months ended September 30, 2011. Components of interest expense for the nine months ended September 30, 2012 included $253,700 for the amortization of the loan discount, $384,800 for the acceleration of amortization of the loan discount due to refinancing, $104,400 to recognize the fair value of the loan conversion inducement shares, $100,200 for the amortization of prepaid loan costs, $30,300 accrued interest offset by $9,600 of interest income.

Other Income

For the three and nine months ended September 30, 2011 other income included $119,800 for the forgiveness of debt.

Liquidity

At September 30, 2012, cash and cash equivalents totaled $200,700. We had total liabilities of $3,296,700 including $1,700,000 of convertible long term debt and a stockholders' deficit of $2,570,100, compared to total cash and cash equivalents of $431,000, total liabilities of $1,843,800 including $200,000 of long term debt and total stockholders' deficit of $1,049,300 at December 31, 2011.

Net cash used in operating activities was $1,407,600 for the nine months ended September 30, 2012 compared to $848,100 for the nine months ended September 30, 2011. The increase of $ 559,500 in cash used by operating activities for the nine months ended September 30, 2012 was primarily due to an increase in staffing and related salaries.

The Company has negotiated a financing and security agreement which provides up to $4,000,000 of debt based on certain terms and conditions and which it believes will provide sufficient working capital to fund the Company's operations for the next 12 months. We currently have $2.3 million of unused credit on this line. See Note 3-Liquidity.

Inflation

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements.

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