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 1934For the quarterly period ended February 28, 2011[  ]
Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934For 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, Suite 114, Los Angeles, CA 90068(Address of principal executive offices)
 
 (925) 304-4400(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 preceeding 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: 21,342,280 common shares as of April 14, 2011.
 
 Table of Contents
 
 TABLEOF CONTENTS

graphic1
PagePART I – FINANCIAL INFORMATIONItem 1:
Financial Statements
3Item 2:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
4Item 3:
Quantitative and Qualitative Disclosures About Market Risk
8Item 4:
Controls and Procedures
8PART II – OTHER INFORMATIONItem 1:
Legal Proceedings
9Item 1A:
Risk Factors
9Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
9Item 3:
Defaults Upon Senior Securities
9Item 4:
(Removed and Reserved)
9Item 5:
Other Information
9Item 6:
Exhibits
9
 
 2
 Table of Contents
 
 PART I - FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 Our financial statements included in this Form 10-Q are as follows:F-1
Consolidated Balance Sheets as of February 28, 2011 and May 31, 2010 (unaudited);F-2
Consolidated Statements of Operations for the three and nine months ended February 28, 2011 and 2008 (unaudited);F-4
Consolidated Statement of Stockholders’ Equity as of February 28, 2011 (unaudited);F-5
Consolidated Statements of Cash Flows for the nine months ended February 28, 2011 and February 28, 2010 (unaudited);F-6
Notes to Consolidated Financial Statements;
 
 
 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 28, 2011 are not necessarily indicative of the results that can be expected for the full year.
 3
 Table of Contents
 SUPPORTSAVESOLUTIONS, INC.
 (A NEVADA CORPORATION)
 
 CONSOLIDATED BALANCE SHEETS
 FEBRUARY 28, 2011 (UNAUDITED) AND MAY 31, 2010 (AUDITED)
 
 ASSETS
February 28, 2011

May 31, 2010CURRENT ASSETSCash and cash equivalents
$
886,254

$
1,588,056Investment in marketable securities

273


610Accounts receivable - trade

139,157


170,249Accounts receivable - other

-0-


15,441Note receivable - Florida office building

-0-


210,000Accrued interest receivable

6,521


3,541TOTAL CURRENT ASSETS

1,032,205


1,987,897PROPERTY AND EQUIPMENTFurniture and equipment

364,682


320,417Construction in progress

541,173


-0-Less accumulated depreciation

(171,606
)

(118,694)NET PROPERTY AND EQUIPMENT

734,249


201,723OTHER ASSETSSecurity deposits

66,396


64,208Note receivable - related party

100,000


50,000Deferred tax asset

249,000


-0-TOTAL OTHER ASSETS

415,396


114,208$
2,181,850

$
2,303,828
 
 F-1
 Table of Contents
 SUPPORTSAVE SOLUTIONS, INC.
 (A NEVADA CORPORATION)
 
 CONSOLIDATED BALANCE SHEETS
 FEBRUARY 28, 2011 (UNAUDITED) AND MAY 31, 2010 (AUDITED)
 
 LIABILITIES AND STOCKHOLDERS' EQUITY
February 28, 2011

May 31, 2010CURRENT LIABILITIESAccounts payable - trade
$
35,648

$
50,985Accrued expenses

37,500


39,185Payroll tax withholdings

1


12,062Accrued wages

54,809


62,621Deferred income taxes

97,000


97,000Loan payable - officer

800


800TOTAL CURRENT LIABILITIES

225,758


267,734STOCKHOLDERS' EQUITYCommon stock, $.00001 par value, 100,000,000 shares authorized, 15,186,031 and 14,503,531

shares issued and outstanding at February 28, 2011 and May 31, 2010, respectively

151


145Additional paid-in-capital

2,355,519


1,958,084Treasury stock

(3,029
)

(3,029)Cumulative translation adjustment

(61,333
)

(43,818)Unrealized loss on investments

(19,740
)

(19,403)Retained earnings (deficit)

(315,476
)

149,196STOCKHOLDERS' EQUITY

1,956,092


2,041,175$
2,181,850

$
2,303,828
 
 F-2
 Table of Contents
 SUPPORTSAVESOLUTIONS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE THREE MONTHS ENDED FEBRUARY 28, 2011 AND 2010 (UNAUDITED)
 
 2011

2010REVENUESales
$
770,893

$
732,906Less returns and allowances

(15,902
)

(19,942)TOTAL REVENUE

754,991


712,964EXPENSESWages and benefits

601,413


338,460Rent

76,793


27,867Telephone, internet and utilities

41,057


29,904Commissions

42,695


67,653Selling, general & administrative

112,400


86,730TOTAL EXPENSES

874,358


550,614OPERATING INCOME (LOSS)

(119,367
)

162,350OTHER INCOME (EXPENSE)Interest income

(42
)

4,087Other income

-0-


110Bad debt expense

(110,000
)

-0-Settlement expense

(32,000
)

-0-Gains/(losses) from currency hedging contracts

-0-


13,002TOTAL OTHER INCOME (EXPENSE)

(142,042
)

17,199NET INCOME (LOSS) BEFORE PROVISION

FOR FEDERAL INCOME TAX BENEFIT

(261,409
)

179,549PROVISION FOR FEDERAL INCOME TAX (BENEFIT)

(91,000
)

56,000NET INCOME (LOSS)
$
(170,409
)
$
123,549WEIGHTED AVERAGE SHARES OUTSTANDING:BASIC AND DILUTED

15,186,031


13,838,531NET INCOME (LOSS) PER SHARE:BASIC AND DILUTED
$
(0.01
)
$
0.01
 
 F-3
 Table of Contents
 SUPPORTSAVE SOLUTIONS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE NINE MONTHS ENDED FEBRUARY 28, 2011 AND 2010 (UNAUDITED)
 
 2011

2010REVENUESales
$
2,093,904

$
2,180,766Less returns and allowances

(25,616
)

(28,144)TOTAL REVENUE

2,068,288


2,152,622EXPENSESWages and benefits

1,988,461


816,633Rent

132,004


75,328Telephone, internet and utilities

118,647


95,143Commissions

96,729


187,198Selling, general & administrative

315,709


299,353TOTAL EXPENSES

2,651,550


1,473,655OPERATING INCOME (LOSS)

(583,262
)

678,967OTHER INCOME (EXPENSE)Interest income

11,386


11,060Other income

204


235Gains on sales of investments

-0-


24,395Bad debt expense

(110,000
)

-0-Settlement expense

(32,000
)

-0-Gains/(losses) from currency hedging contracts

-0-


39,883Gains/(losses) on sales of assets

-0-


(3,152)TOTAL OTHER INCOME (EXPENSE)

(130,410
)

72,421NET INCOME BEFORE PROVISION

FOR FEDERAL INCOME TAX BENEFIT

(713,672
)

751,388PROVISION FOR FEDERAL INCOME TAX (BENEFIT)

(249,000
)

260,000NET INCOME (LOSS)
$
(464,672
)
$
491,388WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

14,993,531


13,449,642NET INCOME (LOSS) PER SHARE
$
(0.03
)
$
0.04
 
 F-4
 Table of Contents
 SUPPORTSAVESOLUTIONS, INC.
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
 FOR THE NINE MONTHS ENDED FEBRUARY 28, 2011 AND YEAR ENDED MAY 31, 2010 (UNAUDITED)
 
 Common Stock

Additional

Paid-in

Treasury

Cumulative

Translation

Unrealized

Gain (loss)

Retained

Earnings

Stockholders'Shares

Amount

Capital

Stock

Adjustment

on Investments

(Deficit)

EquityBalance, May 31, 2009

13,255,198

$
132

$
1,143,291

$
(64,207
)
$
(21,958
)
$
-0-

$
(124,859
)
$
932,399Purchase of treasury stock

-0-


-0-


-0-


(9,017
)

-0-


-0-


-0-


(9,017)Private placement of common stock

875,000


9


524,992


-0-


-0-


-0-


-0-


525,001Sale of treasury stock

-0-


-0-


9,805


70,195


-0-


-0-


-0-


80,000Issuance of common stock

373,333


4


279,996


-0-


-0-


-0-


-0-


280,000Net income and translation adjustment

-0-


-0-


-0-


-0-


(21,860
)

(19,403
)

274,055


232,792Balance, May 31, 2010

14,503,531

$
145

$
1,958,084

$
(3,029
)
$
(43,818
)
$
(19,403
)
$
149,196

$
2,041,175Issuance of common stock

682,500


6


397,435


-0-


-0-


-0-


-0-


397,441Net (loss) and translation adjustment

-0-


-0-


-0-


-0-


(17,515
)

(337
)

(464,672
)

(482,524)Balance, February 28, 2011

15,186,031

$
151

$
2,355,519

$
(3,029
)
$
(61,333
)
$
(19,740
)
$
(315,476
)
$
1,956,092
 
 F-5
 Table of Contents
 SUPPORTSAVESOLUTIONS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE NINE MONTHS ENDED FEBRUARY 28, 2011 AND 2010 (UNAUDITED)
 
 2011

2010CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
$
(464,672
)
$
491,388Adjustments to reconcile net income to net cash provided by operating activities:Depreciation

52,912


41,434Stock based compensation expense

397,442


-0-(Gain) loss on sale of property

-0-


3,152Bad debt expense

110,000


-0-Changes in:Accounts receivable - trade

31,092


(146,134)Accounts receivable - other

15,441


6,200Accrued interest receivable

(2,980
)

(1,225)Deferred tax asset

(249,000
)

50,000Accounts payable

(15,338
)

(13,999)Accrued wages

(7,812
)

14,771Accrued federal income tax

-0-


210,000Deferred revenue

-0-


1,554Payroll tax withholdings payable

(12,061
)

6,345Accrued expenses

(1,685
)

-0-TOTAL ADJUSTMENTS

318,011


172,098NET CASH PROVIDED BY (USED BY)OPERATING ACTIVITIES

(146,661
)

663,486CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment

(585,438
)

(105,364)Sale of property and equipment

-0-


15,000Security deposit

(2,188
)

(7,478)Change in investment of marketable securities

-0-


78,050Increase in note receivable - related party

(50,000
)

-0-Currency translation adjustment

(17,515
)

(16,982)NET CASH PROVIDED BY (USED BY)INVESTING ACTIVITIES

(655,141
)

(36,774)CASH FLOWS FROM FINANCING ACTIVITIES:Issuance of common stock

-0-


525,000Proceeds from note receivable

100,000


-0-Private placement of common stock

-0-


80,000Purchase and sale of treasury stock

-0-


(9,017)Investment in closely held company

-0-


(66,500)Net borrowings on note payable

-0-


28,923Proceeds from loan payable to officer

-0-


800NET CASH PROVIDED BY (USED BY)FINANCING ACTIVITIES

100,000


559,206NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS

(701,802
)

1,185,918CASH AND CASH EQUIVALENTS - BEGINNING

1,588,056


474,626CASH AND CASH EQUIVALENTS - ENDING
$
886,254

$
1,660,544SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for interest
$
-0-

$
-0-SUPPLEMENTAL NONCASH TRANSACTIONS:Conversion of warrants to common stock
$
-0-

$
-0-


F-6
 Table of Contents


SUPPORTSAVESOLUTIONS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FEBRUARY 28, 2011





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".





2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Basis of Presentation





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 U.S. dollars.  The Company uses the accrual basis of accounting and has adopted a May 31 year end.





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, 2010.  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.





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 real estate (building) and 5 to 7 years for furniture and equipment.  Normal expenditures for repairs and maintenance are charged to operations as incurred.




F-7
 Table of Contents


SUPPORTSAVE SOLUTIONS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


FEBRUARY 28, 2011





2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Deferred Revenue





Deferred revenue represents advances received on services to be rendered for the period subsequent to February 28, 2011 and May 31, 2010.  Deferred revenue was $0 and $0 as of February 28, 2011 and May 31, 2010, respectively.





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.





Revenue Recognition





The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.





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 Statement of Operations and Changes in Stockholders’ Equity as Other comprehensive income (loss).





Currency Hedging Contract 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.  Any gains or losses from the settled and outstanding forward contracts are recorded as Other income/expense in the Statement of Operations.




F-8
 Table of Contents




SUPPORTSAVE SOLUTIONS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


FEBRUARY 28, 2011





2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Advertising Costs





The Company follows the policy of expensing advertising costs as they are incurred.  Advertising expenses for the nine months ended February 28, 2011 and 2010 were $54,939 and $87,609, respectively.





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 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.





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.





Treasury Stock





Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock in recorded as treasury stock.  Gains and losses on the subsequent reissuance of shares are credited or charged to capital in excess of par value using the average-cost method.





Basic Income per Share





Basic loss per share has been calculated based on the weighted average number of shares of common stock outstanding during the period.




F-9
 Table of Contents


SUPPORTSAVE SOLUTIONS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


FEBRUARY 28, 2011





2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





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.  During the nine months ended February 28, 2011 and the year ended May 31, 2010, the Company issued 682,500 and 373,333 shares of common stock to employees, respectively.  See Note 8.





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.





3.
NOTE RECEIVABLE - BUILDING





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 was 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 May 11, 2011.  On January 28, 2011, the Company settled the note receivable for $100,000.  The Company has written off the remaining balance of the note receivable as bad debt expense and has no further obligation from the purchaser.





4.
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 is due on June 14, 2011, and at that time, a total balloon payment of $55,000 is due that will satisfy the principal and accrued interest.





On June 2, 2010, the Company loaned an additional $50,000 to a related party.  The loan is due eighteen (18) months from the date of issuance and a balloon payment of $55,000, consisting of principal and interest, will be due at that time.





5.
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 28, 2011 and May 31, 2010, unrealized losses of $19,740 and $19,403, respectively, have been recorded.


F-10
 Table of Contents


SUPPORTSAVE SOLUTIONS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


FEBRUARY 28, 2011





5.
MARKETABLE SECURITIES (CONTINUED)





Cost and market value of marketable equity securities at February 28, 2011 and May 31, 2010 are as follows:





Cost

Gross Unrealized Gains/(Losses)

Market ValueFebruary 28, 2011:Equities/options
$
20,013

$
(19,740
)
$
273May 31, 2010:Equities/options
$
20,013

$
(19,403
)
$
610





6.
INVESTMENTS





During the year ended May 31, 2010, the Company invested in a company, Affordacars, LLC, in the amount of $16,500.  As of May 31, 2010, the Affordacars, LLC is insolvent and the investment has been written off in full.





7.
ACCRUED EXPENSES





Accrued expenses consisted of the following as of February 28, 2011 and May 31, 2010:





February 28, 2011

May 31, 2010Accrued professional fees
$
5,500

$
12,015Accrued foreign taxes

-0-


25,985Accrued miscellaneous

-0-


1,185Employment settlement

32,000


-0-Total accrued expenses
$
37,500

$
39,185





8.
COMMON STOCK





The Company issued shares at various times to employees for services rendered.  During the nine months ended February 28, 2011 and the year ended May 31, 2010, 682,500 and 373,333 shares were issued to employees for a total value of $397,442 and $280,000, respectively.  The shares were valued at the market price on the grant date.





On January 1, 2010, the Company sold 875,000 shares of its common stock in a private offering at $0.60 per share for a total cash value of $525,000.




F-11
 Table of Contents


SUPPORTSAVE SOLUTIONS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


FEBRUARY 28, 2011





8.
COMMON STOCK (CONTINUED)





The Company purchased back 266,769 shares of treasury stock for a total cost of $64,207 during the year ended May 31, 2009.  The Company purchased an additional 20,500 shares for a total cost of $9,017 during the year ended May 31, 2010.  On August 21, 2009, the Company sold 275,387 shares of this treasury stock for $80,000 through a subscription agreement in a private placement.  The proceeds and cost of these shares have been accounted for in additional paid in capital.  The remaining 11,882 shares continue to be held as treasury stock, as a reduction to shareholders’ equity.





The Company issued 682,500 shares of common stock as compensation during the nine months ended February 28, 2011.  The shares were valued at $397,442, which was the fair market value as of the grant dates.





As of February 28, 2011, the Company has 15,186,031 shares of common stock issued and outstanding.





9.
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 rate of approximately $3,500 per month.  Additional space has recently been added at an additional $1,720 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.





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.  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.  The Company has begun moving into their new facility during the current fiscal quarter.





Minimum annual rents for all leases for the next five years are as follows:





Twelve Months

Ended February 28,
Amount2011
$
203,2252012

185,8312013

146,0832014

153,5332015

65,281$
753,954




F-12
 Table of Contents


SUPPORTSAVE SOLUTIONS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


FEBRUARY 28, 2011





10.
INCOME TAXES





The provision for Federal income taxes consists of the following at February 28:





2011

2010Current expense
$
-0-

$
204,000Deferred (benefit) expense

(249,000
)

-0-$
(249,000
)
$
204,000





The cumulative tax effect at the expected rate of 35% of significant items comprising our net deferred tax amount is as follows at February 28, 2011 and May 31, 2010:





February 28, 2011

May 31, 2010Deferred tax asset attributable to:Net operation loss carryover
$
249,000

$
(97,000)Less: valuation allowance

-0-


-0-Net deferred tax asset
$
249,000

$
(97,000)





11.
CONCENTRATION OF CREDIT RISK





The Company maintains cash balances at three financial institutions.  At February 28, 2011, the Company’s cash and cash equivalents exceeded federally insured limits by $536,002.  Of the total cash and cash equivalents, $8,565 is invested in a broker/dealer money market account.





12.
SALES TO MAJOR CUSTOMER





Sales to one customer amounted to 32% and 26% of net sales in the nine months ended February 28, 2011 and 2010, respectively.





13.
SIGNIFICANT EVENTS





On December 20, 2010, the Company moved their Philippine operations to their new facility as described in Note 9.  The Company has not completely moved from the old facility and is trying to settle its lease obligation.





In February 2011, the Company terminated employment with an executive and two other employees.  The Company reached a settlement with one of the employees in April for $32,000, which has been expensed in the current quarter.  The Company is currently in negotiations with the other former employee and the results of these negotiations are indeterminable at this time.




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SUPPORTSAVE SOLUTIONS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


FEBRUARY 28, 2011





14.
SUBSEQUENT EVENTS





During the current quarter, the Company entered into a settlement agreement with an investor who invested $500,000 in January 2010.  The investor made an investment after a bankruptcy filing, to which the court has requested the money back.  Under terms of the agreement, the Company will pay $200,000 once the settlement is approved by the court and the investor has six months to sell the remainder of his stock.  At that point, the Company will owe the investor the balance of unsold shares or the difference between what the Company paid and what the investor sold them at.  The resulting amount the Company may be liable for is indeterminable at this point.





Management has evaluated subsequent events through the date of which the financial statements were submitted to the Securities and Exchange Commission and has determined it does not have any other material subsequent events to disclose.




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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 affect 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.




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Results of Operations for the three and nine months ended February 28, 2011 and 2009





To become more profitable and competitive, we have to attract more clients, sell our services and generate more revenues.





Our revenue reported for the three months ended February 28, 2011 was $770,893, compared with $732,906 for the three months ended February 28, 2010.  Our revenue reported for the nine months ended February 28, 2011 was $2,093,904, compared with $2,180,766 for the nine months ended February 28, 2010.  Our revenue generated for all periods was attributable to the sale of our BPO services.





Returns and allowances are refunds for services not provided.  Returns and allowances for the three months ended February 28, 2011 amounted to $15,902, compared with $19,942 for the same period ended February 28, 2010.  Returns and allowances for the nine months ended February 28, 2011 amounted to $25,616, compared with $28,144 for the same period ended February 28, 2010.  We experienced more returns and allowances in the three and nine months ended February 28, 2011 compared with the same period 2010 as a result of some infrastructure issues related to our current facility.





Our revenue less returns and allowances is our total revenue.  Total revenue for the three months ended February 28, 2011 was $754,991, compared with $712,964 for the same period ended February 28, 2010.  Total revenue for the nine months ended February 28, 2011 was $2,068,288, compared with $2,152,622 for the same period ended February 28, 2010.





Our operating expenses for the three months ended February 28, 2011 was $874,358, compared with $550,614 for the same period ended February 28, 2010.  The increase in our operating expenses for the three months ended February 28, 2011 compared with February 28, 2010 is mainly attributable to an increase in wages and benefits, which amounted to $601,413 in 2011 compared with $338,460 in 2010. We also spend $76,793 in rent for 2011 as compared with only $27,867 in 2010.  This was the result of the move to our new facility in Cebu, Philippines. Our administrative expenses also increased to $112,400 in 2011 from $86,730 in 2010.





Our operating expenses for the nine months ended February 28, 2011 was $2,651,550, compared with $1,473,655 for the same period ended February 28, 2010.  Again, the increase in our operating expenses for the nine months ended February 28, 2011 compared with February 28, 2010 is mainly attributable to an increase in wages and benefits, which amounted to $1,988,461 in 2011 compared with $816,633 in 2010. Our rent also increased to $132,004 in 2011 compared with $75,328 in 2010. Our commission expenses decreased to $96,729 in 2011 from $187,198 in 2010.





As we reported last quarter, we expected to experience higher costs related to the compensation of our new management team and the build out and migration to our new 550 seat operation center in the Cybergate building in Cebu, Philippines.  This quarter we terminated our former President, Mr. Joseph Duryea, and other sales employees which we believe will have the effect of lowering our wages and salary expenses in the coming year, to somewhat offset our initial expectation. However, our new facility was opened in early December 2010 and we experienced higher costs as we migrated to the facility, and we expect to continue to incur higher costs with the move to a larger, more modern facility during 2011. Also, we have not completely moved from the old facility and we are trying to settle this lease obligation. We are still hopeful that our move to this new facility will result in new business contracts that are much larger than the typical and traditionally smaller BPO contracts we now have. Consequently, we anticipate the increased expense associated with our facility will impair our profitability in the near-term and mid-term, but we also anticipate significant improvement in both overall revenues and profits in the long-term as these new contracts are secured and ramp up.




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In addition, next quarter we expect to incur increased expenses associated with stock-based compensation.  On April 11, 2011, we sold 3,000,000 shares of our common stock in a private offering for working capital.  This issuance triggered the anti-dilution provisions in our employment agreements with Mr. Chris Johns, our President, and Ms. Aina Dumlao, our CEO.   As required by their employment agreements, we were required to issue them additional shares of common stock so that their proportionate ownership in our company’s common and voting shares is not decreased. Thus, this new issuance will result in an increase in our stock-based compensation expenses for our fourth quarter and will stand in addition to the increased expenses associated with our new facility and the anticipated settlement costs of our old facility.





We had other expenses of $142,042 for the three months ended February 28, 2011, compared with other income of $17,199 for the three months ended February 28, 2010. We had other expenses of $130,410 for the nine months ended February 28, 2011, compared with other income of $72,421 for the nine months ended February 20, 2010.   Other expenses in 2011 resulted from a bad debt expense of $110,000 and settlement expenses of $32,000 that were not incurred in 2010.   On May 11, 2009, we sold our office building for $260,000 on a note receivable.  We received $50,000 down and the remainder was 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 May 11, 2011.  On January 28, 2011, we settled the note receivable for $100,000.  We have written off the remaining balance of the note receivable as bad debt expense and have no further obligation from the purchaser.





We had a net loss of $170,409 for the three months ended February 28, 2011, compared with net income of $123,549 for the three months ended February 28, 2010. We had a net loss of $464,672 for the nine months ended February 28, 2011, compared with net income of $491,388 for the nine months ended February 28, 2010.





Liquidity and Capital Resources





As at February 28, 2011, we had $1,032,205 in current assets and $225,758 in current liabilities. On February 28, 2011, we had working capital of $806,447.





As explained more fully below, we settled a case brought against us by Joseph Loomis in the United States Bankruptcy Court for the District of Arizona (Case No. 2:10-bk-01885).  Under the settlement, we paid Mr. Loomis $200,000, and may have to pay Mr. Loomis the remaining $300,000 if he is unable to sell his shares in the open market.  This contingency may negatively affect our liquidity in the next 12 months.





Operating activities used $146,661 in cash for the nine months ended February 28, 2011. Our net loss of $464,672, along with deferred tax asset of $249,000 were the primary components of our negative operating cash flow, offset by mainly stock-based compensation of $397,442 and bad debt expenses of $110,000. Cash flows used by investing activities during the nine months ended February 28, 2011 was $655,141 mainly as a result of $585,438 in the purchase of property and equipment. Cash flows provided $100,000 for the nine months ended February 28, 2011 from the proceeds of a note receivable.





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.




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Off Balance Sheet Arrangements





As of February 28, 2011, there were no off balance sheet arrangements.





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 carried out an evaluation of 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 28, 2011.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Aina Dumlao.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of February 28, 2011, our disclosure controls and procedures are effective.  There have been no changes in our internal controls over financial reporting during the quarter ended February 28, 2011.





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.




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 PART II – OTHER INFORMATION





Item 1.     Legal Proceedings





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”).





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.





Once the entire $500,000 is returned to the Debtor at the end of the 180 day period, the parties will jointly dismiss the bankruptcy action.





Item 1A:  Risk Factors





A smaller reporting company is not required to provide the information required by this Item.




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Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds





On April 11, 2011, we sold 3,000,000 shares of our common stock in a private offering at $0.05 per share.  Under the terms of the subscription agreement, we received $100,000 of the investment at closing, and will receive the remaining $50,000 no later than 60 days from the closing. Further under the subscription agreement, the investor agreed to a three-year lockup on open market transactions.





As stated in our employment agreements with our President, Chris Johns, and our CEO, Aina Dumlao, if we issue additional securities of any class, then both Mr. Johns and Ms. Dumlao will be entitled to receive a corresponding increase in the amount of securities they hold so that their proportionate ownership in our company’s common and voting shares is not decreased. The above issuance of 3,000,000 has triggered these anti-dilution provisions in the employment agreements with Mr. Johns and Ms. Dumlao.  We therefore issued 975,000 shares of common stock to Ms. Dumlao and 1,050,000 shares of common stock to Mr. Johns to fulfill these anti-dilution provisions.





We issued shares at various times to employees for services rendered.  During the nine months ended February 28, 2011, 682,500 shares were issued to employees for a total value of $397,442.  The shares were valued at the market price on the grant date.





The private offering was exempt under Section 4(2) of the Securities Act of 1933, as amended (the “Act”), and/or Rule 506 promulgated under the Act.





Item 3.     Defaults upon Senior Securities





None





Item 4.     (Removed and Reserved)





Item 5.     Other Information





None





Item 6.      Exhibits





Exhibit Number
Description of Exhibit31.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





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SIGNATURES





In accordance with the requirements of the Securities and 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 14, 2011By:       /s/ Aina Dumlao

Aina Dumlao

Title:Chief Executive Officer and Director