UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________
to ____________
Commission file number 000-52994
THE OLB GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
1120 Avenue of the Americas, 4th
Floor, New York, NY10036
(Address of Principal Executive Offices with Zip
Code)
Registrant’s telephone number, including
area code (212)278-0900
Securities registered pursuant to Section 12(b)
of the Act: None.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.0001 par value OLB The Nasdaq Capital Market
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
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 ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates: $3,343,377 based on 1,114,459 non affiliate shares outstanding at $3.00 per share, which is the price
at which the registrant’s common shares were last sold on the last business day of the registrant’s most recently completed
second fiscal quarter.
As of April 7, 2025, there were 2,368,075 shares of the registrant’s
common stock, par value $0.0001 per share, outstanding.
THE OLB GROUP, INC.
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
Item 1A. Risk Factors 12
Item 1B. Unresolved Staff Comments 43
Item 1C. Cybersecurity 43
Item 2. Property 44
Item 3. Legal Proceedings 44
Item 4. Mine Safety Disclosures 44
PART II
Item 6. [Reserved] 45
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 49
Item 8. Financial Statements and Supplementary Data F-1
Item 9A. Controls and Procedures 50
Item 9B. Other Information 52
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 52
PART III
Item 10. Directors, Executive Officers and Corporate Governance 53
Item 11. Executive Compensation 57
Item 14. Principal Accountant Fees and Services 62
PART IV
Item 15. Exhibits, and Financial Statement Schedules 63
Signatures 66
i
PART I
Item 1. Business.
Forward-Looking Statements
Unless the context indicates otherwise, as used
in this Annual Report, the terms “OLB,” “we,” “us,” “our,” “our company” and
“our business” refer, to The OLB Group, Inc., including its subsidiaries named herein. 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.” 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. 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 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.
Overview
We are a FinTech company that focuses on a suite
of products in the merchant services marketplace and seeks to provide integrated business solutions to merchants throughout the United States.
We seek to provide merchants with a wide range of products and services through our various online platforms, including financial and
transaction processing services. We also have products that provide support for crowdfunding and other capital raising initiatives. We
supplement our online platforms with certain hardware solutions that are integrated with our online platforms. Our business functions
primarily through three wholly-owned subsidiaries, eVance, Inc., a Delaware corporation (“eVance”), OmniSoft.io, Inc., a Delaware
corporation (“OmniSoft”), and CrowdPay.Us, Inc., a New York corporation (“CrowdPay”).
OmniSoft operates a cloud-based business
management platform that provides turnkey solutions for merchants to enable them to build and manage their retail businesses,
whether online or at a “brick and mortar” location. The OmniSoft platform, which can be accessed by merchants through
any mobile and computing device, allows merchants to, among other features, manage and track inventory, track sales and process
customer transactions and can provide interactive data analysis concerning sales of products and need for additional inventory.
Merchants generally utilize the platform by uploading to the platform information about their inventory (description of units,
number of units, price per unit, and related information). Once such information has been uploaded, merchants, either with their own
device or with hardware that we sell directly to them, are able to utilize the platform to monitor inventory and process and track
sales of their products (including coordinating shipping of their products with third party logistics companies). We manage and
maintain the OmniSoft platform through a variety of domain names or a merchant can integrate our platform with their own domain
name. Using the OmniSoft platform, merchants can “check-out” their customers at their “brick and mortar”
stores or can sell products to customers online, in both cases accepting payment via a simple credit card or debit card transaction
(either swiping the credit card or entering the credit card number), a cash payment, or by use of a QR code or loyalty and reward
points, and then print or email receipts to the customer. For more information regarding our OmniSoft platform, see
“Description of our OmniSoft Business.”
1
eVance provides competitive payment processing
solutions to merchants which enable merchants to process credit and debit card-based internet payments for sales of their products at
competitive prices (whether such sales occur online or at a “brick and mortar” location). eVance is an independent sales
organization (an “ISO”) that signs up new merchants on behalf of acquiring banks and processors that provides financial and
transaction processing solutions to merchants throughout the United States. eVance differentiates itself from other ISOs by focusing
on both obtaining and maintaining new merchant contracts for its own account (including, but not limited to, merchants that utilize the
OmniSoft platform) and also obtaining and maintaining merchant contracts obtained by third-party ISOs (for which we negotiate a shared
fee arrangement) and utilizing our own software and technology to provide merchants and other ISOs differentiating products and software.
In particular, we (i) own our own payments gateway, (ii) have proprietary omni-commerce software platform, (iii) have
in-house underwriting and customer service, (iv) have in-house sub-ISO management system which offers sub-ISOs and agents tools
for online boarding, account management, residual reports among other tools, and (v) offer a suite of products in the financial
markets (through CrowdPay). Leveraging our relationship with three of the top five merchant processors in the United States (representing
a majority of the merchant processing market) and with the use of our proprietary software, our payment gateway (which we call “SecurePay”)
enables merchants to reduce the cost of transacting with their customers by removing the need for a third-party payment gateway solution.
eVance operates as both a wholesale ISO and a retail ISO depending on the risk profile of the merchant and the applicable merchant processor
and acquiring bank. As a wholesale ISO, eVance underwrites the processing transactions for merchants, establishing a direct relationship
with the merchant and generating individual merchant processing contracts in exchange for future residual payments. As a retail ISO,
eVance primarily gathers the documents and information that our partners (acquiring banks and acquiring processors) need to underwrite
merchants’ transactions and as a result receives only residual income as commission for merchants it places with our partners.
For more information regarding the electronic payment industry, see “Business — Description of our eVance Business —
Our Industry.”
2
3
SecurePay
SecurePay is a payment gateway and virtual terminal
with proprietary business management tools that is in compliance with the Payment Card Industry (PCI).
SecurePay has been certified by Visa and MasterCard
(certified Level II and Level III) and finalized implementation of “3D Secure” in 2019 (a feature that is unique to what we
offer in order to provide for more secure environment for E-commerce and mobile payments in-store and online).
On June 15, 2023, the Company entered into a Membership
Interest Purchase Agreement with SDI Black 001, LLC (“Seller”) whereby the Company acquired from Seller 80.01% of the membership
interests of Moola Cloud, LLC, a Florida limited liability company (f/k/a Cuentas SDI, LLC) (the “LLC”). The LLC will enable
the Company to focus on marketing to the underbanked communities utilizing the LLC’s debit and calling card platform’s ability
for users to reload cash to their account and provide instant access to digital products to their customers’ Mobile App and digital
wallet into its electronic portal. The Company plans to market to the LLC’s merchant network, which currently has approximately
31,600 locations in the United States, the ability of having one POS system that will allow the retail customer to purchase products using
OLB’s payment processing solutions along with the ability to reload payment cards and their mobile phone minutes. On May 20, 2024,
the Company entered into a second Membership Interest Purchase Agreement with the minority member of the LLC (the “Agreement”)
whereby it acquired the remaining 19.99% of the membership interests of the LLC for a purchase price of $215,500. As a result, effective
May 20, 2024, the Company owns 100% of the LLC. On August 14, 2024, the LLC changed its name to Moola Cloud, LLC. The Agreement contains
a restrictive covenant whereby for a period of three (3) years from the closing, none of Seller, including its any of its principals,
executives, officers, directors, managers, employees, salespersons, or entities in which such principal has any interest, will directly
or indirectly (i) induce, attempt to induce, interfere with, disrupt or attempt to disrupt any past, present or prospective business relationship,
solicit, market to, endeavor to obtain as a customer, or contract with any merchant in order to provide services to such Merchant in competition
with the Company; or (ii) solicit or interfere with, disrupt or attempt to disrupt any past, present or prospective business relationship,
contractual or otherwise any person or entity that is a party to any contract assigned to the Company to terminate its contractual or
business relationship with the Company
4
Crowdpay
CrowdPay.usTM operates a white label capital
raising platform that targets small and midsized businesses seeking to raise capital and registered broker-dealers seeking to host capital
raising campaigns for such businesses by integrating the platform onto such company’s or broker-dealer’s website. Our CrowdPay
platform is tailored for companies seeking to raise money through a crowdfunding offering of between $1 million and $50 million pursuant
to Regulation CF under Title III of the Jumpstart Our Business Startups (the “JOBS Act”), offerings pursuant to Rule 506(b)
and Rule 506(c) under Regulation D of the Securities Act of 1933, as amended (the “Securities Act”), and offerings pursuant
to Regulation A+ of the Securities Act. Our platform, which can be used for multiple offerings at once, provides companies and broker-dealers
with an easy-to-use, turnkey solution to support company offerings, allowing companies and broker-dealers to easily present online to
potential investors relevant marketing and offering materials and by aiding in the accreditation and background check processes to ensure
investors meets the applicable requirements under the rules and regulations of the Securities Exchange Commission (the “SEC”).
CrowdPay charges a fee to each company and broker-dealer for the use of its platform under a fee structure that is agreed to between CrowdPay
and the Company and/or broker-dealer prior to the initiation of the offering. CrowdPay also generates revenues by providing ancillary
services to the companies and broker-dealers utilizing our platform, including running background checks and providing anti-money laundering
and know-your-customer compliance. CrowdPay is not a registered funding portal or a registered broker-dealer.
On January 3, 2022, the Company entered into a
share exchange agreement with all of the stockholders of Crowd Ignition, Inc. (“Crowd Ignition”) whereby the Company purchased
100% of the equity of Crowd Ignition in exchange for 1,318,408 shares of the common stock, par value $0.0001 of the Company (the “CI
Issued Shares”). The value of the CI Issued Shares was, for purposes of the Agreement, based on the closing trading price of the
Company on October 1, 2021 (the date on which a third-party fairness opinion was issued), resulting in an aggregate purchase price for
Crowd Ignition of $5.3 million. The share exchange transaction closed on January 3, 2022. Prior to the closing of the share exchange transaction,
Ronny Yakov, Chairman and CEO of the Company, and John Herzog, a stockholder of the Company, owned 100% of the outstanding equity of Crowd
Ignition.
Crowd Ignition is a web-based crowdfunding software
system. The software provides broker-dealer, merchant banks and law firms a platform to market crowdfunding offerings, collect payments
and issue securities. The software has been developed in response to, and to comply with, recent changes in investment regulations including
Regulation D 506(b) and 506(v), Regulation A+ and Title III of the Jobs Act (Regulation CF), including raising the crowdfunding limit
from $1.07 million to $5.0 million. Crowd Ignition is one of only about 50 companies registered with the SEC to provide the services permitted
under Regulation CF.
5
OLBit and DMINT
On May 14, 2021, the Company formed OLBit, Inc.,
a wholly owned subsidiary (“OLBit”). The purpose of OLBit is to hold the Company’s assets and operate its business related
to its emerging money transmission and transactional business. OLBit was previously in the process of applying for money transmission
licenses in all 50 states. In June 2023, it was decided to delay the process of applying for such licenses in order to have a greater
focus of financial and management resources on the Company’s payment processing business and Bitcoin mining business.
On July 23, 2021, we formed our wholly owned subsidiary,
DMINT, Inc. (“DMINT”), to operate in the Bitcoin mining industry. DMINT initiated the first phase of its Bitcoin mining operation
by establishing data centers and ASIC-based Antminer S19J Pro mining computers specifically configured to mine Bitcoin in Bradford, Pennsylvania.
As of December 31, 2024, DMINT has 1,000 computers and had 400 computers online and mining for Bitcoin. DMint has a data center located
in Selmer, Tennessee. In February 2023, DMINT redeployed its mining computers from its Pennsylvania location and focus the mining efforts
at the Selmer, Tennessee location because of the lower cost of operations in the location.
On August 16, 2022, DMINT Real Estate Holdings, Inc. (“DREH”),
a wholly owned subsidiary of DMINT, purchased 4.73 acres of land and a building located at 565 Industrial Park Drive, Selmer, McNairy
County, Tennessee for a purchase price of $408,000. DMINT established a Bitcoin mining data center powered on the local power grid. The
location is expected to have capacity for up to 5,000 mining machines. The Company plans to complete the buildout of the building to be
fully operational with 5,000 machines in 2025 following a spin-off of DMINT into a standalone entity which is currently in process.
As stated above, we are currently in the process
of spinning off DMINT into a stand-alone entity. Our planned DMINT spin-off distribution (the “Spin-Off Distribution”) will
occur upon DMINT’s Form S-1 Registration Statement filing being declared effective by the Securities and Exchange Commission, and
the approval by the Nasdaq Capital Market (“NASDAQ”) of the listing of DMINT’s common shares on the NASDAQ. Following
the consummation of the Spin-Off Distribution, of which there is no guarantee, (i) DMINT will no longer be a wholly owned subsidiary of
the Company and will be a stand-alone entity, (ii) all of DMINT’s outstanding shares of common stock will be owned by the existing
stockholders of the Company, and (iii) DMINT Real Estate Holdings, Inc. (“DREH”) will remain a wholly owned subsidiary of
DMINT.
6
Synergies between the subsidiaries
The success of our business model is dependent on the synergies between
the business segments operated by our subsidiaries. We have created and developed products that we believe form an ecosystem of e-commerce
to provide a variety of clients, from online equity financing companies or merchants selling online or in brick and mortar stores, with
multiple product offerings and ancillary services from underwriting with the banks and merchant billing from the cloud software. We expect
that these synergies will create additional revenue by charging transaction fees on each service provided to clients by our partnerships
with Merchant Acquiring Banks and PCI Compliance.
We believe that our wholly-owned subsidiaries
combine to create an ecosystem where each subsidiary benefits the other. Starting with the services provided by eVance, we enable each
of our products and platforms to communicate with each other and create an ecosystem among our products and, potentially, third-party
products. These services are provided to our other subsidiaries.
The product environment created with a new registered
merchant or issuer enables all merchant information to be stored in a single, centralized location but utilized by all subsidiaries. For
example, merchant services utilizing eVance provide electronic payment processing services that can be utilized for payments on the Crowdfunding
platform. The platform is used by merchant services to allow mobile and online processing to merchants.
The Omni commerce platform will be offered to
all of the merchant services clients. The offered Merchant Services products we provide will enable all processing needs for the OmniCommerce
system. The gateway will allow merchants that are using the platform to accept online eCommerce transactions.
7
Competitive Advantages
We believe that our platform of services will
provide the following key advantages.
Risks Associated with our Business
Our business and ability to execute our business
strategy are subject to a number of risks of which you should be aware before you decide to buy our securities. In particular, you should
consider the following risks, which are discussed more fully in the section entitled “Risk Factors” in this Annual Report:
● The properties included in our mining network may experience damages;
8
Regulations
Various aspects of our service areas are subject
to U.S. federal, state, and local regulation. Certain of our services also are subject to rules promulgated by various card networks and
banking and other authorities as more fully described below.
The Dodd-Frank Act
In July 2010, the Dodd-Frank Act was signed into
law in the United States. The Dodd-Frank Act has resulted in significant structural and other changes to the regulation of the financial
services industry. Among other things, Title X of the Dodd-Frank Act established a new, independent regulatory agency known as the Consumer
Financial Protection Bureau (the “CFPB”) to regulate consumer financial products and services (including some offered by our
customers). The CFPB may also have authority over us as a provider of services to regulated financial institutions in connection with
consumer financial products. Separately, under the Dodd-Frank Act, debit interchange transaction fees that a card issuer receives and
are established by a payment card network for an electronic debit transaction are now regulated by the Federal Reserve and must be “reasonable
and proportional” to the cost incurred by the card issuer in authorizing, clearing, and settling the transaction. Effective October
1, 2011, the Federal Reserve capped debit interchange rates for card issuers operating in the United States with assets of $10 billion
or more at the sum of $0.21 per transaction and an ad valorem component of 5 basis points to reflect a portion of the issuer’s fraud
losses plus, for qualifying issuers, an additional $0.01 per transaction in debit interchange for fraud prevention costs. In addition,
the new regulations contain non-exclusivity provisions that ban debit card networks from prohibiting an issuer from contracting with any
other card network that may process an electronic debit transaction involving an issuer’s debit cards and prohibit card issuers
and card networks from inhibiting the ability of merchants to direct the routing of debit card transactions over any network that can
process the transaction. Beginning April 1, 2012, all debit card issuers in the United States were required to participate in at least
two unaffiliated debit card networks. On April 1, 2013, the ban on network exclusivity arrangements became effective for prepaid card
and healthcare debit card issuers, with certain exceptions for prepaid cards issued before that date.
Effective July 22, 2010, merchants were allowed
to set minimum dollar amounts (not to exceed $10) for the acceptance of a credit card (while federal governmental entities and institutions
of higher education may set maximum amounts for the acceptance of credit cards). They were also allowed to provide discounts or incentives
to entice consumers to pay with an alternative payment method, such as cash, checks or debit cards.
9
Association and network rules
We are subject to the rules of credit card associations
and other credit and debit networks. In order to provide processing services, a number of our subsidiaries are registered with Visa or
Mastercard as service providers for member institutions. Various subsidiaries of ours are also processor level members of numerous debit
and electronic benefits transaction networks or are otherwise subject to various network rules in connection with processing services
and other services we provide. As such, we are subject to applicable network rules. Card networks and their member financial institutions
regularly update and generally expand security expectations and requirements related to the security of cardholder data and environments.
We are also subject to network operating rules promulgated by the National Automated Clearing House Association relating to payment transactions
processed by us using the Automated Clearing House Network and to various state federal and foreign laws regarding such operations, including
laws pertaining to electronic benefits transactions.
Privacy and information security regulations
We provide services that may be subject to various
state, federal, and foreign privacy laws and regulations, including, among others, the Financial Services Modernization Act of 1999 (the
“Gramm-Leach-Bliley Act”). These laws and their implementing regulations restrict certain collection, processing, storage,
use, and disclosure of personal information, require notice to individuals of privacy practices, and provide individuals with certain
rights to prevent use and disclosure of protected information. These laws also impose requirements for the safeguarding and proper destruction
of personal information through the issuance of data security standards or guidelines. Certain federal, state and foreign laws and regulations
impose similar privacy obligations and, in certain circumstances, obligations to notify affected individuals, state officers or other
governmental authorities, the media, and consumer reporting agencies, as well as businesses and governmental agencies, of security breaches
affecting personal information. In addition, there are state and foreign laws restricting the ability to collect and utilize certain types
of information such as Social Security and driver’s license numbers.
Unfair trade practice regulations
We and our clients are subject to various federal
and state laws prohibiting unfair or deceptive trade practices, such as Section 5 of the Federal Trade Commission Act. Various regulatory
agencies, including the Federal Trade Commission, the Consumer Financial Protection Bureau, and state attorneys general, have authority
to take action against parties that engage in unfair or deceptive trade practices or violate other laws, rules, and regulations, and to
the extent we are processing payments for a client that may be in violation of laws, rules, and regulations, we may be subject to enforcement
actions and incur losses and liabilities that may impact our business.
Anti-money laundering, anti-bribery, sanctions,
and counter-terrorist regulations
We are subject to anti-money laundering laws and
regulations, including certain sections of the USA PATRIOT Act of 2001. We are also subject to anti-corruption laws and regulations, including
the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other laws, that prohibit the making or offering of improper payments
to foreign government officials and political figures and includes anti-bribery provisions enforced by the Department of Justice and accounting
provisions enforced by the SEC. The FCPA has a broad reach and requires maintenance of appropriate records and adequate internal controls
to prevent and detect possible FCPA violations. Many other jurisdictions where we conduct business also have similar anticorruption laws
and regulations. We have policies, procedures, systems, and controls designed to identify and address potentially impermissible transactions
under such laws and regulations.
We are also subject to certain economic and trade
sanctions programs that are administered by the Office of Foreign Assets Control (“OFAC”) which prohibit or restrict transactions
to or from or dealings with specified countries, their governments, and in certain circumstances, their nationals, and with individuals
and entities that are specially-designated nationals of those countries, narcotics traffickers, and terrorists or terrorist organizations.
Other group entities may be subject to additional local sanctions requirements in other relevant jurisdictions.
10
Securities Act
Since the JOBS Act was passed, Crowdfunding, Regulation
D offerings and Regulation A and A+ offerings rapidly became a familiar concept among investment firms, venture capitalists, real estate
developers and small to medium sized businesses as a way to facilitate and democratize financing. We believe it has created, and continues
to create, a profound shift in the world of investments. Below is a brief overview of the rules that permit the offer and sale of securities
through such platforms. This overview is in no way intended to be a comprehensive review of all the rules and regulations associated with
the above mentioned offerings and should not be relied upon by anyone.
Regulation D under the Securities Act is the most common regulatory
exemption used small businesses to raise capital through equity financing. It exempts private placement offerings under Rule 506(b) and
506(c) when sold to accredited investors, as defined under Rule 501 of Regulation D. Companies relying on the Rule 506 exemptions can
raise an unlimited amount of money, so long as they comply with the rule’s requirements. Regulation A and Regulation A+ are
more similar to a public offering, and require filing Form 1-A with the SEC. Regulation A and Regulation A+ offer two tiers of offerings;
the first tier is for offerings of up to $20 million within any 12 month period and the second tier is for offerings of up to $50 million,
within any 12 month period. Regulation CF allows a company to raise up to $1.07 million from non-accredited investors.
Intellectual property
Our products and services utilize a combination
of proprietary software and hardware that we own and license from third parties. Over the last few years, we have developed a payment
gateway, merchant boarding system, E-commerce platform, recurring billings and a crowdfunding platform. We generally control access to
and use of our proprietary software and other confidential information through the use of internal and external controls, including entering
into non-disclosure and confidentiality agreements with both our employees and third parties. As of the date of this report, we have a
patent pending on transferable QR codes on Omni Commerce devices.
Employees
As of December 31, 2024, we had six key employees as part of our overall
staff of 15 full-time employees. Our risk, compliance, underwriting and analyst’s accounting and customer service functions are
primarily located in Georgia. In addition, we have operations in India where we retain 35 developers at any given time depending on our
requirements and scope of projects. None of our employees are represented by a labor union or covered by a collective bargaining agreement.
We consider our relationship with our employees to be good.
Corporate Information
We were incorporated in the State of Delaware
on November 18, 2004, for the purpose of merging with OLB.com, Inc., a New York corporation incorporated in 1993 (“OLB.com”).
The merger was done for the purpose of changing our state of incorporation from New York to Delaware. In April 2018, we completed an acquisition
of substantially all of the assets of Excel Corporation and its subsidiaries Payprotec Oregon, LLC, Excel Business Solutions, Inc. and
eVance Processing, Inc. (collectively, the “eVance Asset Acquisition”) (such assets are the foundation of our eVance business).
In connection with the eVance Asset Acquisition, in May 2018, we entered into share exchange agreements with CrowdPay and OmniSoft, affiliate
companies owned by our CEO, Ronny Yakov, and John Herzog, a stockholder of the Company, pursuant to which each of CrowdPay and OmniSoft
became wholly owned subsidiaries of the Company.
On April 26, 2024, the Company filed with the
State of Delaware a Certificate of Amendment to Certificate of Incorporation (the “Certificate of Amendment”) which became
effective on April 26, 2024, to effect a one-for-ten (1:10) reverse stock split (the “Reverse Stock Split”) of the shares
of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) The Reverse Stock Split was approved
by the Company’s stockholders at a special meeting on April 26, 2024.
11
As a result of the Reverse Stock Split, every
ten (10) shares of issued and outstanding Common Stock were automatically combined into one (1) issued and outstanding share of Common
Stock, without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split and any
fractional shares resulting from the reverse stock split were rounded down to the nearest number of whole shares so that we will issue
cash in lieu of any fractional shares that such stockholder would have received as a result of the Reverse Stock Split. Immediately following
the Reverse Stock Split, the number of shares of Common Stock outstanding was reduced from 18,103,462 shares to 1,810,346 shares. The
shares of Common Stock underlying the Company’s outstanding stock options and warrants were similarly adjusted along with corresponding
adjustments to their exercise prices. The number of authorized shares of Common Stock under the Certificate of Incorporation will remain
unchanged at 50,000,000 shares.
Our Company’s headquarters is located at
1120 Avenue of the Americas, 4th Floor, New York, NY 10036. Our telephone number is (212) 278-0900.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company”
as defined under the Securities Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements
that are otherwise applicable to public companies. These provisions include, but are not limited to:
In addition, an emerging growth company can take advantage of an extended
transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the
adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves
of this extended transition period. We will remain an emerging growth company until the earliest to occur of: (i) our reporting $1.07
billion or more in annual gross revenues; (ii) the end of fiscal year 2024; (iii) our issuance, in a three-year period, of more than $1
billion in non-convertible debt; and (iv) the end of the fiscal year in which the market value of our common stock held by non-affiliates
exceeded $700 million on the last business day of our second fiscal quarter.
Item 1A. Risk Factors
Investing in our common stock involves a high
degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information
contained in this annual report, before deciding to invest in our common stock. If any of the following risks materialize, our business,
financial condition, results of operation and prospects will likely be materially and adversely affected. In that event, the market price
of our common stock could decline and you could lose all or part of your investment.
Risks Related to Our Company
The substantial and continuing losses, and
significant operating expenses incurred in the past few years may cause us to be unable to pursue all of our operational objectives if
sufficient financing and/or additional cash from revenues is not realized.
We have limited cash resources and operating losses
throughout our history. As of December 31, 2024 we had a working capital deficit of $8,650,939 and a net loss of $11,224,911. Our cash
flow used by operating activities for the year ended December 31, 2024 was $2,600,306. Notwithstanding the foregoing, management has concluded
that it has sufficient liquidity to continue operations for a period of at least twelve months from the date of this Annual Report, which
conclusion would not have been possible without close monitoring of the Company’s projected cash flow and operating expenses for
a period of at least the next twelve months.
12
We have historically relied on related parties
and affiliates to finance our operations, but there is no guarantee that these parties will continue to finance our operations in the
future.
While we will be able to fund future liquidity
and capital requirements through cash flows generated from our operating activities alone for a period of twelve months, we previously
financed our operations from short-term loans from Ronny Yakov, our Chief Executive Officer. It is not assured that Mr. Yakov will continue
to provide such assistance if the Company were to require it in the future.
We may be subject to liabilities arising
prior to the Asset Acquisition under certain “successor liability” theories.
We acquired our business by means of a foreclosure
of the relevant secured lender’s security interest in the assets in the Asset Acquisition through an auction under Article 9 of
the Uniform Commercial Code. Although the general rule in the context of transactions such as the Asset Acquisition is that a purchaser
of assets does not assume the seller’s liabilities, various courts have established exceptions to this general rule, including where
the purchaser is a ‘mere continuation’ of the seller and there is a ‘continuity of enterprise.’ To date, we have
had one lawsuit whereby we have been found to have successor liability. This matter was settled by the parties. This is a highly fact
specific inquiry, and there can be no assurance that any interested creditor, the United States (through the Internal Revenue Service)
or state or local taxing agencies will not seek to hold us responsible for any existing liabilities at the time of the Asset Acquisition
under one or more of these successor liability theories, for which we have no indemnification protection under the agreements relating
to the Asset Acquisition.
We operate in a complex regulatory environment,
and failure to comply with applicable laws and regulations could adversely affect our business.
Our operations are subject to a broad range of
complex and evolving laws and regulations. As a result, we must perform our services in compliance with the legal and regulatory requirements
of multiple jurisdictions. Some of these laws and regulations may be difficult to ascertain or interpret and may change from time to time.
Violation of such laws and regulations could subject us to fines and penalties, damage our reputation, constitute a breach of our client
agreements, impair our ability to obtain and renew required licenses, and decrease our profitability or competitiveness. If any of these
effects were to occur, our operating results and financial condition could be adversely affected.
We may not be able to integrate new technologies
and provide new services in a cost-efficient manner.
The online E-commerce industry is subject to rapid
and significant changes in technology, frequent new service introductions and evolving industry standards. We cannot predict the effect
of these changes on our competitive position, our profitability or the industry generally. Technological developments may reduce the competitiveness
of our networks and our software solutions and require additional capital expenditures or the procurement of additional products that
could be expensive and time consuming. In addition, new products and services arising out of technological developments may reduce the
attractiveness of our services. If we fail to adapt successfully to technological advances or fail to obtain access to new technologies,
we could lose customers and be limited in our ability to attract new customers and/or sell new services to our existing customers. In
addition, delivery of new services in a cost-efficient manner depends upon many factors, and we may not generate anticipated revenue from
such services.
Disruptions in our networks and infrastructure
may result in customer dissatisfaction, customer loss or both, which could materially and adversely affect our reputation and business.
Our systems are an integral part of our customers’
business operations. It is critical for our customers, that our systems provide a continued and uninterrupted performance. Customers may
be dissatisfied by any system failure that interrupts our ability to provide services to them. Sustained or repeated system failures would
reduce the attractiveness of our services significantly and could result in decreased demand for our services.
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We face the following risks to our networks, infrastructure
and software applications:
Disruptions may cause interruptions in service
or reduced capacity for customers, either of which could cause us to lose customers and/or incur expenses, and thereby adversely affect
our business, revenue and cash flow.
Our positioning in the marketplace as a
smaller provider places a significant strain on our resources, and if not managed effectively, could result in operational inefficiencies
and other difficulties.
Our positioning in the marketplace may place a
significant strain on our management, operational and financial resources, and increase demand on our systems and controls. To manage
this position effectively, we must continue to implement and improve our operational and financial systems and controls, invest in development
and engineering, critical systems and network infrastructure to maintain or improve our service quality levels, purchase and utilize other
systems and solutions, and train and manage our employee base. As we proceed with our development, operational difficulties could arise
from additional demand placed on customer provisioning and support, billing and management information systems, product delivery and fulfilment,
sales and marketing and administrative resources.
For instance, we may encounter delays or cost
overruns or suffer other adverse consequences in implementing new systems when required. In addition, our operating and financial control
systems and infrastructure could be inadequate to ensure timely and accurate financial reporting.
We must attract and retain skilled personnel.
If we are unable to hire and retain technical, technical sales and operational employees, our business could be harmed.
Our ability to integrate our acquired assets and
to grow will be particularly dependent on our ability to hire, develop and retain an effective sales force and qualified technical and
managerial personnel. We need software development specialists with in-depth knowledge of a blend of IT and telecommunications or with
a blend of security and telecom. We intend to hire additional necessary employees, including software engineers, communication engineers,
project managers, sales consultants, employees and operational employees, on a permanent basis. The competition for qualified technical
sales, technical, and managerial personnel in the communications and software industry is intense in the markets where we operate, and
we may not be able to hire and retain sufficient qualified personnel. In addition, we may not be able to maintain the quality of our operations,
control our costs, maintain compliance with all applicable regulations, and expand our internal management, technical, information and
accounting systems in order to support our desired growth, which could have an adverse impact on our operations. Volatility in the stock
market and other factors could diminish our use, and the value, of our equity awards as incentives to employees, putting us at a competitive
disadvantage or forcing us to use more cash compensation.
We are dependent on the continued services
and performance of our senior management and other key employees, the loss of any of whom could adversely affect our business, operating
results and financial condition.
Our future performance depends on the continued
services and contributions of our senior management, including our Chief Executive Officer, Ronny Yakov, Vice President, Finance, Patrick
Smith and other key employees to execute on our business plan and to identify and pursue new opportunities and product innovations. The
loss of services of senior management or other key employees could significantly delay or prevent the achievement of our strategic objectives.
In addition, some of the members of our current senior management team have only been working together for a short period of time, which
could adversely impact our ability to achieve our goals. From time to time, there may be changes in our senior management team resulting
from the hiring or departure of executives, which could disrupt our business. We do not maintain key person life insurance policies on
any of our employees other than a policy providing limited coverage on the life of our Chief Executive Officer. The loss of the services
of one or more of our senior management or other key employees for any reason could adversely affect our business, financial condition
and operating results and require significant amounts of time, training and resources to find suitable replacements and integrate them
within our business, and could affect our corporate culture.
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Our Chief Financial Officer is currently
employed on a part-time basis.
Given the size of the Company and our operational
needs, we initially hired our Chief Financial Officer, Rachel Boulds, on a part-time basis. While we have discussed with Ms. Boulds the
possibility of becoming our full-time Chief Financial Officer, it is anticipated that Ms. Boulds will continue to be employed on a part-time
basis for the next twelve months. In addition to her role as Chief Financial Officer, Ms. Boulds is also operating her solo accounting
practice providing services for clients unrelated to the Company. While we believe that Ms. Boulds currently devotes adequate time to
the Company to perform the role and duties of our Chief Financial Officer, we cannot guarantee that she will be able to continue to do
so until she is with the Company on a fulltime basis. If Ms. Boulds cannot devote adequate time to our Company to fulfil her role and
duties as Chief Financial Officer or if any conflicts of interest arise during this time, it could have a material adverse impact on our
Company.
Our success depends on our continued investment
in research and development, the level and effectiveness of which could reduce our profitability.
We intend to continue to make investments in research and development
and product development in seeking to sustain and improve our competitive position and meet our customers’ needs. These investments
currently include streamlining our suite of software functionalities, including modularization and improving scalability of our integrated
solutions. To maintain our competitive position, we may need to increase our research and development investment, which could reduce our
profitability and cash flows. In addition, we cannot assure you that we will achieve a return on these investments, nor can we assure
you that these investments will improve our competitive position.
Risks Related to Our Business
CROWDPAY.US, INC.
We operate in a regulatory environment that
is evolving and uncertain.
The regulations that govern the companies and broker-dealers that utilize
our platform and the investors that find investment opportunities on our platform have been in existence for a very few years. Further,
there are constant discussions among legislators and regulators with respect to changing this regulatory environment. New laws and regulations
could be adopted in the United States and abroad. Further, existing laws and regulations may be interpreted in ways that would impact
our platform, including our ability to communicate and work with investors, broker-dealers and the companies that use our platforms’
services. For instance, over the past year, there have been several attempts to modify the current regulatory regime. Some of those suggested
reforms could make it easier for anyone to sell securities (without using our platform), or could increase our regulatory burden, including
requiring us to register as a broker-dealer or funding portal before we choose to do so. Any such changes would have a negative impact
on our business.
We may be liable for misstatements made
by issuers on our platform.
Under the Securities Act and the Securities and
Exchange Act of 1934, as amended (the “Exchange Act”), issuers making offerings through our platform may be liable for including
untrue statements of material facts or for omitting information that could make the statements made misleading. This liability may also
extend in Regulation Crowdfunding offerings to funding portals. Even though we are not a registered funding portal, there can be no assurance
that if we were sued we would prevail. Further, even if we do succeed, lawsuits are time consuming and expensive, and being a party to
such actions may cause us reputational harm that would negatively impact our business.
Our compliance is focused on U.S. laws and
we have not analyzed foreign laws regarding the participation of non-U.S. residents.
Some of the investment opportunities posted on
our platform are open to non-U.S. residents. We have not researched all the applicable foreign laws and regulations, and therefore we
have not set up our structure to be compliant with all those laws. It is possible that we may be deemed in violation of those laws, which
could result in fines or penalties as well as reputational harm. This may limit our ability in the future to assist companies in accessing
money from those investors, and compliance with those laws and regulation may limit our business operations and plans for future expansion.
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The types of offerings that we expect to
be posted on our platform are relatively new in an industry that is still quickly evolving.
The principal types of offerings that are posted
on our platform are pursuant to Regulation A and Regulation Crowdfunding (CF) which have only been in effect in their current form since
2015 and 2016, respectively. Our ability to penetrate the market to host these types of offerings remains uncertain as potential issuer
companies may choose to use different platforms or providers (including, in the case of Regulation A, using their own online platform),
or determine alternative methods of financing. Investors may decide to invest their money elsewhere. Further, our potential market may
not be as large, or our industry may not grow as rapidly, as anticipated. With a smaller market than expected, we may have fewer customers.
Success will likely be a factor of investing in the development and implementation of marketing campaigns, subsequent adoption by issuer
companies as well as investors, and favorable changes in the regulatory environment.
CrowdPay and its providers are vulnerable
to hackers and cyber-attacks.
As an internet-based business, we may be vulnerable
to hackers who may access the data of the investors and the issuer companies that utilize our platform. Further, any significant disruption
in service on our platform or in our computer systems could reduce the attractiveness of the platform and result in a loss of investors
and companies interested in using our platform. Further, we rely on a third-party technology provider to provide some of our back-up technology
as well as act as our escrow agent. Any disruptions of services or cyber-attacks either on our technology provider or on our company could
harm our reputation and materially negatively impact our financial condition and business.
CrowdPay currently relies on one escrow
agent and technology service provider.
We currently rely on Microsoft Azure to serve
as our technology provider and all escrow accounts are held at MVB Bank, Inc. Any change in these relationships will require us to find
another technology service provider, escrow agent and escrow bank. This may cause us delays as well as additional costs in transitioning
our technology.
We are dependent on general economic conditions.
Our business model is dependent on investors investing
in the companies presented on our platform. Investment dollars are disposable income. Our business model is thus dependent on national
and international economic conditions. Adverse national and international economic conditions may reduce the future availability of investment
dollars, which would negatively impact revenues generated by CrowdPay and possibly our ability to continue operations at CrowdPay. It
is not possible to accurately predict the potential adverse impacts on us, if any, of current economic conditions on its financial condition,
operating results and cash flow.
We face significant market competition.
We facilitate online capital formation. Though
this is a new market, we compete against a variety of entrants in the market as well likely new entrants into the market. Some of these
follow a regulatory model that is different from ours and might provide them competitive advantages. New entrants could include those
that may already have a foothold in the securities industry, including some established broker-dealers. Further, online capital formation
is not the only way to address helping start-ups raise capital, and we have to compete with a number of other approaches, including traditional
venture capital investments, loans and other traditional methods of raising funds and companies conducting crowdfunding raises on their
own websites. Additionally, some competitors and future competitors may be better capitalized than us, which would give them a significant
advantage in marketing and operations.
Our revenues and profits are subject to
fluctuations.
It is difficult to accurately forecast our revenues
and operating results, and these could fluctuate in the future due to a number of factors. These factors may include adverse changes in