Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operation
The following discussion and analysis of our
consolidated financial condition and results of operations for years ended December 31, 2024 and 2023 should be read in conjunction
with the consolidated financial statements and notes related thereto included elsewhere in this report.
Overview
We are a FinTech company that focuses on a suite
of products in the merchant services marketplace that seeks to provide integrated business solutions to merchants throughout the United States.
We seek to accomplish this by providing 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, OmniSoft, and CrowdPay, though substantially all of our revenue has been
generated from our eVance business (we began generating revenue from our OmniSoft and CrowdPay businesses in the second half of 2019).
We expect to build out our OmniSoft software business and to rely more on individualized merchant services offerings for revenue so that
we are not dependent on our revenue from our eVance business but there is no guarantee that we will be able to do so.
With respect to our eVance business, our merchants
are currently processing over $100,000,000 in gross transactions monthly and average approximately 1,400,000 transactions a month. These
transactions come from a variety of sources including direct accounts and ISO channels. The accounts consist of businesses across the
United States with no concentration of industries or merchants.
We have integrated all the applications for OmniSoft
and the ShopFast Omnicommerce solution with the eVance mobile payment gateway, SecurePay.comTM. SecurePay.comTM, is currently used by
approximately 3,000 merchants processing over 32,000 transactions and approximately $9,000,000 of monthly gross transactions (though our
revenue from these transactions is limited). In July 2019, we launched a new merchant and ISO boarding system that will be able to onboard
merchants instantly. This provides the merchant with an automated approval and ISOs will have the ability to see all their merchants and
their residuals as they load to the system.
On May 22, 2020, the Company purchased certain
assets from POSaBIT Inc. (“POSaBIT”), including its contracts and arrangements with the Doublebeam merchant payment processing
platform (the “POSaBIT Asset Acquisition”). The assets included, but were not limited to, software source codes, customer
lists, customer contracts, hardware and website domains.
On May 14, 2021, the Company formed its wholly
owned subsidiary, OLBit, Inc. (“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.
On July 23, 2021, we formed our wholly owned subsidiary,
DMINT, Inc. (“DMINT”), to operate in the Bitcoin mining industry, specifically the mining of Bitcoin. DMINT initiated the
first phase of its Bitcoin mining operation by placing data centers and ASIC-based Antminer S19J Pro mining computers specifically configured
to mine Bitcoin in Pennsylvania. As of December 31, 2024, DMINT has 1,000 computers and had 400 computers online and mining for Bitcoin.
In February 2023, it re-deployed all of the computers to its Selmer, Tennessee location. At December 31, 2024, DMINT had mined 57.74 Bitcoin.
The Company is currently in the process of spinning off DMINT into a stand-alone entity.
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.
46
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.
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
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.
As a result of the Reverse Stock Split, every
ten (10) shares of issued and outstanding Common Stock was 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.
47
Results of Operations
Year Ended December 31, 2024 Compared to
the Year Ended December 31, 2023
For the year ended December 31, 2024, we had total revenue of $12,838,988
compared to $30,571,637 of revenue for the year ended December 31, 2023, a decrease of $17,732,649 or 58%. We earned $9,684,152 in transaction
and processing fees, $75,575 in merchant equipment sales, $521,268 in revenue from monthly recurring subscriptions, $413,332 of revenue
from the Bitcoin Mining segment, and $2,144,661 of digital product revenue; compared to $27,096,245 in transaction and processing fees,
$89,532 in merchant equipment sales, $312,565 in revenue from monthly recurring subscriptions, $538,718 of revenue from the Bitcoin Mining
Segment and $2,534,577 of digital product revenue. We had a decrease of revenue for our transaction and processing fees of $17,412,093,
a decrease of $125,386 of bitcoin mining revenue, a decrease of $208,703 from the monthly recurring subscriptions, a decrease in merchant
equipment sales of $13,957 and a decrease of $389,916 of digital product revenue.
Transaction and processing revenue decreased as
a result of the loss of the CBD portfolio. Bitcoin revenue decreased due to the price of bitcoin dropping in 2024 compared to 2023. Monthly
recurring subscription revenue decreased due to less subscriptions.
For the year ended December 31, 2024, we had processing
and servicing costs of $10,669,238 compared to $21,181,499 of processing and servicing costs for the year ended December 31, 2023, a decrease
of $10,512,261 or 49.6%. Processing and servicing costs decreased in conjunction with the decreased revenue.
Amortization expense for the year ended December
31, 2024 was $533,805 compared to $4,172,117 for the year ended December 31, 2023, a decrease of $3,638,312 or 87.2%. We record amortization
expense on our merchant portfolio, trademarks and natural gas purchase rights. The decrease in the current period is due to the
write off of the CBD portfolio as of December 31, 2023, therefore no amortization was recorded for the asset during the year ended December
31, 2024.
Depreciation expense for our Bitcoin Mining Segment
was $2,616,137 for the year ended December 31, 2024 compared to $2,560,015 for the year ended December 31, 2023, an increase of $56,122
or 2.2%.
Salary and wage expense for the year ended December
31, 2024 was $2,932,948 compared to $3,817,508 for the year ended December 31, 2023, a decrease of $884,560 or 23.2%. The decrease is
due to a decrease in headcount.
Professional fees for the year ended December
31, 2024 were $1,939,542 compared to $2,336,785 for the year ended December 31, 2023, a decrease of $397,243 or 17%. Professional fees
consist mainly of audit and legal fees. The decrease in the current period is due to a decrease in legal fees.
General and Administrative (“G&A”)
expense for the year ended December 31, 2024, was $2,861,300 compared to $7,078,947 for the year ended December 31, 2023, a decrease of
$4,217,647 or 59.6%. The decrease was mainly due to a $788,700 decrease in banking fees, a decrease of $295,500 in Computer & Software
Expenses, a $353,700 decrease in Utility Expense and a $550,450 decrease in contracted services.
For the year ended December 31, 2024, we had total impairment expense
of $2,962,469 related to Dmint’s exclusive agreement to purchase natural gas. For the year ended December 31, 2023, we had total
impairment expense of $12,902,788. $12,642,857 was for the write down of the Acquired Merchant Portfolio. There was also an impairment
of $259,931 related to the Bitcoin miners owned by DMINT.
For the year ended December 31, 2024, we recognized
a realized gain from the sale of bitcoin of $222,751 and an unrealized gain on investment of $274,731. We also had interest expense of
$45,942. For the year ended December 31, 2023, we recognized a realized gain from the sale of bitcoin of $288,584 and an unrealized gain
on investment of $23,662. We also had other income of $40,320 and interest expense of $148,483.
Our net loss for year ended December 31, 2024,
was $11,224,911 compared to $23,273,939 for year ended December 31, 2023. We had a decrease in our net loss of $12,049,028 for the reasons
discussed above.
Liquidity and Capital Resources
Changes in Cash Flows
Operating Activities
For the year ended December 31, 2024, we used
$2,600,036 of cash in operating activities, which included our net loss offset by $3,149,942 for amortization and depreciation expense,
$406,500 for stock-based compensation, impairment expense of $2,962,469, a realized gain of $222,751 from the sale of bitcoin and a realized
gain on investment of $274,731 and net changes in operating assets and liabilities of $2,598,309.
48
For the year ended December 31, 2023, we received $2,046,922 of cash
in operating activities, which included our net loss offset by $6,732,132 for amortization and depreciation expense, $727,758 for stock-based
compensation, impairment expense of $12,902,788, a realized gain of $288,584 from the sale of bitcoin and an unrealized gain on investment
of $23,662 and net changes in operating assets and liabilities of $5,274,238.
Investing Activities
For the year ended December 31, 2024, we received
$332,893 of cash used for investing activities. We received $548,393 from the sale of investment and used $215,500 to purchase the
remaining 19.99% interest in the LLC.
For the year ended December 31, 2023, we used
$2,080,113 of cash used for investing activities. We used $1,225,148 for property and equipment, $4,965 for purchase of intangible assets
and $850,000 the purchase of an 80.01% interest in Cuentas SDI, LLC.
Financing Activities
For the year ended December 31, 2024, we received
net cash of $2,115,843 from financing activities as a result of receiving $1,191,282 from our CEO, $1,090,890 from the sale of common
stock, $6,840 in proceeds from exercise of options by related parties, and an increase in our cash overdraft of $31,750. We made repayments
on our note payable of $204,919.
For the year ended December 31, 2023, we used
net cash of $221,829 in financing activities as a result of a cash overdraft obtained in an acquisition of $8,050 and payments on a note
payable of $226,457 along with $12,678 in advances from related parties.
Liquidity and Capital Resources
At December 31, 2024, the Company had cash of
$27,436 and negative working capital of $8,650,939.
On February 16, 2024, the Company entered into
an Equity Distribution Agreement (the “Agreement”) with Maxim Group LLC (“Maxim”) to create an at-the-market equity
program. Under the Agreement, the Company may offer and sell its common stock, par value $0.0001 per share, from time to time having an
aggregate offering amount of up to $15,000,000 (the “Shares”) during the term of the Agreement through Maxim, as sales agent
(the “ATM Offering”). The Company has agreed to pay Maxim a commission equal to 3.0% of the gross sales price from the sales
of Shares pursuant to the Agreement. In addition, the Company agreed to reimburse Maxim for its costs and out-of-pocket expenses incurred
in connection with its services, including the fees and out-of-pocket expenses of its legal counsel. As of December 31, 2024, the ATM
Offering has resulted in net proceeds of $1,090,890.
During the twelve months ended December 31, 2024,
Mr. Yakov made payments on behalf of the Company in the amount of $1,191,282. As of December 31, 2024, the Company owes Mr. Yakov $1,203,960.
On August 12, 2024, the Company entered into an agreement with Yakov
Holdings LLC, an entity controlled by Mr. Yakov (the “Yakov LLC”) whereby the Yakov LLC committed to loan to the Company up
to Five Million Dollars ($5,000,000) (the “Yakov LLC Loan”). The Yakov LLC Loan is revolving in nature, allowing the Company
to borrow, repay, and re-borrow amounts under the terms and conditions set forth herein, provided that the total outstanding amount shall
not exceed Five Million Dollars ($5,000,000). The interest rate of the Yakov LLC Loan is twelve percent (12%) and it matures on March
31, 2026. In addition, the Yakov LLC Loan is secured by a first priority security interest for the benefit of the Yakov LLC over all of
the assets of the Company.
The Company has reviewed its cash flow activity during 2024 and projected
cash flow forecast for 2025 and performed an overall analysis of market trends to determine whether or not it has sufficient liquidity
to continue as a going concern for a period of at least twelve months from the date of this Annual Report. Based on projected cash to
be used in operations to be offset by expected proceeds from the ATM program and loan proceeds from Ronny Yakov under the loan agreement,
the Company believes it has sufficient liquidity in order to sustain operations for at least the twelve months following the filing of
this Annual Report. However, management recognizes that it may be required to obtain additional resources to successfully execute its
business plans. No assurances can be given that management will be successful in raising additional capital, if needed, or on acceptable
terms. Without raising additional capital, either via additional advances made pursuant to the ATM, related party loan or from other sources,
there is substantial doubt about the Company’s ability to continue as a going concern through March 31, 2026. The accompanying consolidated
financial statements have been prepared assuming that the Company will continue as a going concern. This basis of presentation contemplates
the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.
Significant Accounting Policies
Refer to Note 2 of our financial statements contained
elsewhere in this Form 10-K for a summary of our significant accounting policies and recently adopting and issued accounting standards.
Item 7A. Quantitative and Qualitative
Disclosures about Market Risk
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
49
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID # 587) F-2
Report of Independent Registered Public Accounting Firm (PCAOB ID # 6258) F-3
Consolidated Balance Sheets at December 31, 2024 and 2023 F-5
Notes to the Consolidated Financial Statements F-9
F-1
www.rbsmllp.com
Report of Independent Registered Public Accounting
Firm
To the Board of Directors and Stockholders of
OLB Group, Inc. and Subsidiaries
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated
balance sheet of OLB Group, Inc. and subsidiaries (the “Company”) as of December 31, 2024, and the related consolidated statement
of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2024, and the related notes (collectively
referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the
year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
The Company’s Ability to Continue as
a Going Concern
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company
has recurring losses from operations, limited cash flow, and an accumulated deficit. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note
3. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. Our opinion
is not modified with respect to that matter.
Basis for Opinion
These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial
statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides
a reasonable basis for our opinion.
/s/ RBSM LLP
We have served as the Company’s auditor since 2024.
Houston, TX
F-2
Report of Independent Registered Public Accounting
Firm
Board of Directors and Stockholders
The OLB Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of The
OLB Group, Inc. as of December 31, 2023, and the related consolidated statements of operations, changes in stockholders’ equity,
and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the financial position of The OLB Group, Inc. as of December
31, 2023, and the results of its operations and its cash flows for the year then ended in conformity accounting principles generally accepted
in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the entity’s
management. Our responsibility is to express an opinion on the entity’s financial statements based on our audit. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to
be independent with respect to The OLB Group, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. The OLB Group, Inc. is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from
the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Stock Based Compensation (Note 9)
During the year ended December 31, 2023, the Company was to grant stock
options to their CEO, Ronny Yakov, to purchase 200,000 shares of common stock pursuant to the terms of his employment agreement, however,
there were delays that resulted in the options being issued and then exercised subsequent to December 31, 2023. As a result of the delay,
the Company failed to initially capture the option grant in their books. Upon discovery of this oversight the Company used the Black Scholes
Merton option pricing model to calculate the grant date fair value of the award which required a number of inputs based on management’s
estimates.
In order to audit the grant date fair value for Mr. Yakov’s
option grant we had to review the specific terms of the award and had to review the Company’s calculation of fair value and determine
the reasonableness of each input into the calculation, which included a determination of the grant date, along with estimates of expected
life and volatility.
Also during our audit, we had to test the reasonableness of the stock-based
compensation recorded by the Company and noted that in addition to the value captured for Mr. Yakov’s options it included amounts
the Company had to capture related to options granted in prior years due to compensation expense being recognized over service periods
and/or based on the expected timing of a performance, market, or service condition being met. To audit this amount, we had to obtain support
for options issued as far back as 2018 and review the terms and valuations of all grants.
Accordingly, testing the Company’s stock-based compensation
was challenging, time consuming, and there was subjectivity involved with complex auditor judgment due to the estimates that had to be
tested, all of which resulted in significant audit effort. As a result of our audit procedures adjustments were recorded to ensure recorded
equity and expense amounts were reasonable.
F-3
Business Combination (Note 7)
During the year ended December 31, 2023, the Company entered
into a Membership Interest Purchase Agreement that was accounted as a business combination under ASC 805 which required the Company to
determine the fair market value of assets acquired, liabilities assumed, and the non-controlling interest.
As this disclosure was considered material to the financial
statements, we identified a risk of material misstatement related to this transaction. In order to audit the Company’s business
combination, we reviewed managements analysis of the transaction, obtained an understanding of all aspects of the transaction, and completed
our own detailed analysis of the accounting literature governing business combinations to ensure the accounting treatment was reasonable.
We also reviewed the reasonableness of the fair value estimates for all recorded amounts.
Due to the extensive analysis of the transaction as well
as the judgment and subjectivity that was involved in applying audit procedures there was significant audit effort required to ensure
the transaction was properly accounted for.
Bitcoin Mining Transactions (Note 2)
The Company’s operations and activities include bitcoin
mining and the exchange of bitcoin for U.S. dollars and such transactions have inherent audit complexities associated with them. The Company
has entered into a third-party subscription agreement to monitor their bitcoin activity and has entered into a digital asset mining pool
contract with a third-party to provide computing power in exchange for earning bitcoin. The Company has used significant judgment to determine
its accounting for its bitcoin mining revenue and it took significant time, effort, and subjectivity during our audit to ensure revenue
and exchange transactions were properly stated.
In order to test the Company’s recognition of revenue
we obtained a detailed understanding of the Company’s operations and its third party-contracts and arrangements. We evaluated the
Company’s compliance with accounting standards and we completed detailed testing to ensure we could rely on third party reports.
We corroborated recorded transactions with data recorded on public blockchain networks and we independently calculated the value of bitcoin
received to ensure recorded revenue amounts were reasonable. We also independently calculated the gain/loss on all exchanges of bitcoin
for U.S. dollars to ensure amounts were accurately recorded in accordance with the Company’s policies and procedures. We ensured
all bitcoin transactions were reasonably recorded and ensured the Company’s disclosures in their financial statements regarding
such were adequate.
Intangible Assets and Goodwill Impairment (Note 2 and
Note 4)
The Company evaluates for impairment of intangible assets
by first evaluating for impairment indicators, which requires significant judgment, and then by completing a recoverability test to compare
the carrying value of each asset with the sum of the undiscounted cash flows expected to result from the use and eventual disposition
of the assets, which can depend on estimates and assumptions. If the carrying amount is in excess of the undiscounted cash flows the Company
calculates a fair value for the asset, which can also be based on subjectivity, estimates, and judgments, and ensures the carrying amount
is not in excess of its fair value.
The Company evaluates goodwill for impairment at least
annually at the reporting unit level and compares the carrying amount of goodwill to its fair value. Accordingly, the Company has to use
significant judgment, assumptions, and subjectivity to determine it reporting units and the fair value of their goodwill. As of December
31, 2023 the Company engaged a valuation specialist to assist with the fair value calculations.
During our audit we identified potential impairment as
a risk of material misstatement, as the intangible assets and goodwill values had balances and disclosures that were material to the financial
statements. In order to test the Company’s intangible asset for impairment, we had to analyze each material intangible asset and
use significant auditor judgment and subjectivity to review impairment indicators based on Company operations and the nature of the intangible
assets, review undiscounted cash flow amounts where we noted no significant amounts that were necessary to test, and had to test fair
value amounts by obtaining third party market data, which required significant audit effort.
In order to test the Company’s goodwill impairment,
we had to use significant auditor judgement to gain comfort in the Company’s reporting unit(s) by completing an overall analysis
of the Company’s business and operations. We also had to gain comfort with the expertise and experience of the third-party valuation
expert and review the techniques and valuation approach used by the expert for reasonableness. Lastly, we reviewed all inputs and/or underlying
data used by the valuation expert to ensure the fair value associated with the goodwill was reasonable.
Property and Equipment (Note 5)
During the year ended December 31, 2023 the Company incurred
significant costs related to the build out of their bitcoin mining warehouse and an audit risk was identified related to the value and
recoverability of their assets. Significant audit effort was required to ensure the property and equipment was recorded properly, that
depreciation expense was reasonable, and that asset values were recoverable.
During our audit we had to obtain sufficient corroborating
evidence regarding the timing of asset receipt and the assets existence at the reporting date. We also had to recalculate all depreciation
amounts and complete a detailed impairment analysis which required auditor subjectivity. We ensured the Company’s property and equipment
was reasonably stated at its recoverable value and ensured the disclosures for such were accurate.
/s/ Mac Accounting Group & CPAs, LLP
We have served as The OLB Group Inc.'s auditor since 2023.
Midvale, Utah
April 15, 2024
F-4
The OLB Group, Inc. and Subsidiaries
Consolidated Balance Sheets
ASSETS
Current Assets:
Investment in equity securities — 273,662
Other Assets:
Operating lease right-of-use assets 140,218 —
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Cash overdraft $ 31,750 $ —
Operating lease liability – current portion 46,491 —
Long Term Liabilities:
Notes payable, net of current portion — 149,039
Operating lease liability – net of current portion 93,869 —
Commitments and contingencies (Note 10)
Stockholders’ Equity:
Noncontrolling interest — 119,224
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
The OLB Group, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31,
Revenue:
Other revenue from monthly recurring subscriptions 521,268 312,565
Operating expenses:
Other income (expense):
Income tax expense — —
Net loss attributed to noncontrolling interest — 93,276
Net loss per common share, basic and diluted $ (6.10 ) $ (15.33 )
Weighted average shares outstanding, basic and diluted 1,860,538 1,520,371
The accompanying notes are an integral part
of these consolidated financial statements.
F-6
The OLB Group, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’
Equity
For the Years Ended December 31, 2024 and 2023
Shares Amount Shares Amount In Capital Stock Deficit Interest Total
Preferred stock dividends-related party — — — — (124,222 ) — — — (124,222 )
Preferred stock dividends-related party — — — — (124,903 ) — — — (124,903 )
Shares issued for charitable contribution 2,500 — 4,725 — — 4,725
Adjustment for 10 for 1 reverse stock split — — (146 ) — — — — — —
The accompanying notes are an integral part
of these consolidated financial statements.
F-7
The OLB Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES:
Common stock issued for charitable contribution 4,725 —
Operating lease expense, net of repayment 142 (3,809 )
Changes in assets and liabilities:
Other long-term assets — 106,965
Net cash provided by (used in) operating activities (2,600,306 ) 2,046,922
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment — (1,225,148 )
Purchase of intangible assets — (4,965 )
Proceeds from sale of investment 548,393 —
Purchase of 80.01% interest in Moola Cloud, LLC — (850,000 )
Purchase of 19.99% interest in Moola Cloud, LLC (215,500 ) —
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft acquired in acquisition — (8,050 )
Common stock sold for cash 1,090,890 —
Proceeds from exercise of options – related party 6,840 —
Net cash (used) provided by financing activities 2,115,843 (221,829 )
Cash paid for:
Interest $ — $ —
Income taxes $ — $ —
Non-cash investing and financing transactions:
Common stock issued for accrued liabilities $ 900,000 $ 164,998
Cancellation of operating leases $ — $ 174,090
The accompanying notes are an integral part
of these consolidated financial statements.
F-8
The OLB Group, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2024
NOTE 1 – BACKGROUND
Background
The OLB Group, Inc. (“OLB” the “Company”)
was incorporated in the State of Delaware on November 18, 2004 and provides services through its wholly-owned subsidiaries and business
segments. The Company generates its revenue through two business segments its Fintech Services and Bitcoin Mining Business segments.
Fintech Services:
The Company provides integrated financial and
transaction processing services (“Fintech Services”) to businesses throughout the United States. Through its eVance, Inc.
subsidiary (“eVance”), the Company provides an integrated suite of third-party merchant payment processing services and related
proprietary software enabling products that deliver credit and debit card-based internet payment processing solutions primarily to small
and mid-sized merchants operating in physical “brick and mortar” business environments, on the internet and in retail settings
requiring both wired and wireless mobile payment solutions. eVance operates as an independent sales organization (“ISO”) generating
individual merchant processing contracts in exchange for future residual payments. As a wholesale ISO, eVance has a direct contractual
relationship with the merchants and takes greater responsibility in the approval and monitoring of merchants than do retail ISOs and as
a result, receives additional consideration for this service and risk. The Company’s Securus365, Inc. (“Securus365”)
subsidiary operates as a retail ISO and receives residual income as commission for merchants it places with third party processors. The
Company’s eVance Capital, Inc subsidiary provides lending services to merchants processing with eVance, Inc.
CrowdPay.us, Inc. (“CrowdPay”) is
a Crowdfunding platform used to facilitate a capital raise anywhere from $1,000,000 -$50,000,000 of various types of securities
under Regulation D, Regulation Crowdfunding, Regulation A and the Securities Act of 1933. To date, the activities of this subsidiary have
been nominal.
OmniSoft, Inc. (“OmniSoft”) operates
a software platform for small merchants. The Omnicommerce applications work on an iPad, mobile device and the web and allow customers
to sell a store’s products in a physical, retail setting. To date, the activities of this subsidiary have been nominal when compared
to the overall business.
On May 14, 2021, the Company formed its wholly
owned subsidiary, OLBit, Inc. (“OLBit”). The purpose of OLBit is to hold the Company’s assets and operate its business
related to its emerging lending and transactional business leveraging the Company’s Bitcoin Business and Fintech Services business.
To date, the activities of this subsidiary have been nominal.
On June 15, 2023, the Company entered into a Membership
Interest Purchase Agreement (the “Agreement”) with SDI Black 001, LLC (“Seller”) whereby the Company acquired
80.01% of the membership interests of Cuentas SDI, LLC, a Florida limited liability company (the “LLC”). The LLC owns the
platform of Seller and the network serving over 31,000 bodega convenience stores in and around New York and New Jersey (see Note
7).
The Company also provides ecommerce development
and consulting services on a project-by-project basis.
Bitcoin Mining Business:
On July 23, 2021, the Company formed its wholly
owned subsidiary, DMINT, Inc., (“DMINT”). The purpose of DMINT is to operate its business related to Bitcoin mining (“Bitcoin
Business”).
On June 24, 2022 the Company formed DMINT Real
Estate Holdings, Inc., a wholly-owned subsidiary of DMINT. The purpose of DMINT Real Estate Holdings, Inc is to buy and hold real estate
related to DMINT. Currently, its only asset is the building and property located in Selmer, Tennessee where all of the mining computers
are located.
F-9
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The Company’s consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of Estimates
The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The Company’s accounting estimates include the collectability
of receivables, useful lives of long-lived assets and recoverability of those assets, impairment in fair value of goodwill, valuation
allowances for income taxes and stock-based compensation.
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries, eVance Inc, eVance Capital Inc, Securus365, Inc., CrowdPay.us,
Inc., OmniSoft, Inc., OLBit, Inc., DMINT, Inc., and DMINT Real Estate Holdings. The Company owns 100% of Cuentas SDI, LLC, which has been
included in the consolidated financial statements.
All significant intercompany transactions and
balances have been eliminated.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of
the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of
the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States
of America (U.S. GAAP) and expands disclosures about fair value measurements. To increase consistency and comparability in fair
value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority
to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The
three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1: Quoted market prices available in active markets for identical
assets or liabilities as of the reporting date.
Level 2: Pricing inputs other than quoted prices
in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs that are generally unobservable inputs and
not corroborated by market data.
The carrying amount of the Company’s financial
assets and liabilities, such as cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses approximate their fair
value because of the short maturity of those instruments. The Company’s notes payable represents the fair value of such instruments
as the notes bear interest rates that are consistent with current market rates.
Concentration of Credit Risk
Financial instruments that potentially expose
the Company to concentration of credit risk consist primarily of cash and accounts receivable. The Company’s cash is deposited with
major financial institutions. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurable amount (“FDIC”).
As of December 31, 2024 and 2023, the Company had no cash in excess of the FDIC’s $250,000 coverage limit.
Operating Segments
Operating segments are defined as components of
an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”),
or decision maker group, in deciding how to allocate resources to an individual segment and in assessing performance. Our chief operating
decision–making group is composed of the Chief Executive Officer and Vice President. The Company has two operating segments as of
December 31, 2024 and 2023. (see Note 17).
F-10
Stock-based Compensation
We account for equity-based transactions with
employees and non-employees under the provisions of FASB ASC Topic 718, “Compensation – Stock Compensation” (“Topic
718”), which establishes that equity-based payments to employees and non-employees are recorded at the grant date the fair
value of the equity instruments the entity is obligated to issue when the employees and non-employees have rendered the requisite service
and satisfied any other conditions necessary to earn the right to benefit from the instruments. Topic 718 also states that observable
market prices of identical or similar equity or liability instruments in active markets are the best evidence of fair value and, if available,
should be used as the basis for the measurement for equity and liability instruments awarded in these share-based payment transactions.
However, if observable market prices of identical or similar equity or liability instruments are not available, the fair value shall be
estimated by using a valuation technique or model that complies with the measurement objective, as described in Topic 718.
Net Loss per Share
Basic net loss per share of common stock is computed by dividing net
loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed
by dividing net loss by the weighted average number of shares of common stock and dilutive potentially outstanding shares of common stock
during the period. The weighted average number of common shares for the years ended December 31, 2024 and 2023 does not include warrants
to acquire 856,313 shares of common stock because of their anti-dilutive effect. The weighted average number of common shares for years
ended December 31, 2024 and 2023, does not include 20,000 and 125,468 options, respectively, to purchase common stock because of their
anti-dilutive effect.
Investments in Equity Securities
The Company accounts for its investments under
ASC 321, “Investments – Equity Securities,” which requires that investments in equity securities be measured at fair
value with changes in value recorded as unrealized gains and losses in current period operations.
Bitcoin
The Company obtains bitcoin through our mining
activities, which is accounted for in connection with our revenue recognition policy. The bitcoin held is recorded as other assets in
the Consolidated Balance Sheets and is accounted for as indefinite-lived intangible assets initially measured at cost, in accordance with
ASC 350 – “Intangibles-Goodwill and Other” (“ASC 350”). The use of bitcoin is accounted for in accordance
with the first in first out method of accounting. We do not amortize our bitcoin but assess the value for impairment as further discussed
in our impairment policy.
At December 31, 2024 and 2023, the carrying value
of the Company’s bitcoin was $0 and $312,565, respectively. As of December 31, 2023, the Company had 11.14 bitcoin on hand which
had a fair value of $470,633 based on the price of bitcoin of approximately $42,265. For the years ended December 31, 2024 and 2023, we
recorded a realized gain on our bitcoin transactions of $222,751 and $288,584, respectively.
Property and Equipment
Property and equipment is stated at cost and depreciated
using the straight-line method over the estimated useful lives of the assets. Depreciation is calculated once the asset has been received
and is ready for its intended use, using half of the monthly depreciation in the first month and half of the monthly depreciation in the
last month. Cost and accumulated depreciation applicable to items replaced or retired are eliminated from the related accounts with any
gain or loss on the disposition included in the statement of operations. Expenditures for repairs and maintenance are expensed as incurred.
F-11
The Company capitalizes all capital assets utilizing
the following criteria:
● All land acquisitions;.
● All buildings/facilities acquisitions and new construction;
● Facility renovation and improvement projects costing more than $100,000;
● Land improvement and infrastructure projects costing more than $100,000,
● Computer equipment costing more than $5,000; and
The estimated useful lives for all the Company’s
property and equipment are as follows:
Item Useful Life
Computer equipment 3 years