OLB GROUP, INC. 10-K

Item 8. Financial Statements and Supplementary Data 51 INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID # 229 ) F-2 Consolidated Balance Sheets at December 31, 2021 and 2020 F-4 Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020 F-5 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2021 and 2020 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020 F-7 Notes to the Consolidated Financial Statements F-8 F- 1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders The OLB Group, Inc. New York, New York Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of The OLB Group, Inc. (the “Company”) at December 31, 2021 and 2020, and the related consolidated statements operations, stockholders’ equity and cash flows for each of the two years in the periods ended December 31, 2021 and 2020, 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 Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America. 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 financial statements based on our audits. 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 audits 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 audits, 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 audits 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 audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter 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 matter 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 matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. F- 2 Continued from previous page Intangible Assets Impairment Assessments As described in Notes 2 and 4 to the consolidated financial statements, the Company has goodwill and intangible assets of $28.9 million at December 31, 2021. In most cases, no directly observable market inputs are available to measure the fair value to determine if the asset is impaired. Therefore, an estimate is derived indirectly and is based on net present value techniques utilizing post-tax cash flows and discount rates. The estimates that management used in calculating the net present values depend on assumptions specific to the nature of the management service activities with regard to the amount and timing of projected future cash flows; long-term forecasts; actions of competitors (competing services), future tax and discount rates. The principal considerations for our determination that performing procedures relating to the intangible assets impairment assessment is a critical audit matter are the significant judgment by management when developing the net present value of the intangible assets. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the amount and timing of projected future cash flows and the discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing management’s process for developing the fair value estimate; evaluating the appropriateness of the net present value techniques; testing the completeness and accuracy of underlying data used in the model; and evaluating the significant assumptions used by management, including the amount and timing of projected future cash flows and the discount rate. Evaluating management’s assumptions related to the amount and timing of projected future cash flows and the discount rate involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the intangible assets, the consistency with external market and industry data, and whether these assumptions were consistent with evidence obtained in other areas of the audit. /s/ Daszkal Bolton LLP Daszkal Bolton LLP We have served as the Company’s auditor since 2020 Boca Raton, Florida March 24, 2022 F- 3 The OLB Group, Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2021 December 31, 2020 ASSETS Current Assets: Cash $ 3,470,339 $ 3,824,491 Accounts receivable, net 670,822 355,994 Prepaid expenses 15,064 15,754 Other current assets 729,351 8,768 Total Current Assets 4,885,576 4,205,007 Other Assets: Property and equipment, net 8,967,096 19,807 Intangible assets, net 23,964,180 2,640,816 Goodwill 6,858,216 6,858,216 Operating lease right-of-use assets 402,538 269,508 Other long-term assets 451,885 384,148 Total Other Assets 40,643,915 10,172,495 TOTAL ASSETS $ 45,529,491 $ 14,377,502 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 501,762 $ 359,968 Accrued expenses 416,182 103,634 Merchant portfolio purchase installment obligation 2,000,000 — Operating lease liability – current portion 133,180 85,598 Note payable – current portion — 450,000 Total Current Liabilities 3,051,124 999,200 Long Term Liabilities: Notes payable, net of current portion — 7,441,076 Operating lease liability – net of current portion 273,166 185,045 Total Liabilities 3,324,290 8,625,321 Commitments and contingencies (Note 10) Stockholders’ Equity: Preferred stock, $ 0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding — — Series A Preferred stock, $ 0.01 par value, 10,000 shares authorized, 4,633 shares issued and outstanding at December 31, 2021 and 2020, respectively 46 46 Common stock, $ 0.0001 par value, 200,000,000 shares authorized, 11,984,396 and 6,170,054 shares issued and outstanding at December 31, 2021 and 2020, respectively 1,197 617 Additional paid-in capital 67,810,922 26,380,124 Accumulated deficit ( 25,606,964 ) ( 20,628,606 ) Total Stockholders’ Equity 42,205,201 5,752,181 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 45,529,491 $ 14,377,502 T he accompanying notes are an integral part of these consolidated financial statements. F- 4 The OLB Group, Inc. and Subsidiaries Consolidated Statements of Operations For the Years Ended December 31, 2021 2020 Revenue: Transaction and processing fees $ 15,810,626 $ 8,358,459 Merchant equipment rental and sales 131,802 88,538 Revenue, net - cryptocurrency mining 304,004 — Other revenue from monthly recurring subscriptions 464,327 1,319,624 Total revenue 16,710,759 9,766,621 Operating expenses: Processing and servicing costs, excluding merchant portfolio amortization 13,480,212 6,003,931 Amortization and depreciation expense 1,890,899 844,423 Salaries and wages 2,126,451 1,363,451 Professional fees 1,590,520 769,159 General and administrative expenses 2,387,416 1,520,362 Total operating expenses 21,475,498 10,501,326 Loss from operations ( 4,764,739 ) ( 734,705 ) Other income (expense): Interest expense ( 116,737 ) ( 807,982 ) Interest expense, related party — ( 235,951 ) Gain on forgiveness of debt 236,231 — Litigation expense ( 333,158 ) — Other income 45 1,911 Total other expense ( 213,619 ) ( 1,042,022 ) Net Loss $ ( 4,978,358 ) $ ( 1,776,727 ) Net loss per share, basic and diluted $ ( 0.63 ) $ ( 0.31 ) Weighted average shares outstanding, basic and diluted 7,918,263 5,711,266 The accompanying notes are an integral part of these consolidated financial statements. F- 5 The OLB Group, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Equity For the Years ended December 31, 2021 and 2020 Preferred Stock Common Stock Additional Paid Accumulated Shares Amount Shares Amount In Capital Deficit Total Balance at December 31, 2019 — $ — 5,411,905 $ 541 $ 16,050,938 $ ( 18,851,879 ) $ ( 2,800,400 ) Stock based compensation — — — — 298,381 — 298,381 Conversion of debt – related party 4,633 46 — — 4,634,396 — 4,634,442 Common stock units issued for cash — — 700,000 70 4,942,811 — 4,942,881 Warrants sold for cash — — — — 155,380 — 155,380 Common stock issued for exercise of Warrants — — 21,150 2 94,498 — 94,500 Common stock issued for services – related party — — 36,999 4 203,720 — 203,724 Net loss — — — — — ( 1,776,727 ) ( 1,776,727 ) Balance at December 31, 2020 4,633 46 6,170,054 617 26,380,124 ( 20,628,606 ) 5,752,181 Stock based compensation — — — — 296,042 — 296,042 Common stock issued exercise of warrants – related party 159,103 16 — 16 Options issued for intangible assets — — — 4,499,952 — 4,499,952 Common stock units issued for cash — — 3,387,696 338 28,379,312 — 28,379,650 Common stock issued for director service — — 35,639 3 165,006 — 165,009 Common stock issued for exercise of warrants — — 2,231,904 223 8,090,486 — 8,090,709 Net loss — — — — — ( 4,978,358 ) ( 4,978,358 ) Balance at December 31, 2021 4,633 $ 46 11,984,396 $ 1,197 $ 67,810,922 $ ( 25,606,964 ) $ 42,205,201 The accompanying notes are an integral part of these consolidated financial statements. F- 6 The OLB Group, Inc. and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended December 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (4, 978,358) $ ( 1,776,727 ) Adjustments to reconcile net loss to net cash provided by and used in operations: Depreciation and amortization 1,890,899 861,269 Stock based compensation 296,042 298,381 Common stock issued for services – related party 165,009 203,724 Operating lease expense 2,674 1,134 Gain on forgiveness of debt ( 236,231 ) — Changes in assets and liabilities: Accounts receivable ( 314,828 ) 123,410 Prepaid expenses and other current assets ( 719,893 ) 101,068 Other long-term assets ( 67,738 ) ( 67,635 ) Accounts payable 141,794 ( 232,885 ) Accrued expenses – related party — 235,952 Other accrued liabilities 312,548 25,242 Deferred revenue — ( 99,594 ) Net cash provided by (used in) operating activities ( 3,508,082 ) ( 326,661 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment ( 9,596,599 ) — Acquisition of intangible assets ( 16,065,001 ) ( 150,000 ) Net cash used in investing activities ( 25,661,600 ) ( 150,000 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable — 236,231 Payments on note payable ( 7,654,845 ) ( 1,845,155 ) Proceeds from exercise of warrants 8,090,709 94,500 Proceeds from sale of common stock units 28,379,650 5,446,000 Proceeds from exercise of options – related party 16 — Proceeds from sale of warrants — 154,775 Payment of deferred offering costs — ( 292,815 ) Net cash provided by financing activities 28,815,530 3,793,536 Net change in cash ( 354,152 ) 3,316,875 Cash – beginning of year 3,824,491 507,616 Cash – end of year $ 3,470,339 $ 3,824,491 Cash paid for: Interest $ 116,736 $ 813,483 Income taxes $ — $ — Supplemental non-cash disclosure: Establishment of ROU operating lease asset and related liability $ 233,308 $ 323,812 Conversion of debt – related party $ — $ 4,634,442 Merchant portfolio purchase installment obligation $ 2,000,000 — Options issued for acquisition of natural gas rights $ 4,499,952 $ — The accompanying notes are an integral part of these consolidated financial statements. F- 7 The OLB Group, Inc. and Subsidiaries Notes to the Consolidated Financial Statements December 31, 2021 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. Fintech Services: The Company provides integrated financial and transaction processing services (“Fintech Services”) to businesses throughout the United States. Through its eVance Capital, 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. 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.io, Inc. (“OmniSoft”) operates a software platform for small merchants. The Omnicommerce applications work on an iPad, mobile device and the web and allows 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 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 cryptocurrency-related lending and transactional business. Cryptocurrency Business: On July 23, 2021, the Company formed DMINT, Inc., a wholly owned subsidiary (“DMINT”). The purpose of DMINT is to operate its business related to cryptocurrency mining (“Cryptocurrency Business”). On July 28, 2021, the Company entered into an exclusive agreement with Cai Energy Blockchain, Inc. (“CAI”) whereby CAI provided the Company with an exclusive natural gas supply agreement (the “Services”). In exchange for the Services, the Company granted CAI options to purchase up to 767,918 shares of Common Stock, $ 0.0001 par value (with a fair value of approximately $ 4.5 million on the date of grant) at an exercise price of $ 0.0001 per share. The natural gas will be used in connection with the Company’s, newly launched, cryptocurrency mining business. The Company also provides ecommerce development and consulting services on a project-by-project basis. The Company generates its revenue through two business segments its Fintech Services and Cryptocurrency Business segments. F- 8 COVID-19 Impact On January 30, 2020, the World Health Organization declared the COVID-19 (coronavirus) outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. The virus and actions taken to mitigate its spread have had and are expected to continue to have a broad adverse impact on the economies and financial markets of many countries, including the geographical areas in which the Company operates. In response to the pandemic, the Company has been working with merchants to address potential changes to the purchase patterns of consumers. In addition, it has been focusing on servicing merchants that sell products with an extended delivery time frame, that have products that are paid for in advance, and that work in the catering, ticketing, limo and travel related businesses which have been directly impacted by the social distancing requirement of the pandemic. Further, for those of the Company’s employees that are able to perform their job remotely, the Company implemented a “remote work” policy and provided employees with the technology necessary to continue to do their jobs from home and for those employees that are unable to perform their job from a remote location, the Company has taken steps to ensure appropriate distancing, continue to require wearing masks in the office and added sanitizing stations along with requiring frequent hand washing and work station cleaning. In addition, the Company has been encouraging its employees to get vaccinated, if possible. At December 31, 2021, most employees were no longer working remotely and had returned to the office. However, the Company continues to monitor and follow the advice of federal and state authorities. The Company has not seen a material impact on its business since states began to roll back restrictions on businesses in the United States. 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, stock-based compensation. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, eVance, Securus, CrowdPay, Omnisoft, OLBit and DMINT. All significant intercompany transactions and balances have been eliminated. Reclassifications Certain reclassifications have been made to the prior year financial information to conform to the presentation used in the financial statements for year ended December 31, 2021. 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, 2021, the Company had $ 3,220,339 of 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, 2021. See Note 15, “Segment Information”. F- 9 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 FASB ASC 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 year ended December 31, 2021 and 2020 does not include warrants to acquire 9,963,127 and 3,353,698 shares of common stock, respectively, because of their anti-dilutive effect. The weighted average number of common shares for the year ended December 31, 2021 and 2020 does not include 772,362 and 172,438 options, respectively, to purchase common stock because of their anti-dilutive effect. Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Leasehold improvements are amortized over the lesser of the remaining term of the lease or the estimated useful life of the asset. Expenditures for repairs and maintenance are expensed as incurred. Impairment of Long-Lived Assets The Company periodically reviews the carrying value of its long-lived assets held and used at least annually or when events and circumstances warrant such a review. If significant events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. Cash flow projections are sometimes based on a group of assets, rather than a single asset. If cash flows cannot be separately and independently identified for a single asset, the Company determines whether impairment has occurred for the group of assets for which it can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, it measures any impairment by comparing the fair value of the asset group to its carrying value. If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded. Merchant Portfolios Merchant portfolios are valued at fair value of merchant customers on the date of acquisition and are amortized over their estimated useful lives ( 7 years). Goodwill The Company accounts for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill. The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , the Company performed a quantitative assessment of indefinite lived intangibles and goodwill and determined there was no impairment at December 31, 2021 and 2020. F- 10 Accounts Receivable Accounts receivable represent contractual residual payments due from the Company’s processing partners or other customers. Residual payments are determined based on transaction fees and revenues from the credit and debit card processing activity of merchants for which the Company’s processing partners pay the Company. Based on collection experience and periodic reviews of outstanding receivables, management considers all accounts receivable for our residual payments to be fully collectible and accordingly, no allowance for doubtful accounts is required; however, CrowdPay has a recorded an allowance of approximately $ 0 and $ 38,000 as of December 31, 2021 and 2020, respectively. Reserve for Chargeback Losses Disputes between a cardholder and a merchant periodically arise as a result of, among other things, cardholder dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction is “charged back” to the merchant, which means the purchase price is refunded to the customer through the merchant’s bank and charged to the merchant. If the merchant has inadequate funds, the Company must bear the credit risk for the full amount of the transaction. The Company evaluates the risk for such transactions and estimates the potential loss for chargebacks based primarily on historical experience and records a loss reserve accordingly. Revenue Recognition and Cost of Revenues The Company receives a percentage of recurring monthly transaction related fees comprised of credit and debit card fees charged to merchants, net of association fees, otherwise known as Interchange, as well as certain service charges and convenience fees, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions. Fees are calculated on either a percentage of the dollar volume of the transaction or a fixed fee or a hybrid of the two and are recognized at the time of the transaction. In the case of “wholesale” residual revenue in which the Company has a direct contractual relationship with the merchant, bears risk of chargebacks and performs underwriting on the merchants, the Company records the full discount charged to the merchant as revenue and the related interchange and other processing fees as expenses. In cases of residual revenue where the Company is not responsible for merchant underwriting and has no chargeback liability and has no or limited contractual relationship with the merchant, the Company records the amount it receives from the processor net of interchange and other processing fees as revenue. Disaggregation of Revenue The following table presents the Company’s revenue disaggregated by revenue source: For the Years Ended December 31, 2021 2020 Revenue from contracts with customers: Wholesale contracts $ 13,336,832 $ 5,106,588 Retail contracts $ 1,680,680 $ 2,242,164 Other transaction and processing fees $ 1,693,247 $ 2,417,869 Total transactions and processing fees $ 16,710,759 $ 9,766,621 F- 11 The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition through the following steps: ● Identification of a contract with a customer; ● Identification of the performance obligations in the contract; ● Determination of the transaction price; ● Allocation of the transaction price to the performance obligations in the contract; and ● Recognition of revenue when or as the performance obligations are satisfied. Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Shipping and handling activities associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment activity and recognized as revenue at the point in time at which control of the goods transfers to the customer. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less. Transaction and processing fees Fees for the Company’s transaction and processing arrangements are typically billed and paid on a monthly basis. The Company receives a percentage of recurring monthly transaction related fees comprised of credit and debit card fees charged to merchants, net of association fees, otherwise known as Interchange, as well as certain service charges and convenience fees, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions. Fees are calculated on either a percentage of the dollar, volume of the transaction or a fixed fee or a hybrid of the two and are recognized at the time of the transaction. These merchant services represent a single performance obligation satisfied over time and that the same measure of progress should be used to measure the Company’s progress toward complete satisfaction of the performance obligation. The Company will recognize revenue on a monthly basis as the services are transferred to the customer in short daily increments that qualify for series guidance as the best measure of the transfer of control. In wholesale contracts, the Company recognizes transaction and processing fees on a gross basis as the Company is the principal in the merchant services. The Company has concluded it is the principal because it has a direct contractual relationship with the merchant, is primarily responsible for the delivery of services to the merchants, including performing underwriting, has discretion in setting prices, and bears risk of chargebacks and other merchant losses. The Company also has the unilateral ability to accept or reject a transaction based on criteria established by the Company. As the principal, the Company records the full discount charged to the merchant as revenue and the related interchange and other processing fees within cost of revenues. In retail contracts, the Company is not responsible for merchant underwriting, has no chargeback liability and has no or limited contractual relationship with the merchant. As such, the Company records the net amount it receives from the processor, after interchange and other interchange and other processing fees, as revenue. Merchant equipment sales and other The Company generates revenue through the sale and rental of merchant equipment. The Company satisfies its performance obligation upon delivery of equipment to merchants and recognizes revenue at a point in time. The Company allows for customer returns which are accounted for as variable consideration. The Company estimates these amounts based on historical experience and reduces revenue recognized. The Company invoices customers upon delivery of the equipment to merchants, and payments from such customers are due upon invoicing. The Company offers hardware installment sales to customers with terms ranging from three to forty-eight months. The Company allocates a portion of the consideration received from these arrangements to a financing component when it determines that a significant financing component exists. The financing component is subsequently recognized as financing revenue separate from hardware revenue, within subscription and services-based revenue, over the terms of the arrangement with the customer. Pursuant to practical expedients afforded under ASC 606, the Company does not recognize a financing component for hardware installment sales that have a term of one year or less. Cryptocurrency mining The Company has entered into digital asset mining pools by executing contracts, as amended from time to time, with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power, the Company is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are immaterial and are recorded as a deduction from revenue), for successfully adding a block to the blockchain. The Company’s fractional share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm. F- 12 Providing computing power to solve complex cryptographic algorithms in support of the Bitcoin blockchain (in a process known as “solving a block”) is an output of the Company’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions. Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt. Each individual unit of cryptocurrency held by the Company is a separate unit of account. There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the Financial Accounting Standards Board (“FASB”), the Company may be required to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations. NOTE 3 – LIQUIDITY AND CAPITAL RESOURCES At December 31, 2021, the Company had cash of approximately $ 3.5 million and working capital of approximately $ 1,800,000 . As such, the Company believes it has sufficient liquidity to fund its future operations and capital requirements for a period of at least twelve months from the date these consolidated financial statements are issued. NOTE 4 – INTANGIBLE ASSETS Intangible assets, net, consist of the following as of: December 31, 2021 December 31, 2020 Merchant Portfolios $ 2,405,000 $ 2,340,000 Less accumulated amortization ( 1,562,798 ) ( 1,199,184 ) Net residual portfolios $ 842,202 $ 1,140,816 December 31, 2021 December 31, 2020 Trade name $ 2,500,000 $ 2,500,000 Less accumulated amortization ( 1,500,000 ) ( 1,000,000 ) Net trade name $ 1,000,000 $ 1,500,000 December 31, 2021 December 31, 2020 CBD Merchant Portfolio $ 18,000,000 $ — Less accumulated amortization ( 190,476 ) — Net trade name $ 17,809,524 $ — December 31, 2021 December 31, 2020 Exclusive agreement to purchase natural gas $ 4,499,952 $ — Less accumulated amortization ( 187,498 ) — Net mineral rights $ 4,312,454 $ — Total intangible assets, net $ 23,964,180 $ 2,640,816 Amortization expense for the years ended December 31, 2021 and 2020 was $ 1,241,589 and $ 844,423 , respectively. The Company’s merchant portfolios and tradename are being amortized over respective useful lives of 7 and 5 years. F- 13 The Company’s agreement to purchase natural gas is being amortized over the useful life of 10 years. The following sets forth the estimated amortization expense related to amortizing intangible assets for the years ended December 31: 2022 $ 3,858,090 2023 3,834,281 2024 3,320,234 2025 3,021,424 2026 3,021,424 Thereafter 6,908,727 Total $ 23,964,180 The weighted average remaining useful life of amortizing intangible assets was 6.20 years at December 31, 2021. NOTE 5 – PROPERTY AND EQUIPMENT Long lived assets, including property and equipment assets to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Property and equipment are first recorded at cost. Depreciation and is computed using the straight-line method over the estimated useful lives of the various classes of assets. Maintenance and repair expenses, as incurred, are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. 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 as income. Assets stated at cost, less accumulated depreciation consisted of the following: December 31, 2021 December 31, 2020 Furniture and Fixtures $ 36,471 $ 36,471 Office Equipment 474,873 288,273 Computer Software 182,345 182,345 Leasehold Improvements 17,877 17,877 Cryptocurrency Mining Equipment 9,410,000 — Total 10,121,566 — Less accumulated depreciation ( 1,154,470 ) ( 505,159 ) Property and Equipment, net $ 8,967,096 $ 19,807 F- 14 Depreciation expense Depreciation expense for the years ended December 31, 2021 and 2020 was $ 649,310 and $ 16,846 , respectively. NOTE 6 – NOTE PAYABLE On April 8, 2018, eVance, Omnisoft, and CrowdPay, (collectively, the “Borrowers”), entered into a term loan of $12,500,000 with GACP (the “Term Loan”) which obligations are guaranteed by the Company (collectively with the Borrowers, the “Loan Parties”), under the Loan and Security Agreement (the “Credit Agreement”). On March 2, 2021, the Company transferred cash in the amount of $7,712,256.28 to the Agent under the Credit Agreement (the “Prepayment”). The Prepayment facilitated the discharge in full of all of the obligations under the Credit Agreement. In connection with the extinguishment of the obligations under the Credit Agreement, 40,000 warrants to purchase Common Stock were cancelled. On May 6, 2020, the Company received a Paycheck Protection Program loan under the CARES Act for $236,231 (the “PPP Loan”). The PPP Loan matures on May 7, 2022 and bears interest at 1% per annum. Monthly amortized principal and interest payments are deferred for 6 months after the date of the agreement. The Paycheck Protection Program provides that the use of PPP Loan proceeds were limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. The Company received notice on October 11, 2021 that the $236,000 PPP Loan had been entirely forgiven resulting in the recognition of a gain on extinguishing of debt. On November 24, 2021, we entered into an Asset Purchase Agreement (the “Agreement”) dated as of November 15, 2021 with FFS Data Corporation (“Seller”) whereby we acquired a portfolio of merchants in the Cannabidiol (or “CBD”) industry, along with other merchants utilizing financial transaction processing services (the “Purchased Assets”). The purchase price is $ 20 million, with $ 16 million paid at closing, $ 2 million payable within six months after closing, and a $ 2 million payment to be transferred to an escrow account, contingent upon an Attrition Adjustment, as described in the Agreement. Company management has not recognized a liability for the contingent payment amount. NOTE 7 – STOCK OPTIONS On January 1, 2021, the Company granted stock options to purchase 6,667 shares of common stock pursuant to the terms on the Company’s employment agreement with Mr. Yakov. The grant shall vest at the rate of 1/3 beginning on each anniversary of the effective date of grant. The options have an exercise price of $0.001 per share and expire in three years after each vest date. The aggregate fair value of the options totaled $ 32,793 based on the Black Scholes Merton pricing model using the following estimates: exercise price of $ 0.001 , 0.16 % risk free rate, 35.03 % volatility and expected life of the options of 3 years. The fair value is being amortized over the applicable vesting period and credited to additional paid in capital. On July 28, 2021, the Company entered into an exclusive agreement with Cai Energy Blockchain, Inc. (“CAI”) whereby CAI provided the Company with an exclusive natural gas supply agreement (the “Services”). In exchange for the Services, the Company granted CAI options to purchase up to 767,918 shares of Common Stock, $ 0.0001 par value (with a fair market value equal to $ 4.5 million on the date of grant) at an exercise price of $ 0.0001 per share. The aggregate fair value of the options totaled $ 4,499,952 based on the Black Scholes Merton pricing model using the following estimates: exercise price of $ 0.0001 , 1.26 % risk free rate, 143.3 % volatility and expected life of the options of 10 years. A summary of the status of the Company’s outstanding stock options and changes during the nine months ended December 31, 2021 is presented below: Stock Options Options Weighted Average Exercise Price Aggregate Intrinsic Value Options outstanding at January 1, 2020 278,506 $ 0.0001 - Granted 6,667 $ 0.001 - Exercised - $ - - Forfeited - $ - - Options outstanding December 31, 2020 285,173 $ 0.0001 $ 1,408,755 Granted 774,585 0.0001 - Exercised ( 159,103 ) $ - - Expired ( 6,667 ) $ - - Options outstanding December 31, 2021 893,988 $ 0.0001 $ 2,369,065 Shares exercisable at December 31, 2021 772,361 $ 0.0001 $ 2,046,759 F- 15 NOTE 8 – WARRANTS On August 6, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp., acting as representative of the underwriters (“Aegis”), pursuant to which the Company agreed to sell to the underwriters in a firm commitment underwritten public offering (the “Offering”) an aggregate of 700,000 units (the “Units”), with each Unit consisting of: (a) one share of our common stock; (b) two Series A warrants (the “Series A Warrants”), with each Series A Warrant entitling the holder thereof to purchase one share of our common stock at an exercise price equal to $ 9.00 per share, exercisable until the fifth anniversary of the issuance date, subject to their earlier redemption as described therein; and (c) one-half of one Series B warrant (the “Series B Warrants,” and together with the Series A Warrants, the “Warrants”), with each whole Series B Warrant entitling the holder thereof to purchase one share of common stock at an exercise price equal to $ 4.50 per share, exercisable until the fifth anniversary of the issuance date and subject to their earlier redemption as described therein. The Company also granted the underwriters a 45-day option to purchase up to an additional 105,000 shares of common stock, and/or an additional 210,000 Class A Warrants to purchase shares of common stock and/or an additional 52,500 Class B Warrants to purchase shares of common stock as may be necessary to cover over-allotments in connection with the Offering. The Offering, including the exercise in full of the over-allotment option for the Warrants, closed on August 11, 2020. The Units and the securities underlying the Units were offered by the Company pursuant to a registration statement on Form S-1, as amended (File No. 333-232368), filed with the Securities and Exchange Commission (the “Commission”), which was declared effective by the Commission on August 6, 2020 (the “Registration Statement”). The net proceeds to the Company from the Offering, after deducting the underwriting discount, the underwriters’ fees and expenses and the Company’s Offering expenses, was approximately $ 4.9 million. The Company utilized $ 1,120,155 of the net proceeds to repay a portion of the Company’s long-term indebtedness (the “Term Loan”) and the remainder of the net proceeds from the Offering for working capital and other general corporate purposes and to acquire merchant portfolios and technologies that are synergistic with or complimentary to our business and expand our current products (including payment of outstanding accounts payable). Warrants The Warrants were issued in registered form under separate warrant agent agreements (each a “Warrant Agent Agreement”) between us and our warrant agent, Transfer Online, Inc. (the “Warrant Agent”). Each Series A Warrant entitles the registered holder to purchase one share of our common stock at a price equal to $ 9.00 per share, subject to adjustment as discussed below, terminating at 5:00 p.m., New York City time, on the fifth (5th) anniversary of the date of issuance. No fractional warrants will be issued and only whole warrants are exercisable. The exercise price and number of shares of common stock issuable upon exercise of the Series A Warrants may be adjusted in certain circumstances, including in the event of a stock dividend, extraordinary dividend on or recapitalization, reorganization, merger or consolidation. If we fail to maintain a current prospectus or prospectus relating to the common stock issuable upon the exercise of the Series A Warrants, such holders may exercise their Series A warrants on a “cashless” basis pursuant to a formula set forth in the terms of the Series A Warrants. Each whole Series B Warrant entitles the holder thereof to purchase one share of our common stock at an exercise price of $ 4.50 per share, subject to adjustment as discussed below, terminating at 5:00 p.m., New York City time, on the fifth (5th) anniversary of the date of issuance. No fractional warrants will be issued and only whole warrants are exercisable. The exercise price and number of shares of common stock issuable upon exercise of a whole Series B Warrant may be adjusted in certain circumstances, including in the event of a stock dividend, extraordinary dividend on or recapitalization, reorganization, merger or consolidation. If we fail to maintain a current prospectus or prospectus relating to the common stock issuable upon the exercise of the Series B Warrants, such holders may exercise their Series B warrants on a “cashless” basis pursuant to a formula set forth in the terms of the Series B Warrants. Each holder of the Warrants will be subject to a requirement that they will not have the right to exercise the Warrants to the extent that, after giving effect to such exercise, such holder (together with its affiliates) would beneficially own in excess of 4.99% (subject to increase to 9.99%) of the shares of our common stock outstanding immediately after giving effect to such exercise. F- 16 The Warrants are callable in the event that the last sales price of our common stock for any twenty (20) consecutive trading day period on or after the date of issuance (the “Measurement Period”) exceeds $ 9.00 . The Company may, within ten (10) trading days of the end of such Measurement Period, call for the redemption of all or any portion of the outstanding and unexercised Warrants for consideration equal to the Black Scholes Value (as defined therein) of the remaining unexercised portion of the Warrants called for redemption on such date. Pursuant to the Underwriting Agreement, the Company issued to Aegis a warrant (the “Representative’s Warrants”) to purchase 35,000 shares of common stock. The Representative’s Warrants will be exercisable at a per share exercise price equal to $ 11.25 and is exercisable at any time and from time to time, in whole or in part, during the four-year period commencing twelve months from the effective date of the Registration Statement. The Representative’s Warrants also provide for one demand registration right of the shares underlying the Representative’s Warrants, and unlimited “piggyback” registration rights with respect to the registration of the shares of common stock underlying the Representative’s Warrants and customary anti-dilution provisions. The aggregate fair value of the 35,000 warrants, totaled $ 363,958 based on the Black Scholes Merton pricing model using the following estimates: exercise price of $ 11.25 , 0.21 % risk free rate, 315.6 % volatility and expected life of the warrants of 6 years. The value of the warrants has been netted against the proceeds of the offering proceeds and accounted for in additional paid in capital. On August 18, 2021, the Company sold, in a registered direct offering, an aggregate of 1,418,605 shares of common stock and in a concurrent private placement, warrants to purchase up to 1,418,605 shares of common stock, at an aggregate purchase price of $ 4.30 per Share and associated Warrant. The Warrants will be exercisable six months from the date of issuance at an exercise price of $5.42 per share and will expire five and one-half years following the initial date of issuance. On November 2, 2021, the Company entered into a series of securities purchase agreements with certain institutional accredited investors pursuant to which the Company issued and sold, in a private placement (i) 1,969,091 shares of the Company’s Common Stock (ii) pre-funded warrants exercisable for a total of 2,576,364 shares of Common Stock (the “Prefunded Warrant Shares”) with an exercise price of $ 0.0001 per Prefunded Warrant Share, and (iii) warrants exercisable for a total of 4,545,455 shares of Common Stock (the “Common Warrant Shares” and together with the Prefunded Warrant Shares, the “Warrant Shares”) with an exercise price of $ 6.50 per Common Warrant Share. Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contract Term Outstanding, December 31, 2019 40,000 $ 7.50 0.52 Warrant A Granted (1) 2,639,848 $ 9.00 9.00 Expired - $ - - Warrant B Granted (2) 659,970 $ 4.50 4.50 Warrant B Exercised ( 21,150 ) $ 4.50 - Underwriter Warrant 35,000 $ 11.25 11.25 Underwriter Warrant Exercised - - - Outstanding, December 31, 2020 3,353,698 4.61 4.81 Cancelled ( 40,000 ) $ 7.50 - Underwriter Warrants 8,881,333 $ 3.62 - Warrant A Exercised ( 742,220 ) $ 9.00 - Warrant B Exercised ( 313,320 ) $ 4.50 - Underwriter Warrant Exercised ( 1,176,364 ) $ 0.0001 - Outstanding, December 31, 2021 9,963,127 $ 5.02 4.55 (1) Includes 210,000 Warrant A granted to Underwriters upon exercise of overallotment in connection with the Offering (2) Includes 525,000 Warrant B granted to Underwriters upon exercise of overallotment in connection with the Offering F- 17 NOTE 9 – OPERATING LEASES On June 24, 2020, eVance, Inc. (“eVance”) entered into a Lease Agreement (the “Lease”) with Pergament Lodi, LLC (the “Lessor”) relating to approximately 4,277 square feet of property located at 960 Northpoint Parkway, Alpharetta, Georgia, Suite 400. The term of the Lease is for thirty-nine (39) months commencing September 1, 2020. The monthly base rent is $8,019 for the first twelve (12) months increasing thereafter to $8,768. The total rent for the entire lease term is $315,044 and $8,768 is payable as a security deposit. The first three months of rent will be abated so long as eVance is not in default of any portion of the Lease. On January 11, 2022, DMINT entered into two leases (the “Leases”) in Bradford, Pennsylvania relating to a combined 10,000 square feet of property located at the Bradford Regional Airport Authority multi-tenant building in Lafayette Township. The facility is in the process of being converted into a cryptocurrency mining data center powered on the local power grid in tandem with natural gas power. The location will be used for DMINT’s mining operation with capacity for up to 2,000 Antminer S19j PRO machines. The Leases are each for a term of five years , ending on the later of the date of occupancy and November 10, 2026. The monthly base rent for “Cell 3”, comprising 4,000 square feet, is $ 1,667 per month. The monthly base rent for “Cell 4”, comprising 6,000 square feet, is $ 2,500 per month. The total rent for the entire lease term of the Leases is $ 250,00 and $ 8,768 is payable as a security deposit. Balance Sheet Classification December 31, 2021 Asset Operating lease asset Right of use asset $ 402,538 Total lease asset $ 402,538 Liability Operating lease liability – current portion Current operating lease liability $ 133,180 Operating lease liability – noncurrent portion Long-term operating lease liability 273,166 Total lease liability $ 406,346 Lease obligations at December 31, 2021 consisted of the following: For the year ended December 31: 2022 $ 150,139 2023 144,393 2024 50,000 2025 50,000 2026 41,667 Total payments $ 436,199 Amount representing interest $ ( 29,853 ) Lease obligation, net 406,346 Less current portion ( 133,180 ) Lease obligation – long term $ 273,166 Rent expense for the years ended December 31, 2021 and 2020, was $ 106,201 and $ 91,052 , respectively. NOTE 10 - COMMON STOCK On August 18, 2021, the Company sold, in a registered direct offering, units comprised of an aggregate of 1,418,605 shares of common stock and in a concurrent private placement, warrants to purchase up to 1,418,605 shares of common stock, at an aggregate purchase price of $ 4.30 per Share and associated Warrant, for total net proceeds of $ 6,100,000 . On November 2, 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional accredited investors (the “Investors”) pursuant to which the Company issued and sold, in a private placement (the “Private Placement”), (i) 1,969,091 shares (the “Shares”) of common stock, along with warrants to purchase up to 7,121,819 shares of common stock, for total net proceeds of approximately $22,918,000. F- 18 Refer to Note 12 for common stock issued to related parties. NOTE 11 – PREFERRED STOCK Our certificate of incorporation authorizes the issuance of 50,000,000 shares of blank check preferred stock with such designation, rights and preferences as may be determined from time to time by our board of directors. No shares of preferred stock are currently issued or outstanding. Series A Preferred Stock On August 7, 2020, we filed a Certificate of Designations, Preferences and Rights of Series A Preferred Stock (the “Certificate of Designations”) with the Secretary of State of Delaware. The Certificate of Designations will provide that the Company may issue up to 10,000 shares of Series A Preferred Stock at a stated value (the “Stated Value”) of $1,000 per share. Holders of Series A Preferred Stock are entitled to the following rights and preferences. Dividends The Series A Preferred Stockholders are entitled to receive cash dividends at a rate per share (as a percentage of the Stated Value per share) of 12 % per annum. Dividends accrue quarterly. Dividends are to be paid to the holders from funds legally available for payment and as approved for payment by the Board of Directors of the Company. Conversion The Series A Preferred Stock holders may convert, at their option, on or after the date on which the Term Loan is repaid in full, each share of Series A Preferred Stock (along with accrued but unpaid dividends thereon) into such number of shares of common stock as determined by dividing the Stated Value by the conversion price. The conversion price for the Series A Preferred Stock will be equal to the offering price per Unit in this offering and will be subject to adjustment for splits and the like. The holders of Series A Preferred Stock will only be permitted to convert their shares of Series A Preferred Stock into shares of common stock at such time as the Term Loan has been repaid in full and there is no further outstanding obligations regarding such indebtedness. Voting Each holder of a share of Series A Preferred Stock will have the right to vote its shares of Series A Preferred Stock with the common stock on an as-converted basis, and with respect to such votes, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of common stock, and shall be entitled, to notice of any stockholders’ meeting in accordance with the Company’s bylaws, and shall be entitled to vote, together with holders of common stock, with respect to any question upon which holders of common stock have the right to vote. Fractional votes shall not be permitted, and such shares shall be rounded up. Liquidation Preference Each share of Series A Preferred Stock will have a liquidation preference equal to the Stated Value plus any accrued but unpaid dividends thereon. In the event of a liquidation, dissolution or winding up of the Company (which include,s any merger, reorganization, sale of assets in which control of the Company is transferred or event which results in all or substantially all of the Company’s assets being transferred), the holders of Series A Preferred Stock shall be entitled to receive out of the assets of the Company, before any payment is made to the holders of the Company’s common stock and either in preference to or pari pasu with the holders of any other series of preferred stock that may be issued in the future, a per share amount equal to the liquidation preference. NOTE 12 – RELATED PARTY TRANSACTIONS On May 13, 2020, Mr. Herzog agreed to convert, concurrently with the public offering of the Company’s securities, $ 3,522,191 in principal amount of indebtedness (plus any additional accrued interest and other fees thereon that accrues prior to the offering) into shares of convertible Series A Preferred Stock to be designated concurrently with the offering. On July 24, 2020, the terms of such conversion were amended such that Mr. Herzog agreed to convert such an aggregate of $ 3,582,355 of indebtedness and accrued interest into Series A Preferred Stock and warrants to purchase common stock at an exercise price determined by the public offering (“Conversion Warrants”), which Series A Preferred Stock and conversion warrants would be issued concurrently with the closing of the public offering. The Company has determined Mr. Herzog’s debt is being extinguished in order to protect his equity investment in the Company. Mr. Herzog is considered a principal owner with 10.3 % of voting interests of the Company prior a conversion. The Company believes the equity investment in the Company is significant and indicates that Mr. Herzog entered into the exchange to protect his equity investment. In accordance with ASC 470-50-40-2, an extinguishment transaction between related entities may be capital transactions. If the extinguishment accounting is applied, any gain or loss that results should be reflected in equity. As a result, we believe the extinguishment did not and will not have any impact to the Company’s future financial statements. F- 19 On May 13, 2020, Mr. Yakov agreed to convert, concurrently with the public offering of the Company’s securities, $ 1,011,016 in principal amount of indebtedness and accrued interest, which includes deferred salary and unreimbursed expenses, most of which was outstanding for more than one year, (plus any additional accrued interest and other fees thereon that accrues prior to the offering), into shares of convertible Series A Preferred Stock to be designated concurrently with the offering. On July 24, 2020, the terms of such conversion were amended such that Mr. Yakov agreed to convert an aggregate of $ 1,017,573 of accrued salary, indebtedness and accrued interest into Series A Preferred Stock and Conversion Warrants, which Series A Preferred Stock and conversion warrants were issued concurrently with the closing of the offering. In accordance with ASC 470-50-40-2, an extinguishment transaction between related entities may be a capital transaction. As the extinguishment accounting is applied, any gain or loss that results will be reflected in equity. On July 24, 2020, the terms of the agreement whereby Mr. Herzog agreed to convert, concurrently with the public offering of the Company’s securities, $ 3,522,191 in principal amount of indebtedness (plus any additional accrued interest and other fees thereon that accrues prior to the offering) into shares of convertible Series A Preferred were amended such that Mr. Herzog agreed to convert such an aggregate of $ 3,582,355 of indebtedness and accrued interest into Series A Preferred Stock and Conversion Warrants, which Series A Preferred Stock and Conversion Warrants would be issued concurrently with the closing of the public offering. On August 11, 2020, Mr. Herzog converted $3,612,940 of indebtedness into 3,612 shares of Series A Preferred Stock (the terms of which are described below) and 802,875 Series A Conversion Warrants with an exercise price of $9.00 and 200,719 Series B Conversion Warrants with an exercise price of $4.50. On July 24, 2020, the terms of the agreement whereby Mr. Yakov agreed to convert, concurrently with the public offering of the Company’s securities, $ 1,017,753 in principal amount of indebtedness and accrued interest, which includes deferred salary and unreimbursed expenses (plus any additional accrued interest and other fees thereon that accrues prior to the offering), into shares of convertible Series A Preferred Stock to be designated concurrently with the offering such conversion were amended such that Mr. Yakov agreed to convert an aggregate of $ 1,017,573 of accrued salary, indebtedness and accrued interest into Series A Preferred Stock and conversion warrants, which Series A Preferred Stock and conversion warrants would be issued concurrently with the closing of the offering. On August 11, 2020, Mr. Yakov converted $1,021,512 of indebtedness into 1,021 shares of Series A Preferred Stock (the terms of which are described in Note 10 below) and 227,003 Series A Conversion Warrants with an exercise price of $9.00 and 56,751 Series B Conversion Warrants with an exercise price of $4.50. On November 19, 2021, the company granted 10,800 shares of common stock to Alina Dulimof, Director, for services. The shares were valued at $ 4.63 , the closing stock price on the date of grant, for total non-cash stock compensation expense of $ 50,004 . On November 19, 2021, the company granted 10,800 shares of common stock to Amir Sternhell, Director, for services. The shares were valued at $ 4.63 , the closing stock price on the date of grant, for total non-cash stock compensation expense of $ 50,004 . On November 19, 2021, the company granted 14,039 shares of common stock to Ehud Ernst, Director, for services. The shares were valued at $ 4.63 , the closing stock price on the date of grant, for total non-cash stock compensation expense of $ 65,001 . NOTE 13 – COMMITMENTS AND CONTINGENCIES In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements. F- 20 On October 20, 2017, the Company entered into a 7-year term employment agreement with its founder and President, effective January 1, 2018 through December 31, 2024. The agreement provides for an annual salary of $ 375,000 , fringe benefits ($ 2,500 monthly automobile allowance, any benefit plans of the Company and 4 weeks paid vacation), an incentive bonus of $ 200,000 based on the achievement of certain performance criteria and an acquisition bonus equal to two ( 2 %) percent of the gross purchase price paid in connection therewith upon the closing of any acquisition directly or indirectly by the Company or its subsidiaries during the Employment Period of any company or business (including purchases of all or substantially all of the assets of any such entity) having then existing sales of not less than three million five hundred thousand dollars ($ 3,500,000 ). During the year ended December 31, 2020, Mr. Yakov was paid a $ 400,000 bonus ($ 200,000 per year for 2019 and 2020). See Note 16 - Subsequent Events for additional information on changes in 2022. The Company had an adverse litigation judgment against it during the fiscal year which included damages and attorney fees in favor of the Plaintiff. The Company has appealed the judgment of both the award of damages and attorney fees. The timeline for a ruling on the appeal is unknown. The Company believes that it has sufficient grounds to prevail on its appeal. As the amount of the judgement is known the Company has accounted for it as an accrued expense. NOTE 14 — INCOME TAX Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Net deferred tax assets consist of the following components as of December 31: 2021 2020 Deferred Tax Assets: NOL Carryover $ 2,431,700 $ 1,790,700 Allowance for Doubtful Accounts 10,300 10,300 Depreciation and amortization 687,605 467,658 Less valuation allowance ( 3,129,605 ) ( 2,268,658 ) Net deferred tax assets $ — $ — The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pre-tax income from continuing operations for the period ended December 31, due to the following: 2021 2020 Book loss $ ( 1,045,000 ) $ ( 373,000 ) State taxes ( 299,000 ) ( 107,000 ) Meals and entertainment 1,800 800 Stock based compensation 124,500 135,600 Non deductible expenses 156,421 — Other adjustments 200,332 ( 368,891 ) Valuation allowance 860,947 712,491 $ — $ — At December 31, 2021, the Company had operating loss carry forwards of approximately $9,006,000, $3,417,000 of which expire from 2021 – 2040, and no expiration on the remaining amount. In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s net operating loss carryforwards may be limited in the event of a change in ownership. A full Section 382 analysis has not been prepared and NOLs could be subject to limitation under Section 382. F- 21 NOTE 15 - SEGMENTS The Company applies ASC 280, Segment Reporting , in determining its reportable segments. The Company has two reportable segments during 2021: Cryptocurrency Mining and Fintech Services. The guidance requires that segment disclosures present the measure(s) used by the Chief Operating Decision Maker (“CODM”) to decide how to allocate resources and for purposes of assessing such segments’ performance. The Company’s CODM is comprised of several members of its executive management team who use revenue and expenses of our two reporting segments to assess the performance of the business of our reportable operating segments. The following tables details revenue, operating expenses, and assets for the Company’s reportable segments for the year ended December 31, 2021. For the Year ended December 31, 2021 Reportable segment revenue: Revenue, net - cryptocurrency mining $ 304,004 Fintech services revenue 16,406,755 Total segment and consolidated revenue 16,710,759 Reconciling Items: Processing and servicing costs, excluding merchant portfolio amortization ( 13,480,212 ) Amortization and depreciation expense ( 1,255,674 ) Depreciation expense - cryptocurrency mining ( 635,225 ) Salaries and wages ( 2,126,451 ) Professional fees ( 1,590,520 ) General and administrative expenses ( 2,387,416 ) Interest expense ( 116,737 ) Gain on forgiveness of debt 236,231 Litigation expense ( 333,158 ) Other income 45 Net Loss $ ( 4,978,358 ) December 31, 2021 Total Assets: Cryptocurrency mining $ 9,749,652 Fintech services 33,779,839 $ 43,529,491 NOTE 16 – SUBSEQUENT EVENTS On January 3, 2022, the Company entered into a share exchange agreement with all of the shareholders of Crowd Ignition, Inc. (“Crowd Ignition”) whereby the Company would purchase 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. F- 22 On January 11, 2022, the Company entered into a new employment agreement with Mr. Yakov (the “Yakov Agreement”) and a new employment agreement with Mr. Smith (the “Smith Agreement”). The Yakov Agreement maintains Mr. Yakov’s role as the Company’s Chief Executive Officer through December 31, 2027 and extended for one-year terms thereafter. The Smith Agreement maintains Mr. Smith’s role as the Company’s Vice President, Finance unless terminated or upon his resignation. The Yakov Agreement increases Mr. Yakov’s base salary to $ 750,000 and he will continue to be eligible for insurance coverages and benefits available to the Company’s employees pursuant to the terms of such plans. Mr. Yakov also received a $ 490,000 bonus for acquisitions closed by the Company in 2020 and 2021 and he will be eligible to receive an acquisition bonus equal to two percent ( 2 %) of the gross purchase price paid in connection with a future acquisition. Mr. Yakov shall be eligible to receive an annual bonus of Three Hundred Thousand Dollars ($ 300,000 ) based on performance criteria established by the Board. In addition, on an annual basis, Mr. Yakov shall receive options to purchase up to 200,000 shares of common stock of the Company at an exercise price of $ 0.001 per share. The Yakov Agreement also states that, if Mr. Yakov’s employment is terminated without cause or he voluntarily terminates his employment for good reason, he will continue to receive his base salary for the remainder of the term along with all earned bonuses. In the event the termination is in connection with Mr. Yakov’s death, disability or bankruptcy of the Company, he will receive the pro rata amount of his base salary through the termination date and all bonuses earned through the termination date. The Smith Agreement increases Mr. Smith’s base salary to $ 350,000.00 and he will continue to be eligible for insurance coverages and benefits available to the Company’s employees pursuant to the terms of such plans. Mr. Smith shall be eligible to receive an annual bonus of One Hundred Fifty Thousand Dollars ($ 150,000 ) based on performance criteria established by the Committee. In addition, Mr. Smith shall receive options (the “Options”) to purchase up to 275,000 shares of common stock of the Company at an exercise price of $ 0.001 per share. The Options vest equally over five years at the rate of one-fifth (1/5 th ) beginning on the anniversary of the Effective Date of the Agreement. The Smith Agreement also states that, if Mr. Smith’s employment is terminated without cause or he voluntarily terminates his employment for good reason, he will continue to receive his base salary for the remainder of the term along with all earned bonuses. In the event the termination is in connection with Mr. Smith’s death, disability or bankruptcy of the Company, he will receive the pro rata amount of his base salary through the termination date and all bonuses earned through the termination date. In January 2022, Armistice Capital, received 1,400,000 shares of common stock upon the exercise of 1,400,000 warrants at $ 0.0001 . F- 23 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.