OLB GROUP, INC. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number: 000-52994 THE OLB GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-4188568 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 1120 Avenue of the Americas , Fourth Floor , New York , NY 10036 (Address of principal executive offices) (Zip Code) (212) 278-0900 (Registrant’s telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.0001 par value OLB The Nasdaq Capital Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of November 11, 2022, there were 14,702,804 shares of the issuer’s common stock issued and outstanding. THE OLB GROUP, INC. FORM 10-Q For the Quarterly Period Ended September 30, 2022 INDEX PART I Financial Information 1 Item 1. Financial Statements (unaudited) 1 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3. Quantitative and Qualitative Disclosures about Market Risk 23 Item 4. Controls and Procedures 23 PART II Other Information 24 Item 1. Legal Proceedings 24 Item 1A. Risk Factors 24 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24 Item 3. Defaults Upon Senior Securities 24 Item 4. Mine Safety Disclosures 24 Item 5. Other Information 24 Item 6. Exhibits 24 Signatures 25 i PART I - FINANCIAL INFORMATION Item 1. Financial Statements INDEX TO FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 2 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) 3 Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022, and 2021 (unaudited) 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited) 5 Notes to the Condensed Consolidated Financial Statements (unaudited) 6 1 The OLB Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets September 30, 2022 December 31, 2021 ASSETS (Unaudited) Current Assets: Cash $ 2,296,631 $ 3,470,339 Accounts receivable, net 644,853 670,822 Prepaid expenses 565,384 15,064 Other current assets 1,528,547 729,351 Total Current Assets 5,035,415 4,885,576 Other Assets: Property and equipment, net 7,334,525 8,967,096 Intangible assets, net 21,169,448 23,964,180 Goodwill 6,858,216 6,858,216 Operating lease right-of-use assets 303,367 402,538 Other long-term assets 476,917 451,885 Total Other Assets 36,142,473 40,643,915 TOTAL ASSETS $ 41,177,888 $ 45,529,491 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 358,568 $ 501,762 Accrued expenses 67,894 416,182 Merchant portfolio purchase installment obligation 2,000,000 2,000,000 Operating lease liability – current portion 138,057 133,180 Note payable – current portion 298,053 — Total Current Liabilities 2,862,572 3,051,124 Long Term Liabilities: Notes payable, net of current portion 333,889 — Operating lease liability – net of current portion 169,119 273,166 Total Liabilities 3,365,580 3,324,290 Commitments and contingencies (Note 11) 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 September 30, 2022 and December 31, 2021 46 46 Common stock, $ 0.0001 par value, 200,000,000 shares authorized, 14,702,804 and 11,984,396 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively 1,469 1,197 Additional paid-in capital 68,023,869 67,810,922 Accumulated deficit ( 30,213,076 ) ( 25,606,964 ) Total Stockholders’ Equity 37,812,308 42,205,201 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 41,177,888 $ 45,529,491 T he accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 The OLB Group, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 Revenue: Transaction and processing fees $ 5,982,177 $ 2,680,004 $ 22,209,575 $ 7,436,317 Merchant equipment rental and sales 8,417 32,787 43,759 98,190 Revenue, net - cryptocurrency mining 161,249 — 633,555 — Other revenue from monthly recurring subscriptions 94,708 111,130 518,556 349,390 Total revenue 6,246,551 2,823,921 23,405,445 7,883,897 Operating expenses: Processing and servicing costs, excluding merchant portfolio amortization 4,679,192 2,223,720 17,609,470 5,869,739 Amortization and depreciation expense 892,788 269,475 2,794,731 701,282 Depreciation expense - cryptocurrency mining 799,716 — 2,393,966 — Salaries and wages 649,012 326,776 1,805,785 1,483,570 Professional fees 174,472 358,668 793,626 968,995 General and administrative expenses 753,944 545,646 2,997,169 1,409,956 Total operating expenses 7,949,124 3,724,285 28,394,747 10,433,542 Loss from operations ( 1,702,573 ) ( 900,364 ) ( 4,989,302 ) ( 2,549,645 ) Other Income (Expense): Interest expense — — — ( 116,736 ) Other income (expense) ( 9,989 ) 10 383,190 34 Total other income (expense) ( 9,989 ) 10 383,190 ( 116,702 ) Net Loss before income taxes $ ( 1,712,562 ) $ ( 900,354 ) $ ( 4,606,112 ) $ ( 2,666,347 ) Income Taxes — — — — Net Loss $ ( 1,712,562 ) $ ( 900,354 ) $ ( 4,606,112 ) $ ( 2,666,347 ) Net loss per share, basic and diluted $ ( 0.12 ) $ ( 0.11 ) $ ( 0.31 ) $ ( 0.37 ) Weighted average shares outstanding, basic and diluted 14,702,804 7,862,174 14,639,523 7,228,109 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 The OLB Group, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ Equity For the Three and Nine Months ended September 30, 2022 and 2021 (Unaudited) Preferred Stock Common Stock Additional Paid In Accumulated Shares Amount Shares Amount Capital Deficit Total Balance at January 1, 2022 4,633 $ 46 11,984,396 $ 1,197 $ 67,810,922 $ ( 25,606,964 ) $ 42,205,201 Stock based compensation — — — — 70,833 — 70,833 Common stock issued for common control acquisitions — — 1,318,408 132 ( 132 ) — — Common stock issued for exercise of warrants — — 1,400,000 140 ( 140 ) — — Net loss — — — — — ( 1,455,596 ) ( 1,455,596 ) Balance at March 31, 2022 4,633 46 14,702,804 1,469 67,881,483 ( 27,062,560 ) 40,820,438 Stock based compensation — — — — 71,693 — 71,693 Net loss — — — — — ( 1,437,954 ) ( 1,437,954 ) Balance at June 30, 2022 4,633 $ 46 14,702,804 $ 1,469 $ 67,953,176 $ ( 28,500,514 ) $ 39,454,177 Stock based compensation — — — — 70,693 — 70,693 Net loss — — — — — ( 1,712,562 ) ( 1,712,562 ) Balance at September 30, 2022 4,633 $ 46 14,702,804 $ 1,469 $ 68,023,869 $ ( 30,213,076 ) $ 37,812,308 Preferred Stock Common Stock Additional Paid In Accumulated Shares Amount Shares Amount Capital Deficit Total Balance at January 1, 2021 4,633 $ 46 6,170,054 $ 617 $ 26,380,124 $ ( 20,628,606 ) $ 5,752,181 Stock based compensation — — — — 74,011 — 74,011 Common stock issued for the exercise of Warrants — — 944,720 94 7,160,846 — 7,160,940 Net loss — — — — — ( 1,099,857 ) ( 1,099,857 ) Balance at March 31, 2021 4,633 46 7,114,774 711 33,614,981 ( 21,728,463 ) 11,887,275 Stock based compensation — — — — 79,477 — 79,477 Common stock issued for the exercise of warrants – related party — — 159,103 16 — — 16 Net loss — — — — — ( 666,136 ) ( 666,136 ) Balance at June 30, 2021 4,633 46 7,273,877 727 33,694,458 ( 22,394,599 ) 11,300,632 Common stock and warrants sold for cash — — 1,418,605 141 5,461,411 — 5,461,552 Warrants converted to common stock — — 9,050 — 41,623 — 41,623 Stock based compensation — — — — 79,477 — 79,477 Options issued for intangible assets — — — — 4,499,952 — 4,499,952 Net loss — — — — — ( 900,354 ) ( 900,354 ) Balance at September 30, 2021 4,633 $ 46 8,701,532 $ 868 $ 43,776,921 $ ( 23,294,953 ) $ 20,482,882 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 The OLB Group, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 4,606,112 ) $ ( 2,666,347 ) Adjustments to reconcile net loss to net cash used in operations: Depreciation and amortization 5,204,443 744,389 Stock based compensation 213,219 232,965 Operating lease expense — 34,859 Changes in assets and liabilities: Accounts receivable 25,969 ( 16,879 ) Prepaid expenses and other current assets ( 1,349,516 ) ( 1,765 ) Other long-term assets ( 25,032 ) ( 67,727 ) Accounts payable ( 143,193 ) 148,626 Other accrued liabilities ( 348,288 ) ( 10,527 ) Net cash used in operating activities ( 1,028,510 ) ( 1,602,406 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of intangible assets — ( 65,000 ) Purchase of property and equipment ( 777,140 ) ( 6,003,300 ) Net cash used in investing activities ( 777,140 ) ( 6,068,300 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 875,000 — Payments on note payable ( 243,058 ) ( 7,654,845 ) Proceeds from exercise of warrants — 7,202,563 Net proceeds from sale of common stock and warrants — 5,461,552 Net cash provided by financing activities 631,942 5,009,270 Net change in cash ( 1,173,708 ) ( 2,661,436 ) Cash – beginning of period 3,470,339 3,824,491 Cash – end of period $ 2,296,631 $ 1,163,055 Cash paid for: Interest $ — $ 116,736 Income taxes $ — $ — Supplemental Non-Cash Disclosure: Stock options issued for intangible asset $ — $ 4,499,952 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 The OLB Group, Inc. and Subsidiaries Notes to the Unaudited Consolidated Financial Statements September 30, 2022 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 Cryptocurrency 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. The Company also provides ecommerce development and consulting services on a project-by-project basis. 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 is being used in connection with the Cryptocurrency 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 lending and transactional business leveraging the Company’s Cryptocurrency Business and Fintech Services business. 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 September 30, 2022, all 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. 6 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the nine month period ending September 30, 2022 and not necessarily indicative of the results to be expected for the full year ending December 31, 2022. These unaudited financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. 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 condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, eVance, Securus, CrowdPay, Omnisoft, OLBit, DMINT and Crowd Ignition, Inc. 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 the three and nine months ended September 30, 2022. 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 September 30, 2022, the Company had $ 1,550,124 of cash in excess of the FDIC’s $ 250,000 insurance 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 - Finance. The Company has two operating segments as of September 30, 2022. See Note 13, “Segment Information”. 7 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 nine months ended September 30, 2022 and 2021 does not include warrants to acquire up to 8,563,127 and 3,778,533 shares of common stock, respectively, because of their anti-dilutive effect. The weighted average number of common shares for the nine months ended September 30, 2022 and 2021 does not include up to 774,586 and 11,112 options, respectively, to purchase common stock because of their anti-dilutive effect. 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 September 30, 2022 and December 31, 2021, 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. Other Current Assets Other current assets comprised of the following: September 30, 2022 December 31, 2021 Cryptocurrency at cost $ 937,559 $ 304,004 Investment in cryptocurrency-based fund 250,000 250,000 Other current assets 340,989 175,347 Total $ 1,528,548 $ 729,351 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 Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 Revenue from contracts with customers: Wholesale contracts $ 5,316,986 $ 2,053,772 $ 20,313,337 $ 5,504,044 Retail contracts $ 407,556 $ 417,158 $ 1,160,928 $ 1,288,111 Other transaction and processing fees $ 360,760 $ 352,991 $ 1,297,625 $ 1,091,742 Cryptocurrency mining fees $ 161,249 $ — $ 633,555 $ — Total fees $ 6,246,551 $ 2,823,921 $ 23,405,445 $ 7,883,897 8 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. 9 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. 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. Impairment of cryptocurrency assets is tested annual or more frequently if events or circumstances change. At September 30, 2022, the fair value of the Company’s digital assets was $ 503,585.12 based on the price of Bitcoin being $ 19,563.77 . At its October 12, 2022 Board of Directors meeting, the Financial Accounting Standards Board (FASB) tentatively concluded that companies should follow the guidance in Topic 820, Fair Value Measurement, to measure cryptocurrency assets at fair value, and to recognize increases and decreases in fair value in comprehensive income each reporting period. The FASB plans to issue an Exposure Draft on the new rules, with a new Accounting Standards Update (ASU) finalized and issued only after public comment and deliberations. NOTE 3 – LIQUIDITY AND CAPITAL RESOURCES At September 30, 2022, the Company had cash of approximately $ 2.3 million and working capital of approximately $ 2.2 million. 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 condensed consolidated financial statements are issued. 10 NOTE 4 – INTANGIBLE ASSETS Intangible assets, net, consist of the following as of: September 30, 2022 December 31, 2021 Merchant Portfolios $ 2,405,000 $ 2,405,000 Less accumulated amortization ( 1,835,510 ) ( 1,562,798 ) Net residual portfolios $ 569,490 $ 842,202 September 30, 2022 December 31, 2021 Trade name $ 2,500,000 $ 2,500,000 Less accumulated amortization ( 1,875,000 ) ( 1,500,000 ) Net trade name $ 625,000 $ 1,000,000 September 30, 2022 December 31, 2021 Acquired Merchant Portfolio $ 18,000,000 $ 18,000,000 Less accumulated amortization ( 2,000,000 ) ( 190,476 ) Net Acquired Merchant Portfolio $ 16,000,000 $ 17,809,524 September 30, 2022 December 31, 2021 Exclusive agreement to purchase natural gas $ 4,499,952 $ 4,499,952 Less accumulated amortization ( 524,994 ) ( 187,498 ) Net mineral rights $ 3,974,958 $ 4,312,454 Total intangible assets, net $ 21,169,448 $ 23,964,180 Amortization expense for the three months ended September 30, 2022 and 2021 was $ 892,788 and $ 269,475 , respectively. Amortization expense for the nine months ended September 30, 2022 and 2021 was $ 2,794,731 and $ 701,280 , respectively. The Company’s merchant portfolios and tradename are being amortized over respective useful lives of 7 and 5 years. 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 (three months) $ 1,063,358 2023 3,834,281 2024 3,320,234 2025 3,021,424 2026 3,021,424 Thereafter 6,908,727 Total $ 21,169,448 The weighted average remaining useful life of amortizing intangible assets was 5.45 years at September 30, 2022. 11 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: September 30 2022 December 31, 2021 Furniture and Fixtures $ 36,471 $ 36,471 Office Equipment 842,717 474,873 Computer Software 182,345 182,345 Leasehold Improvements 17,877 17,877 Cryptocurrency Mining Equipment 9,410,000 9,410,000 Plant and Machinery 409,296 — Total 10,898,706 10,121,566 Less accumulated depreciation ( 3,564,181 ) ( 1,154,470 ) Property and Equipment, net $ 7,334,525 $ 8,967,096 Depreciation expense Depreciation expense for the nine months ended September 30, 2022 and 2021 was $ 2,409,100 and $ 43,108 , respectively. NOTE 6 – NOTE PAYABLE 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 “Acquired Merchant Portfolio”). The purchase price was $ 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 recognized a liability for the contingent payment amount. However, on July 18, 2022, the Company notified the Seller of certain breaches of contract relating to, among other things, representations made by Seller in the Agreement, for which it will seek a reduction or cancellation of the final payment and a potential reduction in the overall purchase price. The Company has filed a claim for breach of contract against Seller and Seller has filed a breach of contract counterclaim against the Company. The matter is currently in the early stages and no date for an arbitration or court hearing has been scheduled. On November 29, 2021, the Company entered into a Master Equipment Finance Agreement (the “MFA”) with VFS LLC (“VFS”) which would allow the Company to finance the purchase of certain equipment. The collateral and interest rate are determined at the time the Company borrows the funds. During the nine months ended September 30, 2022, the Company received, as an initial draw on the MFA, $875,000 from VFS (the “Equipment Loan”). The Equipment Loan is secured by cryptocurrency mining computers being utilized by DMINT. The Equipment Loan requires monthly payments of $24,837.75 until the loan is repaid in full or it matures on November 29, 2024, requiring a full payment of all principal and accrued and unpaid interest. 12 NOTE 7 – STOCK OPTIONS A summary of the status of the Company’s outstanding stock options and changes during the nine months ended September 30, 2022 is presented below: Stock Options Options Weighted Average Exercise Price Aggregate Intrinsic Value Options outstanding December 31, 2020 285,173 $ 0.0001 $ 1,408,755 Granted 774,585 $ 0.0001 - Exercised ( 159,103 ) $ - - Expired - - $ - - Options outstanding December 31, 2021 900,655 $ 0.0001 $ 2,386,736 Granted - $ - - Exercised - $ - - Expired - - $ - - Options outstanding September 30, 2022 900,655 $ 0.0001 Shares exercisable at September 30, 2022 900,655 $ 0.0001 $ 954,694 NOTE 8 – WARRANTS A summary of the status of the Company’s outstanding stock warrants and changes during the nine months ended September 30, 2022 is presented below: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contract Term 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 Underwriter Warrant Exercised ( 1,400,000 ) $ 0.0001 - Outstanding, September 30, 2022 8,563,127 $ 5.10 4.20 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. 13 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 September 30, 2022 Asset Operating lease asset Right of use asset $ 303,367 Total lease asset $ 303,367 Liability Operating lease liability – current portion Current operating lease liability $ 138,057 Operating lease liability – noncurrent portion Long-term operating lease liability 169,119 Total lease liability $ 307,176 Lease obligations at September 30, 2022 consisted of the following: For the year ended December 31: 2022 (three months) $ 38,034 2023 144,393 2024 50,000 2025 50,000 2026 41,667 Total payments $ 324,094 Amount representing interest $ ( 16,918 ) Lease obligation, net 307,176 Less current portion ( 138,057 ) Lease obligation – long term $ 169,119 Rent expense for the three months ended September 30, 2022 and 2021, was $ 41,969 and $ 24,909 , respectively. Rent expense for the nine months ended September 30, 2022 and 2021, was $ 136,953 and $ 74,726 , respectively. NOTE 10 – COMMON STOCK In January 2022, Armistice Capital, received 1,400,000 shares of common stock upon the exercise of 1,400,000 warrants at $0.0001. On July 12, 2022, the Board of the Company authorized a share repurchase program, pursuant to which the Company may repurchase up to 1 million shares of its outstanding shares of common stock. The Board authorized the Company to purchase its common stock from time to time on a discretionary basis through open market purchases, privately negotiated transactions or other means, including trading plans intended to qualify under Rule 10b5-1 of the Exchange Act, in accordance with applicable federal securities laws and other applicable legal requirements. The Company expects to fund these repurchases through existing cash balances. Decisions regarding the amount and the timing of purchases under the program will be influenced by the Company’s cash on hand, cash flows from operations, general market conditions and other factors. The Company is not obligated to acquire any particular amount of its common stock. This program has no set termination date and may be suspended or discontinued by the Board at any time. 14 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. The Company currently has 4,633 shares of preferred stock issued and 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 (approximately $ 1.2 million at September 30, 2022).. 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 includes 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. 15 NOTE 12 – RELATED PARTY TRANSACTIONS 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 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 purchase price was used solely to establish the agreed upon purchase price between the parties and not for accounting purposes. Crowd Ignition is a web-based crowdfunding software system. Ronny Yakov, Chairman and CEO of the Company and John Herzog, a significant shareholder of the Company, collectively owned 100 % of the equity of Crowd Ignition. The acquisition of Crowd Ignition., was determined to be a common control transaction as each Company has the same two shareholders with a majority ownership. As a result, the assets and liabilities assumed were recorded on the Company’s condensed consolidated financial statements at their respective carry-over basis; however, as of January 3, 2022, Crowd Ignition has no assets, liabilities or other operations. 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. 16 NOTE 14 – 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 three and nine months ended September 30, 2022. For the Three Months ended September 30, For the Nine Months ended September 30, 2022 2021 2022 2021 Reportable segment revenue: Revenue, net - cryptocurrency mining $ 161,249 $ — $ 633,555 $ — Fintech services revenue 6,085,302 2,823,921 22,771,890 7,883,897 Total segment and consolidated revenue $ 6,246,551 $ 2,823,921 $ 23,405,445 $ 7,883,897 September 30, 2022 December 31, 2021 Total Assets: Cryptocurrency mining $ 10,415,375 $ 9,749,652 Fintech services 30,762,513 33,779,839 $ 41,177,888 $ 43,529,491 17 Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, our actual results may differ significantly from management’s expectations. These risks and uncertainties include those factors described in greater detail in the risk factors disclosed in our Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those anticipated in these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents referred to or incorporated by reference, the date of those documents. The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. Company Overview and Description of Business Overview We are a FinTech company that focuses on a suite of products in the merchant services and payment facilitator verticals 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 our payment processing model 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. 18 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 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. On July 23, 2021, we formed DMINT, Inc., a wholly owned subsidiary (“DMINT”) to operate in the cryptocurrency mining industry. DMINT has initiated the first phase of the cryptocurrency mining operation by placing purchase orders for data centers and ASIC-based Antminer S19J Pro mining computers specifically configured to mine Bitcoin. The first lot of equipment is being used to establish a proof of concept before DMINT expands the number of computers in operation. As of September 30, 2022, DMint has purchased 1,000 computers, of which all computers have been delivered with 350 online and mining for Bitcoin and 400 computers are in process of being installed at the Company’s newly acquired building in Selmer, Tennessee. It has six data centers located in Pennsylvania where it has mined 25 Bitcoin. It has entered into an exclusive agreement whereby it has rights to all of the natural gas produced by 15 mines in Bradford, Pennsylvania. The natural gas is taken directly from the well heads to generate electricity required to power the mining computers. As configured, it is expected that the computers purchased will have a combined computing power of approximately 100 petahash per second. If the initial mining operation results are as anticipated, DMINT plans to expand the number of mining computers every quarter, whereby it would aim to have the computing power of 500 petahash per second by the end of 2022. 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 purchased 100% of the equity of Crowd Ignition). Crowd Ignition is a web-based crowdfunding software system. Ronny Yakov, Chairman and CEO of the Company and John Herzog, a shareholder of the Company, owned 100% of the equity of Crowd Ignition. 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. Results of Operations Management’s discussion and analysis of financial condition and results of operations (“MD&A”) includes a discussion of the consolidated results from operations of The OLB Group, Inc. and its subsidiaries for the three and nine months ended September 30, 2022 and 2021. 19 Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021 For the three months ended September 30, 2022, we had total revenue of $6,246,551 compared to $2,823,921 of revenue for the three months ended September 30, 2021, an increase of $3,302,173 or 123.2%. We earned $5,982,177 in transaction and processing fees, $8,417 in merchant equipment rental and sales, $94,708 in other revenue from monthly recurring subscriptions and $161,249 of other revenue from the Cryptocurrency Mining segment during the three months ended September 30, 2022, compared to $2,680,004 in transaction and processing fees, $32,787 in merchant equipment sales and $111,130 in other revenue during the three months ended September 30, 2021. The increase in revenue was a result of an increase in the amount of fees earned from merchant processing transactions primarily due to the revenue attributed to the merchant portfolio acquired in the fourth quarter ended December 31, 2021 and to revenue from cryptocurrency mining, which we did not have in the prior period. Processing and servicing costs increased by $2,455,472 or 110.4% Amortization and depreciation expense for the three months ended September 30, 2022 was $892,788 compared to $269,475 for the three months ended September 30, 2021, an increase of $623,313 or 231.3%. We record amortization expense on our merchant portfolio, trademarks and natural gas purchase rights. Our amortization expense for the three months ended September 30, 2022, increased in the current year period due to the agreement with Cai Energy to purchase natural gas to operate the cryptocurrency mining computers used in the Cryptocurrency Mining segment. Depreciation expense for our cryptocurrency mining segment was $799,716 in the current period due to the acquisition of Cryptocurrency Mining equipment. Salary and wage expense for the three months ended September 30, 2022, was $649,012 compared to $326,776 for the three months ended September 30, 2021, an increase of $322,236 or 98.6%. Salary and wage expense has increased due to the hiring of new employees during the latter part of 2021 and to an increase in salary for our officers. Professional fees for the three months ended September 30, 2022, were $174,472 compared to $358,668 for the three months ended September 30, 2021, a decrease of $184,196 or 51.4%. Professional fees consist mainly of audit and legal fees. The decrease in the current period is mainly due to a decrease in legal expense. General and administrative expenses (“G&A”) for the three months ended September 30, 2022, was $753,944 compared to $545,646 for the three months ended September 30, 2021, an increase of $208,298 or 38.2%. Some of our larger G&A expenses included insurance policy expense of approximately $104,000 as a result of the cost to insure the cryptocurrency mining machines and the increase in the size of the Company’s business, travel of $71,000 from $29,000 in the same period of 2021 and utilities of $175,100 from $0 in the same period of 2021. For the three months ended September 30, 2022, we had total other expense of $9,989 compared to other income of $10 for the three months ended September 30, 2021. Our net loss for the three months ended September 30, 2022 was $1,712,562 compared to $900,354 for the three months ended September 30, 2021. We had an increase in our net loss of $812,208 for the reasons discussed above. Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021 For the nine months ended September 30, 2022, we had total revenue of $23,405,445 compared to $7,883,897 of revenue for the nine months ended September 30, 2021, an increase of $15,521,548 or 196.9%. We earned $22,209,575 in transaction and processing fees, $43,759 in merchant equipment rental and sales, $518,556 in other revenue from monthly recurring subscriptions and $633,555 of other revenue from the Cryptocurrency Mining segment during the nine months ended September 30, 2022, compared to $7,436,317 in transaction and processing fees, $98,190 in merchant equipment sales and $349,390 in other revenue during the nine months ended September 30, 2021. The increase in revenue was a result of an increase in the amount of fees earned from merchant processing transactions primarily due to the revenue attributed to the merchant portfolio acquired in the fourth quarter ended December 31, 2021 and to revenue from cryptocurrency mining, which we did not have in the prior period. Processing and servicing costs increased by $11,739,731 or 200%. 20 Amortization and depreciation expense for the nine months ended September 30, 2022, was $2,794,731 compared to $701,282 for the nine months ended September 30, 2021, an increase of $2,093,449 or 298.5%. We record amortization expense on our merchant portfolio, trademarks and natural gas purchase rights. Our amortization expense for the nine months ended September 30, 2022, increased in the current year period due to the agreement with Cai Energy to purchase natural gas to operate the cryptocurrency mining computers used in the Cryptocurrency Mining segment. Depreciation expense for our cryptocurrency mining segment was $2,393,966 in the current period due to the acquisition of Cryptocurrency Mining equipment. Salary and wage expense for the nine months ended September 30, 2022 was $1,805,785 compared to $1,483,570 for the nine months ended September 30, 2021 an increase of $322,215. There were $275,000 in salary increases in 2022. Professional fees for the nine months ended September 30, 2022 were $793,626 compared to $968,995 for the nine months ended September 30, 2021, a decrease of $175,369 or 18.1%. Professional fees consist mainly of audit and legal fees. The decrease in the current period is mainly due to a decrease in legal and auditor expenses compared with the prior period in which the Company completed an offering of its common stock and warrants. General and administrative expenses (“G&A”) for the nine months ended September 30, 2022 was $2,997,169 compared to $1,409,956 for the nine months ended September 30, 2021, an increase of $1,587,213 or 112.6%. Some of our larger G&A expenses included insurance policy expense of $234,000 as a result of the cost to insure the cryptocurrency mining machines and the increase in the size of the Company’s business, travel of $250,000 from $40,000 in the same period of 2021, marketing and promotion of $180,000 from $7,400 in the same period of 2021, contracted services of $511,000 from $233,000 in the same period of 2021, utilities of $406,000 from $0 in the same period of 2021and computer and internet expense of $515,000 from $182,000 in the same period of 2021. For the nine months ended September 30, 2022, we incurred $0 of interest expense, compared to $116,736 for the nine months ended September 30, 2021, a decrease of $116,736. The decrease in interest expense is due the conversion of all related party debt and the repayment of the Term Loan in March 2021. For the nine months ended September 30, 2022, we had other income of $383,190 compared to $34 for the nine months ended September 30, 2021. In the current period we recognized a gain of $393,158 from the reversal of a liability associated with a prior adverse judgement on appeal. Our net loss for the nine months ended September 30, 2022 was $4,606,112 compared to $2,666,347 for the nine months ended September 30, 2021. We had an increase in our net loss of $1,939,765 for the reasons discussed above. Liquidity and Capital Resources Trends and Uncertainties The Company’s financial condition and results of operations may be adversely affected by a further prolonging of the COVID-19 pandemic. The New York and Atlanta areas, including the location of the Company’s corporate headquarters and its operations business, continued to experience impacts of the COVID-19 pandemic in the U.S. as some workers were forced to quarantine or convalesce as a result of the spread of the COVID-19 virus. The Company is currently following the recommendations of local health authorities to minimize exposure risk for its employees and visitors. During the first nine months of 2022, the Company did not attribute any material impact on its business as a result of the pandemic. However, the duration of this pandemic continues to remain unknown. If there was another increase in cases requiring quarantines or closures of businesses by our merchants, the duration of the business disruption and related financial impact cannot be reasonably estimated at this time. While the Company has specific business continuity plans to reduce the potential impact of COVID-19, during the remainder of 2022 and into the future, and believe that its business being principally operated using digital platforms, in the long-term, will suffer minimal ongoing negative impact, there is no guarantee that the Company’s continuity plans will be successful or that the Company’s merchants will meet the number of forecasted transactions. 21 In 2021 and the first six months of 2022, the Company experienced some disruptions to its business and disruptions for the Company’s customers and merchants that had an impact on the number of transactions processed by the Company. [From June to September 2022, the Company believes that its business experience no disruptions to its business as a result of the pandemnic.] The extent to which COVID-19 or any other health epidemic may impact the Company’s results for the remainder of 2022 and beyond will depend on future developments and impacts of variants of the virus, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the continuing economic impact of the response to the COVID-19 pandemic. Accordingly, COVID-19 could still have a material adverse effect on the Company’s business, results of operations, financial condition and prospects during the remainder of 2022 and beyond. Changes in Cash Flows For the nine months ended September 30, 2022, $1,028,510 of cash was used by operating activities, which included our net loss, offset by $5,204,443 for amortization and depreciation expense, $213,219 for stock-based compensation and net changes in operating assets and liabilities of $1,840,060. For the nine months ended September 30, 2022, we received net cash of $631,942 in financing activities from a loan payable. Liquidity and Capital Resources At September 30, 2022, the Company had cash of $2,296,631 and working capital of $2,172,843. The Company has approximately $3.4 million of outstanding liabilities. On March 2, 2021, the Company, utilizing a portion of funds received from the exercise of outstanding warrants, paid approximately $7.7 million to the pay off the entire outstanding amount of the Term Loan. In connection with the extinguishment of the obligations under the Term Loan, 40,000 warrants to purchase Common Stock were cancelled. In addition, the Company has received a Paycheck Protection Program loan under the CARES Act for approximately $236,000 (the “PPP Loan”). On October 11, 2021, the Company obtained forgiveness of all amounts due under the PPP Loan. 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 (the “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. The offering closed on November 5, 2021 and the Company received net proceeds of approximately $22.9 million, after deducting placement agent fees and other offering expenses. The Company intends to use the net proceeds from the offering to invest in or acquire companies or technologies that are synergistic with or complimentary to its business, to expand and market its current products and for working capital and general corporate purposes. The Company has reviewed its cash flow for 2022 and projected operating cash flows for the remainder of 2022 and 2023 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 Quarterly Report. As a result of (a) the improved transaction volume trends the Company experienced during 2021 and the first nine months ended September 30, 2022, (b) the increase in the number of merchants after the acquisitions of several portfolios during 2021, and (c) the funds received from the capital raises and PPP Loan, as discussed above, the Company believes it has sufficient liquidity in order to sustain operations for at least the twelve months following the filing of this Quarterly Report. Critical Accounting Policies Refer to our Form 10-K for the year ended December 31, 2021, for a full discussion of our critical accounting policies. Subsequent Events None. 22 ITEM 3. 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, as such, are not required to provide the information under this Item. ITEM 4. CONTROLS AND PROCEDURES During the third quarter of the year ended September 30, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, are recorded, processed, summarized and reported within the required time periods specified in the Commission’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Changes in Internal Control over Financial Reporting There have been no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2022, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting. 23 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no claims, actions, suits, proceedings, or investigations that are currently pending or, to the Company’s knowledge, threatened by or against the Company or respecting its operations or assets, or by or against any of the Company’s officers, directors, or affiliates. ITEM 1A. RISK FACTORS We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS Exhibit Number Exhibit Description 31.1 Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith) 31.2 Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith) 32 Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith) 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 14, 2022 By: /s/ Ronny Yakov Name: Ronny Yakov Title: Chief Executive Officer (Principal Executive Officer) Date: November 14, 2022 By: /s/ Rachel Boulds Name: Rachel Boulds Title: Chief Financial Officer (Principal Financial and Accounting Officer) 25