OLB GROUP, INC. 10-Q

Item 1. Financial Statements INDEX TO FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 2 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited) 3 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023, and 2022 (unaudited) 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited) 5 Notes to the Condensed Consolidated Financial Statements (unaudited) 6 1 The OLB Group, Inc. and Subsidiaries Consolidated Balance Sheets September 30, 2023 December 31, 2022 (Unaudited) ASSETS Current Assets: Cash $ 87,783 $ 434,026 Accounts receivable, net 2,311,698 1,083,169 Prepaid expenses 833,817 582,125 Other current assets 350,797 1,288,951 Total Current Assets 3,584,095 3,388,271 Other Assets: Property and equipment, net 6,186,003 7,325,212 Intangible assets, net 17,610,762 20,310,255 Goodwill 8,139,889 6,858,216 Operating lease right-of-use assets 22,062 268,948 Other long-term assets 400,917 502,917 Total Other Assets 32,359,633 35,265,548 TOTAL ASSETS $ 35,943,728 $ 38,653,819 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 2,532,769 $ 513,266 Customer deposits 17,710 — Accrued expenses 660,467 378,206 Preferred dividend payable (related parties) 387,295 294,384 Merchant portfolio purchase installment obligation 2,000,000 2,000,000 Operating lease liability – current portion 17,427 134,318 Note payable – current portion 298,053 298,053 Total Current Liabilities 5,913,721 3,618,227 Long Term Liabilities: Notes payable, net of current portion 35,836 259,376 Operating lease liability – net of current portion — 138,439 Total Liabilities 5,949,557 4,016,042 Commitments and contingencies (Note 10) Stockholders’ Equity: Preferred stock, $ 0.01 par value, 1,000,000 shares authorized, no shares issued and outstanding — — Series A Preferred stock, $ 0.01 par value, 10,000 shares authorized, 1,021 and 4,633 shares issued and outstanding at December 31, 2022 and 2021, respectively 10 10 Common stock, $ 0.0001 par value, 50,000,000 shares authorized, 15,344,077 and 15,207,714 shares issued, 15,217,905 and 15,081,542 shares outstanding at September 30, 2023 and December 31, 2022, respectively 1,521 1,508 Treasury stock, 126,172 shares issued at September 30, 2023 and December 31, 2022 ( 109,988 ) ( 109,988 ) Additional paid-in capital 68,374,159 68,140,480 Accumulated deficit ( 38,402,644 ) ( 33,394,233 ) Total stockholders’ equity of The OLB Group and Subsidiaries 29,863,058 34,637,777 Noncontrolling interest 131,113 — Total Stockholders’ Equity 29,994,171 34,637,777 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 35,943,728 $ 38,653,819 T he accompanying notes are an integral part of these unaudited consolidated financial statements. 2 The OLB Group, Inc. and Subsidiaries Consolidated Statements of Operations For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Revenue: Transaction and processing fees $ 8,331,185 $ 5,982,177 $ 22,439,904 $ 22,209,575 Merchant equipment rental and sales 21,160 8,417 68,443 43,759 Revenue, net - cryptocurrency mining 95,667 161,249 399,957 633,555 Other revenue from monthly recurring subscriptions 147,068 94,708 295,941 518,556 Digital product revenue 1,099,360 — 1,456,796 — Total revenue 9,694,440 6,246,551 24,661,041 23,405,445 Operating expenses: Processing and servicing costs, excluding merchant portfolio amortization 6,446,563 4,679,192 16,914,672 17,609,470 Amortization and depreciation expense 933,053 892,788 2,732,715 2,794,731 Depreciation expense – cryptocurrency mining 877,521 799,716 2,476,954 2,393,966 Salaries and wages 687,456 649,012 2,070,288 1,805,785 Professional fees 707,900 174,472 1,297,026 793,626 General and administrative expenses 1,901,850 753,944 4,063,159 2,997,169 Total operating expenses 11,554,343 7,949,124 29,554,814 28,394,747 Loss from operations ( 1,859,903 ) ( 1,702,573 ) ( 4,893,773 ) ( 4,989,302 ) Other income (expense): Realized gain (loss) on sale of cryptocurrency — — ( 279,242 ) — Unrealized loss on investment ( 24,947 ) — ( 31,437 ) — Other income (expense) — ( 9,989 ) 114,654 383,190 Total other income (expense) ( 24,947 ) ( 9,989 ) ( 196,025 ) 383,190 Net loss before income taxes ( 1,884,850 ) ( 1,712,562 ) ( 5,089,798 ) ( 4,606,112 ) Income tax expense — — — — Net loss ( 1,884,850 ) ( 1,712,562 ) ( 5,089,798 ) ( 4,606,112 ) Net loss attributed to noncontrolling interest 83,112 — 81,387 — Net loss attributed to The OLB Group and Subsidiaries ( 1,801,738 ) ( 1,712,562 ) ( 5,008,411 ) ( 4,606,112 ) Preferred dividends (related parties) ( 31,311 ) ( 142,079 ) ( 92,911 ) ( 421,603 ) Net Loss Applicable to Common Shareholders $ ( 1,833,049 ) $ ( 1,854,641 ) $ ( 5,101,322 ) $ ( 5,027,715 ) Net loss per common share, basic and diluted $ ( 0.12 ) $ ( 0.13 ) $ ( 0.34 ) $ ( 0.34 ) Weighted average shares outstanding, basic and diluted 15,148,208 14,702,804 15,148,208 14,639,523 The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 The OLB Group, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity For the Three and Nine Months ended September 30, 2023 and 2022 Preferred Stock Common Stock Additional Paid Treasury Accumulated Non-Controlling Shares Amount Shares Amount In Capital Stock Deficit Interest Total Balance at December 31, 2022 1,021 $ 10 15,081,542 $ 1,508 $ 68,140,480 $ ( 109,988 ) $ ( 33,394,233 ) $ — $ 34,637,777 Common stock issued for director services — — 136,363 13 164,985 — — — 164,998 Preferred stock dividends — — — — ( 30,630 ) — — — ( 30,630 ) Stock based compensation 132,788 — 132,788 Net loss — — — — — — ( 2,615,405 ) — ( 2,615,405 ) Balance at March 31, 2023 1,021 10 15,217,905 1,521 68,407,623 ( 109,988 ) ( 36,009,638 ) — 32,289,528 Preferred stock dividends — — — — ( 30,970 ) — — — ( 30,970 ) Recognition of noncontrolling interest in acquisition — — — — — — — 212,500 212,500 Net income (loss) — — — — — — ( 591,268 ) 1,725 ( 589,543 ) Balance at June 30, 2023 1,021 10 15,217,905 1,521 68,376,653 ( 109,988 ) ( 36,600,906 ) 214,225 31,881,515 Preferred stock dividends — — — — ( 31,311 ) — — — ( 31,311 ) Stock based compensation — — — — 28,817 — — 28,817 Net loss — — — — — — ( 1,801,738 ) ( 83,112 ) ( 1,884,850 ) Balance at September 30, 2023 1,021 $ 10 15,217,905 $ 1,521 $ 68,374,159 $ ( 109,988 ) $ ( 38,402,644 ) $ 131,113 $ 29,994,171 Preferred Stock Common Stock Additional Paid Accumulated Shares Amount Shares Amount In Capital Deficit Total Balance at December 31, 2021 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 ) — — Preferred stock dividends (Revised) — — — — ( 138,990 ) — ( 138,990 ) Net loss — — — — — ( 1,455,596 ) ( 1,455,596 ) Balance at March 31, 2022 (Revised) 4,633 46 14,702,804 1,469 67,742,493 ( 27,062,560 ) 40,681,448 Stock based compensation — — — — 71,693 — 71,693 Preferred stock dividends (Revised) — — — — ( 138,990 ) — ( 138,990 ) Net loss — — — — — ( 1,437,954 ) ( 1,437,954 ) Balance at June 30, 2022 (Revised) 4,633 46 14,702,804 1,469 67,675,196 ( 28,500,514 ) 39,176,197 Stock based compensation — — — — 70,693 — 70,693 Preferred stock dividends (Revised) — — — — ( 142,079 ) — ( 142,079 ) Net loss — — — — — ( 1,712,562 ) ( 1,712,562 ) Balance at September 30, 2022 (Revised) 4,633 $ 46 14,702,804 $ 1,469 $ 67,603,810 $ ( 30,213,076 ) $ 37,392,249 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 The OLB Group, Inc. and Subsidiaries Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 5,089,798 ) $ ( 4,606,112 ) Adjustments to reconcile net loss to net cash provided by and used in operations: Depreciation and amortization 5,209,669 5,204,443 Stock based compensation 161,605 213,219 Operating lease expense, net of repayment ( 8,444 ) — Loss on sale of cryptocurrency 279,242 — Changes in assets and liabilities: Accounts receivable ( 1,228,529 ) 25,969 Prepaid expenses and other current assets 407,220 ( 1,349,516 ) Other long-term assets 102,000 ( 25,032 ) Accounts payable 1,735,877 ( 143,193 ) Customer deposits ( 28,096 ) — Other accrued liabilities 424,231 ( 348,288 ) Net cash provided by (used in) operating activities 1,964,977 ( 1,028,510 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment ( 1,229,630 ) ( 777,140 ) Purchase of 80.01 % interest in Cuentas SDI, LLC ( 850,000 ) — Net cash used in investing activities ( 2,079,630 ) ( 777,140 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash overdraft acquired in acquisition ( 8,050 ) — Proceeds from note payable — 875,000 Payments on note payable ( 223,540 ) ( 243,058 ) Net cash (used in) provided by financing activities ( 231,590 ) 631,942 Net change in cash ( 346,243 ) ( 1,173,708 ) Cash – beginning of period 434,026 3,470,339 Cash – end of period $ 87,783 $ 2,296,631 Cash paid for: Interest $ — $ — Income taxes $ — $ — Non-cash investing and financing transactions: Common stock issued for accrued liabilities $ 164,998 $ — Preferred stock dividends $ 92,911 $ 420,059 Cancellation of operating leases $ 174,090 $ — The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 The OLB Group, Inc. and Subsidiaries Notes to the Unaudited Consolidated Financial Statements September 30, 2023 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 Mining Business segments. Fintech Services: The Company provides integrated financial and transaction processing services (“Fintech Services”) to businesses throughout the United States. Through its eVance, Inc. subsidiary (“eVance”), the Company provides an integrated suite of third-party merchant payment processing services and related proprietary software enabling products that deliver credit and debit card-based internet payment processing solutions primarily to small and mid-sized merchants operating in physical “brick and mortar” business environments, on the internet and in retail settings requiring both wired and wireless mobile payment solutions. eVance operates as an independent sales organization (“ISO”) generating individual merchant processing contracts in exchange for future residual payments. As a wholesale ISO, eVance has a direct contractual relationship with the merchants and takes greater responsibility in the approval and monitoring of merchants than do retail ISOs and as a result, receives additional consideration for this service and risk. The Company’s Securus365, Inc. (“Securus365”) subsidiary operates as a retail ISO and receives residual income as commission for merchants it places with third party processors. The Company’s eVance Capital, Inc subsidiary provides lending services to merchants processing with eVance, Inc. CrowdPay.us, Inc. (“CrowdPay”) is a Crowdfunding platform used to facilitate a capital raise anywhere from $ 1,000,000 -$ 50,000,000 of various types of securities under Regulation D, Regulation Crowdfunding, Regulation A and the Securities Act of 1933. To date, the activities of this subsidiary have been nominal. OmniSoft, Inc. (“OmniSoft”) operates a software platform for small merchants. The Omnicommerce applications work on an iPad, mobile device and the web and allow customers to sell a store’s products in a physical, retail setting. To date, the activities of this subsidiary have been nominal when compared to the overall business. On May 14, 2021, the Company formed 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. On June 15, 2023, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) with SDI Black 001, LLC (“Seller”) whereby it acquired 80.01 % of the membership interests of Cuentas SDI, LLC, a Florida limited liability company (the “LLC”). The LLC’s owns the platform of Black011.com and the network serving over 31,000 convenience stores (“Bodegas”) in and around New York and New Jersey (refer to Note 7). The Company also provides ecommerce development and consulting services on a project-by-project basis. 6 Cryptocurrency Mining 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 Bitcoin 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 “CAI Options”). The natural gas was being used in connection with the Cryptocurrency Business prior to opening the Selmer, Tennessee location. On June 24, 2022 the Company formed DMINT Real Estate Holdings, Inc., a wholly-owned subsidiary of DMINT. The purpose of DMINT Real Estate Holdings, Inc is to buy and hold real estate related to DMINT. On November 22, 2022, Mr. Ronny Yakov purchased the CAI Options, in a privately negotiated transaction, for $ 700,000 using his personal funds. 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, 2023 and not necessarily indicative of the results to be expected for the full year ending December 31, 2023. 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, 2022. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s accounting estimates include the collectability of receivables, useful lives of long-lived assets and recoverability of those assets, impairment in fair value of goodwill, valuation allowances for income taxes and stock-based compensation. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, eVance Inc, eVance Capital Inc, Securus365, Inc., CrowdPay.us, Inc., OmniSoft, Inc., OLBit, Inc., DMINT, Inc., DMINT Real Estate Holdings. The Company owns 80.01 % of Cuentas SDI, LLC, which has been included in the consolidated financial statements and the Company has recorded a noncontrolling interest for the 19.99 % interest that they do not own. All significant intercompany transactions and balances have been eliminated. 7 Fair value of financial instruments The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP) and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below: Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data. The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable represents the fair value of such instruments as the notes bear interest rates that are consistent with current market rates. Revision for Correction of Immaterial Error Subsequent to the initial issuance of the Company’s March 31, 2022 financial statements, management discovered it did not record the accrual for dividends on its Series A Preferred Stock. 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. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the error and determined that the related impact did not materially misstate previously issued consolidated financial statements. Although the Company concluded that the misstatement was not material to its previously issued consolidated financial statements, the Company has determined it is appropriate to adjust its previously issued consolidated financial statements to correct for the error in the context of comparative financial statements. The following are the relevant line items from the Company’s consolidated financial statements which illustrate the effect of the corrections to the periods presented: Impact of correction of error - quarter Impact of correction of error - year to date As Previously As Previously Quarter ended September 30, 2022 Reported Adjustments As Revised Reported Adjustments As Revised Net Loss $ ( 1,712,562 ) $ — $ ( 1,712,562 ) $ ( 4,606,112 ) — $ ( 4,606,112 ) Preferred stock dividends — ( 138,990 ) ( 138,990 ) — $ ( 416,940 ) ( 416,940 ) Net loss allocable to common shareholders $ ( 1,712,562 ) $ ( 138,990 ) $ ( 1,851,522 ) $ ( 4,606,112 ) $ ( 416,940 ) $ (5,02,082 ) Loss per share $ ( 0.12 ) $ ( 0.13 ) $ ( 0.31 ) $ ( 0.34 ) Weighted average common shares outstanding 14,702,804 14,702,804 14,607,209 14,607,209 Statement of Cash Flows As Previously As Nine Months Ended September 30, 2022 Reported Adjustments Revised Supplemental non-cash disclosure: Preferred stock dividends $ — $ ( 416,940 ) $ ( 416,940 ) 8 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, 2023 and December 31, 2022, the Company had no cash in excess of the FDIC’s $ 250,000 coverage limit. Operating Segments Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”), or decision maker group, in deciding how to allocate resources to an individual segment and in assessing performance. Our chief operating decision–making group is composed of the chief executive officer and Vice President. The Company has two operating segments as of September 30, 2023 and December 31, 2022. See Note 16, “Segment Information”. 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 nine months ended September 30, 2023 and 2022 does not include warrants to acquire 8,563,127 and 8,563,127 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, 2023 and 2022, does not include 1,254,683 and 774,586 options, respectively, to purchase common stock because of their anti-dilutive effect. Investments in Equity Securities The Company accounts for its investments under ASC 321, “Investments – Equity Securities,” which requires that investments in equity securities be measured at fair value with changes in value recorded as unrealized gains and losses in current period operations. Cryptocurrency The Company obtains cryptocurrency through our mining activities, which is accounted for in connection with our revenue recognition policy. The cryptocurrency held is recorded as other assets in the Consolidated Balance Sheets and is accounted for as indefinite-lived intangible assets initially measured at cost, in accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”). The use of cryptocurrencies is accounted for in accordance with the first in first out method of accounting. We do not amortize our cryptocurrency but assess the value for impairment as further discussed in our impairment policy. Impairment of cryptocurrency assets is tested annually or more frequently if events or circumstances change. At September 30, 2023, the Company had 4.36 Bitcoin and the fair value of the Company’s digital assets was $ 117,585 based on the price of Bitcoin being $ 26,969 . 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. 9 Intangible Assets The Company accounts for its intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 350-30, General Intangibles Other Than Goodwill . ASC Subtopic 350-30, which requires assets to be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. Under ASC Subtopic 350-30 any intangible asset with a useful life is required to be amortized over that life and the useful life is to be evaluated every reporting period to determine whether events or circumstances warrant a revision to the remaining period of amortization. If the estimate of useful life is changed the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Costs to renew or extend the term of an intangible assets are recognized as an expense when 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 September 30, 2023 and December 31, 2022. A summary of goodwill as of September 30, 2023, is as follows: December 31, 2022 $ 6,858,216 Add: 80.01 % acquisition of Cuentas SDI, LLC 1,281,673 September 30, 2023 $ 8,139,889 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 allowance of approximately $ 38,000 and $ 38,000 as of September 30, 2023 and December 31, 2022, 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, 2023 December 31, 2022 Cryptocurrency $ 123,466 $ 1,030,183 Investment in cryptocurrency-based fund 218,563 250,000 Other current assets 8,768 8,768 Total $ 350,797 $ 1,288,951 Revenue Recognition 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, 2023 2022 2023 2022 Transaction and processing fees from wholesale contracts $ 7,949,539 $ 5,316,986 $ 21,199,677 $ 20,313,337 Transaction and processing fees from retail contracts $ 213,753 $ 407,556 $ 806,908 $ 1,160,928 Other transaction and processing fees, revenue from monthly recurring subscriptions, and merchant equipment rental and sales $ 336,121 $ 360,760 $ 797,703 $ 1,297,625 Cryptocurrency mining revenues $ 95,667 $ 161,249 $ 399,957 $ 633,555 Digital product revenue $ 1,099,360 $ — $ 1,456,796 $ — Total revenue from contracts with customers $ 9,694,440 $ 6,246,551 $ 24,661,041 $ 23,405,445 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; 11 ● 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 rental and sales 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. 12 Monthly recurring subscriptions The Company generates recurring revenue through monthly subscriptions for software services. This service is provided based on an agreement with the customer regarding software services. Performance obligations are promises in a contract to a customer. In the subscription model, each billing period represents a performance obligation. The transaction price is the amount of consideration the company expects to receive in exchange for transferring goods or services. For recurring revenue, this is the subscription fee. The Company allocates to the performance obligated based on the selling price for the subscription. If the criteria for recognizing revenue over time are met, revenue is recognized over the period of performance. For subscription and recurring fee, this means recognizing revenue each billing period. Bitcoin 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 Bitcoin 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 Bitcoin 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 from 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. Digital product revenue The Company generates revenue through electronic distribution and sale of digital products that range from prepaid wireless SIM activation, international mobile recharge services and international long distance phone service. The Company generally obtains payment upfront and its performance obligation is to provide products and/or calling services. When products are provided at the point of sale, revenue is recognized immediately and at the time of payment. When a customer purchases a prepaid telecom product, such as a prepaid mobile phone plan, the revenue is initially recorded as a customer deposit and revenue is recognized over the relevant performance period as customers utilize the prepaid telecom services. As of September 30, 2023, customer deposits were $ 0 . Leases The Company determines whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the term of such lease is assessed based on the date on which the underlying asset is made available for the Company’s use by the lessor. The Company’s assessment of the lease term reflects the non-cancelable term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain of not exercising, as well as periods covered by renewal options which the Company is reasonably certain of exercising. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation reflected in the consolidated statements of operations over the lease term. For leases with a term exceeding 12 months, an operating lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of its fixed minimum payment obligations over the lease term. A corresponding operating lease right-of-use asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in its leasing arrangements are typically not readily determinable. The Company’s incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term and economic environment of the associated lease. For the Company’s operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term. For leases with a term of 12 months or less, any fixed lease payments are recognized on a straight-line basis over the lease term and are not recognized on the Company’s consolidated balance sheet as an accounting policy election. Leases qualifying for the short-term lease exception were insignificant. Variable lease costs are recognized as incurred and primarily consist of common area maintenance and utility charges not included in the measurement of right of use assets and operating lease liabilities. 13 Recent Accounting Pronouncements On March 23, 2023, the Financial Accounting Standards Board issued an Exposure Draft “Intangibles – Goodwill and Other – Crypto Assets” (Subtopic 350-60), Accounting for and Disclosure of Crypto Assets. Under the provisions of this Exposure Draft, an entity would be required to present crypto assets separately from other intangible assets in the balance sheet, and measure crypto assets at fair value with changes recognized in net income each reporting period. Upon effectiveness, an entity would reflect a cumulative-effect adjustment to the opening balance of retained earnings. Issuance of the final standard is subject to public comment and deliberations. NOTE 3 – LIQUIDITY AND CAPITAL RESOURCES The Company’s consolidated financial statements have been prepared in accordance with US GAAP, which assumes that the Company’s management will evaluate whether it will be able to meet its obligations and continue its operations in the normal course of business. At September 30, 2023, the Company had cash of approximately $ 88,000 , accounts receivable of approximately $ 2,312,000 and bitcoin valued at $ 123,000 , and accounts payable and accrued expenses of approximately $ 3,193,000 . To date, the Company has generated cash flows from issuances of equity and indebtedness. Management believes that its current available resources will be sufficient to fund the Company’s planned expenditures over the next 12 months. However, management recognizes that it may be required to obtain additional resources to successfully execute its business plans. No assurances can be given that management will be successful in raising additional capital, if needed, or on acceptable terms. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company determine it shall be unable to continue as a going concern. NOTE 4 – INTANGIBLE ASSETS Intangible assets, net, consist of the following as of: September 30, 2023 December 31, 2022 Merchant Portfolios $ 2,405,000 $ 2,405,000 Less accumulated amortization ( 2,027,976 ) ( 1,793,333 ) Net residual portfolios $ 377,024 $ 611,667 September 30, 2023 December 31, 2022 Trade name $ 2,500,000 $ 2,500,000 Less accumulated amortization ( 2,375,000 ) ( 2,000,000 ) Net trade name $ 125,000 $ 500,000 September 30, 2023 December 31, 2022 Merchant Portfolio $ 18,000,000 $ 18,000,000 Less accumulated amortization ( 4,190,476 ) ( 2,476,191 ) Net trade name $ 13,809,524 $ 15,523,809 14 September 30, 2023 December 31, 2022 Exclusive agreement to purchase natural gas $ 4,499,952 $ 4,499,952 Less accumulated amortization ( 1,200,738 ) ( 825,173 ) Net mineral rights $ 3,299,214 $ 3,674,779 Total intangible assets, net $ 17,610,762 $ 20,310,255 Amortization expense for the nine months ended September 30, 2023 and 2022 was $ 2,699,493 and $ 2,794,731 , 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: 2023 $ 1,175,426 2024 3,320,234 2025 3,021,424 2026 3,021,424 2027 3,021,424 Thereafter 4,050,830 Total $ 17,610,762 The weighted average remaining useful life of amortizing intangible assets was 4.45 years at September 30, 2023. 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 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, 2023 December 31, 2022 Furniture and Fixtures $ 36,471 $ 36,471 Office Equipment 2,079,857 1,537,321 Computer Software 323,682 182,345 Leasehold Improvements 800,770 113,676 Bitcoin Mining Equipment 9,410,000 9,410,000 Plant and Machinery 409,296 409,296 Total 13,060,076 11,689,109 Less accumulated depreciation ( 6,874,073 ) ( 4,363,897 ) Property and Equipment, net $ 6,186,003 $ 7,325,212 15 Depreciation expense Depreciation expense for the nine months ended September 30, 2023 and 2022 was $ 2,510,176 and $ 2,409,100 , respectively. NOTE 6 – INVESTMENT IN EQUITY SECURITIES The Company owns 165.27 units ( 1.01 %) of Node Capital Token Opportunity Fund LP (the “Fund”) for which it paid an aggregate of $ 250,000 in August 2021. The investment is locked up for two years and a redemption can be made after the expiration of the lock up period with 90 days written notice. The Fund may, at the discretion of the General Partner, compulsorily redeem all interests if the Net Asset Value of the Fund falls below $ 1,000,000 . During the nine months ended September 30, 2023, the Company recognized an unrealized loss of $ 31,437 . NOTE 7 — BUSINESS COMBINATIONS On June 15, 2023, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) with SDI Black 001, LLC (“Seller”) whereby it acquired 80.01 % of the membership interests of Cuentas SDI, LLC, a Florida limited liability company (the “LLC”) for a purchase price of $ 850,000 . The Company accounted for the transaction as a business combination under ASC 805 and as a result, allocated the fair value of the book value of identifiable assets acquired and liabilities assumed as of the acquisition date as outlined in the table below. Although the accounting is not yet complete, the results of operations of the business acquired by the Company have been included in the consolidated statements of operations since the date of acquisition. All amounts are considered provisional until a more thorough analysis of the acquisition can be completed. The consolidated income statement for the three and nine months ended September 30, 2023, includes $ 1,456,796 of revenue and $ 1,865,776 of expenses of Cuentas SDI, LLC from the date of acquisition (June 15, 2023) through September 30, 2023 for a net loss of $ 408,980 . The excess of the purchase price over the estimated fair values of the underlying identifiable assets acquired, liabilities assumed, and non-controlling interest was allocated to goodwill. The provisional estimated fair value of the noncontrolling interest was based on the price the Company paid for their 80.01 % of their controlling interest. The goodwill represents expected synergies from the combined operations and the acquired base of current and prior merchants to which we hope to sell our merchant services. The allocation of the purchase price and the estimated fair market values of the assets acquired, liabilities assumed, and noncontrolling interest are shown below: Consideration Consideration issued $ 850,000 Identified assets, liabilities, and noncontrolling interest Property and equipment, net 141,337 Cash overdraft ( 8,050 ) Customer deposits ( 45,806 ) Accounts payable ( 283,626 ) Accrued Expenses ( 23,028 ) Noncontrolling interest ( 212,500 ) Total identified assets, liabilities, and noncontrolling interest ( 431,673 ) Excess purchase price allocated to goodwill $ 1,281,673 Proforma information representing the revenue and earnings of the combined company as if the business combination had occurred on January 1, 2022 has not been supplied as of the date of this filing, therefore we are unable to include those amounts here. 16 NOTE 8 – NOTE PAYABLE 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 year ended December 31, 2022, the Company received, as an initial draw on the MFA, $ 875,000 from VFS (the “Equipment Loan”). The Equipment Loan is secured by bitcoin mining computers being utilized by DMINT. The Equipment Loan requires monthly payments of $ 24,838 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. NOTE 9 – STOCK OPTIONS On January 1, 2021, the Company granted stock options to purchase 6,667 shares of common stock pursuant to the terms of 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 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 “CAI Options”). 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. On November 22, 2022, Mr. Ronny Yakov purchased the CAI Options, in a privately negotiated transaction, for $ 700,000 using his personal funds. On December 23, 2022, the Company granted stock options to purchase 200,000 shares of common stock pursuant to the terms of the Company’s employment agreement with Mr. Yakov. 100,000 options are immediately vested with an additional 50,000 vested on January 1, 2023, and the remaining 50,000 vesting on January 1, 2024. The options have an exercise price of $ 0.01 per share. The aggregate fair value of the options totaled $ 188,287 based on the Black Scholes Merton pricing model using the following estimates: exercise price of $ 0.01 , 3.75 % risk free rate, 133.79 % volatility and expected life of the options of 10 years. The fair value of the options has been credited to additional paid in capital. On December 23, 2022, the Company granted stock options to purchase 275,000 shares of common stock pursuant to the terms of the Company’s employment agreement with Mr. Smith. 137,500 options are immediately vested with an additional 68,750 vested on January 1, 2023, and the remaining 68,750 vesting on January 1, 2024. The options have an exercise price of $ 0.01 per share. The aggregate fair value of the options totaled $ 258,895 based on the Black Scholes Merton pricing model using the following estimates: exercise price of $ 0.01 , 3.75 % risk free rate, 133.79 % volatility and expected life of the options of 10 years. The fair value of the options has been credited to additional paid-in capital. A summary of the status of the Company’s outstanding stock options and changes during the year ended December 31, 2022 and the nine months ended September 30, 2023 is presented below: Stock Options Options Weighted Average Exercise Price Aggregate Intrinsic Value Options outstanding December 31, 2021 900,655 $ 0.0001 $ 2,386,736 Granted 475,000 $ 0.010 — Exercised — $ — — Expired — $ — — Options outstanding December 31, 2022 1,375,655 $ 0.004 Granted — $ — — Exercised — $ — — Expired — $ — — Options outstanding September 30, 2023 1,375,655 $ 0.004 Shares exercisable at September 30, 2023 1,254,683 $ 0.003 $ 997,988 During the nine months ended September 30, 2023 and 2022 the Company recognized $ 161,605 and $ 213,219 , respectively, in stock based compensation related to the above mentioned options. 17 NOTE 10 – WARRANTS 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. A summary of the status of the Company’s outstanding warrants and changes during the year ended December 31, 2022 and the nine months ended September 30, 2023 is presented below: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contract Term Outstanding, December 31, 2021 9,963,127 $ 5.02 4.55 Underwriter Warrant Exercised ( 1,400,000 ) $ 0.0001 Outstanding, December 31, 2022 8,563,127 $ 4.85 3.95 Warrants Exercised — $ — Outstanding, September 30, 2023 8,563,127 $ 4.85 3.20 NOTE 11 – 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. 18 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 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 $ 250,000 and $ 8,768 is payable as a security deposit. On March 29, 2023, DMINT entered into a Surrender and Release Agreement with Bradford Regional Airport Authority relating to the property in Bradford, Pennsylvania whereby DMINT agreed to pay $ 50,000 in exchange for an early termination of the Leases. March 31, 2023 is the final day DMINT occupied the property and all mining computers have been moved to the Selmer, Tennessee location. Balance Sheet Classification September 30, 2023 Asset Operating lease asset Right of use asset $ 22,062 Total lease asset $ 22,062 Liability Operating lease liability – current portion Current operating lease liability $ 17,427 Operating lease liability – noncurrent portion Long-term operating lease liability — Total lease liability $ 17,427 Lease expense for the three months ended September 30, 2023, was $ 25,790 , which consisted of amortization expense of $ 24,792 and interest expense of $ 429 . Lease expense for the nine months ended September 30, 2023, was $ 93,532 , which consisted of amortization expense of $ 65,950 and interest expense of $ 2,221 . The cash paid under operating leases during the nine months ended September 30, 2023, was $ 76,858 . Lease expense for the three months ended September 30, 2022, was $ 41,969 , which consisted of amortization expense of $ 37,932 and interest expense of $ 4,037 . Lease expense for the nine months ended September 30, 2022, was $ 136,953 , which consisted of amortization expense of $ 124,625 and interest expense of $ 12,328 . At September 30, 2023, there is one lease remaining that will terminate in November 2023, unless renewed, which the Company will make payments of approximately $ 34,800 for, recording interest of approximately $ 350 . The weighted average discount rate used was 5 %. NOTE 12 – COMMON STOCK 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. 19 Refer to Note 14 for common stock issued to related parties. NOTE 13 – PREFERRED STOCK Our certificate of incorporation, as amended, authorizes the issuance of 1,000,000 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. 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. As of September 30, 2023 and December 31, 2022 there were 1,021 shares of Series A Preferred Stock issued and outstanding. 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 are 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. NOTE 14 – RELATED PARTY TRANSACTIONS On December 31, 2022, the Company granted 41,322 shares of common stock to Alina Dulimof, Director, for services. The shares were valued at $ 1.21 , the closing stock price on the date of grant, for total non-cash stock compensation expense of $ 50,000 . As of December 31, 2022, the shares were not yet issued by the transfer agent and were recorded as an accrued liability as of that date. The shares were issued on February 15, 2023, resulting in a reduction of the accrued liability and an increase to common stock and additional paid-in capital during the nine months ended September 30, 2023. 20 On December 31, 2022, the Company granted 41,322 shares of common stock to Amir Sternhell, Director, for services. The shares were valued at $ 1.21 , the closing stock price on the date of grant, for total non-cash stock compensation expense of $ 50,000 . As of December 31, 2022, the shares were not yet issued by the transfer agent and were recorded as an accrued liability as of that date. The shares were issued on February 15, 2023, resulting in a reduction of the accrued liability and an increase to common stock and additional paid-in capital during the nine months ended September 30, 2023. On December 31, 2022, the Company granted 53,719 shares of common stock to Ehud Ernst, Director, for services. The shares were valued at $ 1.21 , the closing stock price on the date of grant, for total non-cash stock compensation expense of $ 65,000 . As of December 31, 2022, the shares were not yet issued by the transfer agent and were recorded as an accrued liability as of that date. The shares were issued on February 15, 2023, resulting in a reduction of the accrued liability and an increase to common stock and additional paid-in capital during the nine months ended September 30, 2023. On February 14, 2023, a shareholder reported to the Company that they had incurred short swing profits of $ 114,654 in connection with a series of purchases and sales of the Company’s stock on the open market. The shareholder disgorged such short-swing profits to the Company on February 28, 2023. During the nine months ended September 30, 2023, the Company accrued $ 92,911 for dividends on the Series A preferred stock held by Mr. Yakov. As of September 30, 2023, total accrued dividends on the Series A preferred stock due to Mr. Yakov is $ 387,295 . Refer to Note 9 for options to purchase shares of common stock issued to related parties. NOTE 15 – 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. 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 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 of $2,000,000. 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 discovery, which is to be completed by the end of October and no date for an arbitration or court hearing has been scheduled. NOTE 16 – SEGMENTS The Company applies ASC 280, Segment Reporting , in determining its reportable segments. The Company has two reportable segments: 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 detail revenue, operating expenses, and assets for the Company’s reportable segments for the three months ended September 30, 2023 and 2022. 21 For the Three Months ended September 30, For the Nine Months ended September 30, 2023 2022 2023 2022 Reportable segment revenue: Revenue, net – cryptocurrency mining segment $ 95,667 $ 161,249 $ 399,957 $ 633,555 Fintech services revenue 9,598,773 6,085,302 24,261,084 22,771,890 Total segment and consolidated revenue 9,694,440 6,246,551 24,661,041 23,405,445 Operating Expenses Cryptocurrency mining segment ( 1,688,665 ) ( 1,227,342 ) ( 4,235,816 ) ( 3,563,305 ) Fintech services ( 6,446,563 ) ( 4,679,192 ) ( 16,914,672 ) ( 17,609,470 ) General and administrative expenses ( 3,419,115 ) ( 2,402,590 ) ( 8,404,326 ) ( 7,221,792 ) Total operating expenses ( 11,554,343 ) ( 7,949,124 ) ( 29,554,814 ) ( 28,394,747 ) Total other (expense) income ( 24,947 ) ( 9,989 ) ( 196,025 ) 383,190 Net Loss $ ( 1,884,850 ) $ ( 1,712,562 ) $ ( 5,089,798 ) $ ( 4,606,112 ) September 30, 2023 December 31, 2022 Total Assets: Cryptocurrency mining segment $ 6,799,902 $ 9,376,078 Fintech services 29,143,826 29,277,741 $ 35,943,728 $ 38,653,819 NOTE 17 – SUBSEQUENT EVENTS In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements. 22