Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
Management’s Report Disclosure Controls
and Procedures
During the fourth quarter of the year ended December
31, 2023, 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, in light of the material weaknesses described below, our disclosure controls and procedures
were not 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.
Management’s Report on Internal Control
over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed
to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented or detected on a timely basis.
Our management assessed the effectiveness of the
Company’s internal control over financial reporting at December 31, 2023, and this assessment identified the following material
weaknesses in our internal control over financial reporting:
1) The Company has an insufficient control environment. Specifically,
the Company lacks policies to ensure they maintain adequate documentation, the Company does not have a formal process or policy to ensure
there is adequate documentation of board approval for related party transactions, and the Company’s board does not include an independent
financial expert.
49
2) The Company lacks adequate accounting processes and controls.
Specifically, the Company does not have appropriate reviews, reconciliations, or financial close processes to ensure the financial statements
are free from material misstatement.
3) The Company lacks adequate accounting resources. Specifically,
the Company does not have the processes and resources to ensure complex analysis of accounting issues, requiring high levels of accounting
knowledge and expertise, is completed timely or in sufficient detail.
In making its assessment of internal control over
financial reporting, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in Internal Control—Integrated Framework (2013). Management has concluded that, at December 31, 2023, the Company’s internal
control over financial reporting were not effective based on those criteria.
This annual report does not include an attestation
report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s
report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit
the Company to provide only management’s report in this annual report.
Inherent Limitations on Effectiveness of Controls
Internal control over financial reporting has
inherent limitations, which include but is not limited to the use of independent professionals for advice and guidance, interpretation
of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal
control over financial reporting is a process, which involves human diligence and compliance and is subject to lapses in judgment and
breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper
management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements
on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design
into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide
only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial
Reporting
Although management believes that the financial
statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows
for the periods presented, management continues to make improvements to internal controls as deemed necessary for changes within our operations.
Item 9B. Other Information
None .
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections.
None.
50
Part III
Item 10. Directors, Executive Officers and
Corporate Governance
The following table sets forth the names, ages, and titles of our executive
officers and directors.
Name
Age
Position(s)
Ronny Yakov
65
Chief Executive Officer and Chairman of the Board of Directors
Rachel Boulds
54
Chief Financial Officer
Patrick Smith
51
Vice President, Finance
Ehud Ernst
64
Director and Chairman of the Audit Committee
Amir Sternhell
62
Director
Alina Dulimof
57
Director
Ronny Yakov is Chief Executive Officer,
Chairman of the Board of Directors, founder and majority shareholder of the Company. Mr. Yakov has over 25 years of experience of concept-to-print,
software and e-commerce marketing experience with Fortune 500 and 1,000 companies and a proven track record of helping clients adapt their
businesses to technological developments. In 1996, Mr. Yakov entered into the electronic mail-order catalog business with Playboy Enterprises,
creating and hosting two e-commerce sites: Critics’ Choice Video and Collectors’ Choice Music. As founder of the Company,
Mr. Yakov has since developed a number of other branded e-commerce sites for clients, selling a variety of products including sporting
goods, chocolates and cosmetics, with which the company now partners to provide ongoing hosting and maintenance. Other significant accomplishments
of Mr. Yakov have included establishing an AT&T wholesale e-commerce platform for 180,000 employees and working with high-profile
clients such as Disney, Cisco Systems, Pfizer, Motorola, and Microsoft, among many others. Mr. Yakov also developed and maintains a complex
extranet/intranet infrastructure that allows Doremus, an Omnicom Communication subsidiary, to provide its advertising services to 50 of
the top financial institutions on a real-time basis.
Rachel Boulds is Chief Financial Officer
of the Company. Ms. Boulds currently works for the Company on a part-time basis (spending approximately 80% of her time working for the
Company) while also operating her sole accounting practice which she has led since 2009 and which provides all aspects of consulting and
accounting services to clients, including the preparation of full disclosure financial statements for public companies to comply with
GAAP and SEC requirements. Ms. Boulds also currently provides outsourced chief financial officer services for two other companies. From
August 2004 through July 2009, she was employed as a Senior Auditor for HJ & Associates, LLC, where she performed audits and reviews
of public and private companies, including the preparation of financial statements to comply with GAAP and SEC requirements. From 2003
through 2004, Ms. Boulds was employed as a Senior Auditor at Mohler, Nixon and Williams. From September 2001 through July 2003, Ms. Boulds
worked as an ABAS Associate for PriceWaterhouseCoopers. From April 2000 through February 2001, Ms. Boulds was employed as an e-commerce
Accountant for the Walt Disney Group’s GO.com. Ms. Boulds earned a B.S. in Accounting from San Jose University in 2001 and is licensed
as a CPA in the state of Utah.
Patrick Smith is Vice President, Finance
of the Company. Mr. Smith has over 20 years of finance, accounting and operational experience in the merchant services industry. Mr. Smith
joined eVance (Formerly Calpian Commerce) in 2014 as Director of Finance. Prior to eVance, Mr. Smith spent 2 years as Director of Financial
Planning and Analysis at Cynergy Data, an ISO with over 75,000 merchants. He worked with Pay by Touch, a biometric payments start-up company
based in San Francisco, and was part of the financial team that raised over $300M in its capital funding. From 1996 to 2004, Mr. Smith
worked for Concord EFS, a large merchant acquirer. His titles at Concord included Internal Audit, Financial Analyst and Vice President/Controller.
While at Concord EFS, he was part of the diligence team that worked on several large acquisitions, including those of Star and EPS Debit
networks.
51
Ehud Ernst is one of our independent directors
and Chairman of the Audit Committee of the Board of Directors. Since 2015, Mr. Ernst has been the chief executive officer of HyperTail.es.
From 2007 to 2017, Mr. Ernst founded and was the chief executive officer of Feelternet, a creative digital agency, which served some of
the largest brands in the Israeli market. From 2004 to 2007, Mr. Ernst served as division manager at Data-Pro Proximity/BBDO, a large
direct marketing and analytics agency in Israel. From 1985 to 1999, Mr. Ernst founded and was the chief executive officer of Ernst Meron
studios, one of the largest commercial photography production studio in Israel. Mr. Ernst also co-founded Impressia.com, a marketing technology
start-up venture enabling product displays at e-commerce stores. Mr. Ernst graduated from ICP New York with a degree in Photography and
Art.
Amir Sternhell is one of our independent
directors. Since 2016, Mr. Sternhell has served as chief strategy officer of Sertainty, a data optimization company. Mr. Sternhell has
24 years of experience in the IT and Corporate Learning industries, including two-decades, where he was head of a business intelligence
unit representing Microstrategy, and, chief learning officer, representing Harvard Business Publishing. Mr. Sternhell was the founder
of the first Non-Profit Organization that assisted Israel’s Incubator System, in which he hand-held over 100 high-tech companies.
Mr. Sternhell was the vice chairman of the American-Israel Chamber of Commerce and Industry, overseeing its initiatives, and a recipient
of its Business Leadership Award. Mr. Sternhell served in the Directorate of Military Intelligence for the Israel Defense Forces, and
was awarded the Most Outstanding Soldier of the Corp. in 1981. Mr. Sternhell holds an AB in Political Science and Psychology from Tel
Aviv University, an MIA in International Economics from Columbia University and an MBA from the ‘Grand Ecole’ EDHEC ’92
specializing in IT and Management where he graduated first in his class.
Alina Dulimof is one of our independent
directors. She is currently Chief Operating Officer and Head of Investor Relations and Business Development at Dorset Management
LLC, a commodity trading hedge fund she co-founded. Since 2017, she has served as a managing director responsible for business development
with Park Avenue Securities (PAS), a wealth management advisory firm in New York. Prior to PAS, from 2012 to 2017, she was a partner with
Nationwide Planning Associates and from 2007-2009, she was a VP, Private Banking at Merrill Lynch in New York. She has passed the Series
7 (FINRA-General. Securities Representative exam) and Series 66 (NASAA_Uniform Combined State Law exam) exams. From 1999 to 2007, Ms.
Dulimoff was an Investment Manager with BrainHeart, a VC firm in Stockholm, where she was responsible for investment decisions, while
supporting the management teams of its portfolio companies. As an entrepreneur, Ms. Dulimof achieved successful exits from 2 of her startups,
prior to joining BrainHeart. For over 15 years she had managed, advised and invested in a wide range of companies in Blockchain technology,
Fintech, 5G, IoT, Cybersecurity, AI, Robotics, E-commerce, Creator economy, Mobile, OOH advertising and Biotech, alongside entrepreneurs,
venture capital and private equity firms. Prior to her investment management career, she was a technology executive, starting at Ericsson
in Stockholm, directly after her graduation with distinction with a degree in Nuclear Physics from Bucharest University in 1988. At Ericsson,
she held executive positions within diverse business areas, from research to product development, marketing and strategic partnerships.
During her tenure at Ericsson she earned an Executive MBA from Stockholm School of Economics in 2001. She is a CFA charter holder.
None of our directors or officers are related
to each other. There are no arrangements or understandings with any of our principal stockholders, customers, suppliers, or any other
person, pursuant to which any of our directors or executive officers were appointed.
No officer or director has, during the past five
years, been involved in (a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that time, (b) any conviction in a criminal proceeding or being
subject to a pending criminal proceeding (excluding traffic violations and other minor offenses), (c) any order, judgment, or decree,
not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business, securities or banking activities or (d) a finding by a court
of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or
state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
To the best of the Company’s knowledge,
there are no arrangements or understandings between any director, Director Nominee or executive officer and any other person pursuant
to which any person was selected as a director, Director Nominee or executive officer. There are no family relationships between any of
the Company’s directors, Director Nominees or executive officers. To the Company’s knowledge there have been no material legal
proceedings as described in instruction 4 to Item 103 of Regulation S-K or Item 401(f) of Regulation S-K during
the last ten years that are material to an evaluation of the ability or integrity of any of the Company’s directors or executive
officers.
52
Director Independence
Our Board of Directors may establish the authorized
number of directors from time to time by resolution. Our Board of Directors is currently comprised of one member. We have three (3) independent
directors on the Board of Directors. The directors will be elected annually by our stockholders.
Because our common stock is listed on the NASDAQ
Capital Market, the listing rules of this stock exchange generally require that a majority of the members of a listed company’s
board of directors, and each member of a listed company’s audit, compensation and nominating and corporate governance committees,
be independent. Our Board of Directors has determined that Alina Dulimof, Ehud Ernst and Amir Sternhell do not have any relationships
that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and such directors are
“independent” as that term is defined under the rules of the stock market.
Audit committee members must also satisfy the
independence criteria set forth in Rule 10A-3 under the Exchange Act, subject to the transition rule that is applicable to a newly public
company. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not,
other than in his or her capacity as a member of the audit committee, the Board of Directors, or any other board committee accept, directly
or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or be an affiliated
person of the listed company or any of its subsidiaries.
Role of the Board of Directors in Risk Oversight
The Board of Directors is responsible for assessing
the risks facing our company and considers risk in every business decision and as part of our business strategy. The Board of Directors
recognizes that it is neither possible nor prudent to eliminate all risk, and that strategic and appropriate risk-taking is essential
for us to compete in our industry and in the global market and to achieve our growth and profitability objectives. Effective risk oversight,
therefore, is an important priority of the Board of Directors.
While the Board of Directors oversees our risk
management, management is responsible for day-to-day risk management processes. Our Board of Directors expects management to consider
risk and risk management in each business decision, to proactively develop and monitor risk management strategies and processes for day-to-day
activities and to effectively implement risk management strategies that are adopted by the Board of Directors. The Board of Directors
expects to review and adjust our risk management strategies at regular intervals or as needed.
Code of Business Conduct
Our Board of Directors has adopted a code of business
conduct and ethics, the “Code of Business Conduct,” to ensure that our business is conducted in a consistently legal and ethical
manner. Our policies and procedures cover all major areas of professional conduct, including employee policies, conflicts of interest,
protection of confidential information, and compliance with applicable laws and regulations. The Code of Business Conduct is available
at our website at http://www.olb.com/code-of-conduct/ . The reference to our website address in this Annual Report does not include
or incorporate by reference the information on our website into this Annual Report. We intend to disclose future amendments to certain
provisions of our code of conduct, or waivers of these provisions, on our website or in public filings.
Board Committees
Our Board of Directors has an Audit Committee,
Compensation Committee and a Nominating and Corporate Committee.
Audit Committee
The Audit Committee consists of Ehud Ernst, Alina
Dulimof, and Amir Sternhell with Mr. Ernst serving as Chairman. The Audit Committee assists the Board of Directors in discharging its
responsibilities relating to the financial management of our Company and oversight of our accounting and financial reporting, our independent
registered public accounting firm and their audits, our internal financial controls and the continuous improvement of our financial policies
and practices. In addition, the Audit Committee is responsible for reviewing and discussing with management our policies with respect
to risk assessment and risk management. The responsibilities of the Audit Committee, as set forth in its charter, includes:
●
appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm;
●
pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;
53
●
reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;
●
coordinating the oversight and reviewing the adequacy of our internal control over financial reporting;
●
establishing policies and procedures for the receipt and retention of accounting-related complaints, whistleblowers, and concerns; and
●
reviewing and approving any related party transactions.
The composition of our Audit Committee complies
with all applicable requirements of the SEC and the listing requirements of the Nasdaq Capital Market. We intend to comply with future
requirements to the extent they become applicable to us.
Compensation Committee
The Compensation Committee consists of Alina Dulimof,
Ehud Ernst and Amir Sternhell with Mr. Ernst serving as Chairman. The Compensation Committee assists the Board of Directors in setting
and maintaining the Company’s compensation philosophy and in discharging its responsibilities relating to executive and other human
resources hiring, assessment and compensation, and succession planning. The responsibilities of the Compensation Committee, as set forth
in its charter, includes:
●
reviewing and approving corporate goals and objectives relevant to compensation of our chief executive officer;
●
evaluating the performance of our chief executive officer in light of such corporate goals and objectives and determining the compensation of our chief executive officer;
●
determining the compensation of all our other officers and reviewing periodically the aggregate amount of compensation payable to such officers;
●
overseeing and making recommendations to the Board of Directors with respect to our incentive-based compensation and equity plans; and
●
reviewing and making recommendations to the Board of Directors with respect to director compensation.
Nominating and Corporate
Governance Committee
The Nominating and Corporate Governance Committee
consists of Alina Dulimof, Ehud Ernst and Amir Sternhell with Mr. Sternhell serving as Chairman. The responsibilities of the Nominating
and Corporate Governance Committee, as set forth in its charter, includes:
●
making recommendations to the Board of Directors regarding the size and composition of the Board of Directors;
●
recommending qualified individuals as nominees for election as directors;
54
●
reviewing the appropriate skills and characteristics required of director nominees;
●
establishing and administering a periodic assessment procedure relating to the performance of the Board of Directors as a whole and its individual members; and
●
periodically reviewing the corporate governance guidelines and supervising the management representative charged with implementing the Company’s corporate governance procedures.
Compensation Committee Interlocks and Insider
Participation
None of the members of the Compensation Committee
is (or was at any time previously) an officer or employee. None of our executive officers serve or in the past fiscal year has served
as a member of the Board of Directors or Compensation Committee of any other entity that has one or more executive officers serving as
a member of our Board of Directors or expected to serve on the Compensation Committee.
Item 11. Executive Compensation
The table below summarizes
all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services
rendered to us.
Summary Compensation Table
Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($) (2)
Non-Equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($) (1)
Total
Ronny Yakov,
2023
$ 750,000
$ 300,000
$ 0
$ 541,999
$ 0
$ 0
$ 30,000
$ 1,621,999
CEO, Chairman
2022
$ 750,000
$ 300,000
$ 0
$ 1,217,264
$ 0
$ 0
$ 30,000
$ 2,297,264
Patrick Smith,
2023
$ 350,000
$ 150,000
$ 0
$ 0
$ 0
$ 0
$ 0
$ 450,000
Vice President
2022
$ 350,000
$ 150,000
$ 0
$ 279,412
$ 0
$ 0
$ 0
$ 779,412
Rachel Boulds,
2023
$ 36,000
$ 0
$ 0
$ 0
$ 0
$ 0
$ 0
$ 36,000
CFO
2022
$ 36,000
$ 0
$ 0
$ 0
$ 0
$ 0
$ 0
$ 36,000
(1)
Car allowance
(2)
Stock based compensation reflects fair value of options granted during
the years ended December 31, 2023 and 2022, each with an exercise price of $0.01 per share. 50% of options vested as of the date
of grant, 25% vested on January 1, 2023 and 50% vested on January 1, 2024. Options expire after ten years from grant date if not exercised.
Employment Agreements
On January 11, 2022, the Company entered into
a new employment agreement with Mr. Yakov (the “Yakov Agreement”) and a new employment agreement with Mr. Smith (the “Smith
Agreement”). The Yakov Agreement maintains Mr. Yakov’s role as the Company’s Chief Executive Officer through December
31, 2027 and extended for one-year terms thereafter. The Smith Agreement maintains Mr. Smith’s role as the Company’s Vice
President, Finance unless terminated or upon his resignation.
The Yakov Agreement sets Mr. Yakov’s base
salary at $750,000 and he is eligible for insurance coverages and benefits available to the Company’s employees pursuant to the
terms of the Company’s insurance and benefit plans. Mr. Yakov received a $490,000 bonus for acquisitions closed by the Company in
2020 and 2021 and he will be eligible to receive an acquisition bonus equal to two percent (2%) of the gross purchase price paid in connection
with a future acquisition. Mr. Yakov shall be eligible to receive an annual bonus of Three Hundred Thousand Dollars ($300,000) based on
performance criteria established by the Board. In addition, on an annual basis, Mr. Yakov shall receive options to purchase up to 200,000
shares of common stock of the Company at an exercise price of $0.01 per share.
55
The Yakov Agreement also states that, if Mr. Yakov’s
employment is terminated without cause or he voluntarily terminates his employment for good reason, he will continue to receive his base
salary for the remainder of the term along with all earned bonuses. In the event the termination is in connection with Mr. Yakov’s
death, disability or bankruptcy of the Company, he will receive the pro rata amount of his base salary through the termination date and
all bonuses earned through the termination date.
The Smith Agreement sets Mr. Smith’s base
salary to $350,000 and he is eligible for insurance coverages and benefits available to the Company’s employees pursuant to the
terms of the Company’s insurance and benefit plans. Mr. Smith shall be eligible to receive an annual bonus of One Hundred Fifty
Thousand Dollars ($150,000) based on performance criteria established by the Compensation Committee. In addition, Mr. Smith shall receive
options (the “Options”) to purchase up to 275,000 shares of common stock of the Company at an exercise price of $0.01 per
share.
The Smith Agreement also states that, if Mr. Smith’s
employment is terminated without cause or he voluntarily terminates his employment for good reason, he will continue to receive his base
salary for the remainder of the term along with all earned bonuses. In the event the termination is in connection with Mr. Smith’s
death, disability or bankruptcy of the Company, he will receive the pro rata amount of his base salary through the termination date and
all bonuses earned through the termination date.
On April 8, 2024, the Company entered into Amendment
No. 1 (the “Amendment”) to the Employment Agreement with Mr. Yakov (the “Yakov Agreement”). The Amendment corrected
a ministerial error in the terms relating to the exercise price of stock options awarded and automobile allowance for Mr. Yakov. The Amendment
affirmed that the exercise price of stock options issued under the Agreement (the “Stock Options”) shall have a per share
exercise price equal to One Cent ($0.01) and expire ten years after the date of grant. Each Stock Option granted shall become exercisable
as follows: 50% upon the grant date, then 25% upon each of the second and third anniversary of the date on which it is granted. In addition,
the notices provision of the Yakov Agreement was amended to the reflect the current business address of the Company.
Outstanding Equity Awards at Fiscal Year-End
As of December 31, 2023, the following equity
awards were outstanding:
Per the terms of Mr. Smith’s employment
agreement, he was granted stock options to purchase up to 265,172 shares of common stock at an exercise price of $0.003 per share. The
grant vests at the rate of 1/5 beginning on each anniversary of the effective date of grant (April 10, 2018). The stock options will cease
vesting after the termination of Mr. Smith’s employment and any unvested options shall be forfeited upon the termination of employment.
Pursuant to the Smith Agreement, on December 23,
2022, Mr. Smith received options to purchase up to 275,000 shares of common stock of the Company at an exercise price of $0.01 per share.
Per the terms of Mr. Yakov’s employment
agreement, effective on January 1, 2018, and on each anniversary thereafter during the term of his employment agreement, the Company granted
to him options to purchase up to 6,667 shares of common stock with a per share exercise price equal $0.03 per share. Each stock option
shall become exercisable in increments of one-third upon each anniversary of the date on which it is granted.
On November 13, 2019, the Company entered into
an agreement with Mr. Smith and on November 25, 2019, the Company entered into an agreement Mr. Yakov, whereby the Company and option
holders each agreed that the exercise price pertaining to those options only would not be adjusted for the effects of the Reverse Stock
Split.
Pursuant to the Yakov Agreement, on each of December
23, 2022 and January 1, 2023, Mr. Yakov received options to purchase up to 200,000 shares of common stock of the Company at an exercise
price of $0.01 per share for a total of 400,00 options to purchase common stock.
At December 31, 2023, there were a total of 1,568,988
options to purchase common stock, of which 1,248,016 were vested and exercisable.
56
2020 Equity Incentive Plan
The Board of Directors have adopted a 2020 Equity
Incentive Plan (the “Plan”) for the Company and the holders of majority of our outstanding shares of common stock have approved
such plan. On December 22, 2022, the shareholders of the Company approved an amendment and restate of the Plan to increase the number
of our shares of Common Stock available for issuance under the 2020 Plan from 240,000 to 2,000,000 shares. Grants of 715,000 options
to purchase shares of common stock have been issued under the Plan as of December 31, 2023. In general, awards under the Plan shall vest
ratably over a period of three years (on the first, second and third anniversaries of the agreement) subject to accelerated vesting upon
a change of control of our company (although awards may be granted with different vesting terms). Further, pursuant to the Yakov
Agreement, on an annual basis until December 31, 2027, Mr. Yakov received up to 400,000 options under the Plan.
The purpose of our 2020 Equity Incentive Plan
is to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage
a sense of proprietorship and to stimulate an active interest of such persons in our development and financial achievements. The 2020
Equity Incentive Plan is administered by the Compensation Committee of our Board of Directors or by the full Board, which may determine,
among other things, the (a) terms and conditions of any option or stock purchase right granted, including the exercise price and the vesting
schedule, (b) persons who are to receive options and stock purchase rights and (c) the number of shares to be subject to each option and
stock purchase right. The Plan provides for the grant of (i) “incentive” options (qualified under section 422 of the Internal
Revenue Code of 1986, as amended) to employees of our company and (ii) non-qualified options to directors and consultants of our company.
In connection with the administration of our 2020
Equity Incentive Plan, our Compensation Committee:
●
determines which employees and other persons will be granted awards under our 2020 Equity Incentive Plan;
●
grants the awards to those selected to participate;
●
determines the exercise price for options; and
●
prescribes any limitations, restrictions and conditions upon any awards, including the vesting conditions of awards.
Any grant of awards to any of directors under
our 2020 Equity Incentive Plan must be approved by the Compensation Committee of our Board of Directors. In addition, our Compensation
Committee will: (i) interpret our 2020 Equity Incentive Plan; and (ii) make all other determinations and take all other action that may
be necessary or advisable to implement and administer our 2020 Equity Incentive Plan.
The 2020 Equity Incentive Plan provides that in
the event of a change of control, the Compensation Committee or our Board of Directors shall have the discretion to determine whether
and to what extent to accelerate the vesting, exercise or payment of an award.
In addition, our Board of Directors may amend
our 2020 Equity Incentive Plan at any time. However, without stockholder approval, our 2020 Equity Incentive Plan may not be amended in
a manner that would:
●
increase the number of shares that may be issued under our 2020 Equity Incentive Plan;
●
materially modify the requirements for eligibility for participation in our 2020 Equity Incentive Plan;
●
materially increase the benefits to participants provided by our 2020 Equity Incentive Plan; or
●
otherwise disqualify our 2020 Equity Incentive Plan for coverage under Rule 16b-3 promulgated under the Exchange Act.
57
Awards previously granted under our 2020 Equity
Incentive Plan may not be impaired or affected by any amendment of our 2020 Equity Incentive Plan, without the consent of the affected
grantees.
Director Compensation
Our directors are entitled to the following fixed
compensation for their services as directors during the fiscal year ended December 31, 2023.
Name and Principal Position
Fees
Earned
or Paid
in Cash
($)
Stock
Awards
($) (1)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
Alina Dulimof
$ 0
$ 50,000
$ 0
$ 0
$ 0
$ 0
$ 50,000
Ehud Ernst
$ 0
$ 65,000
$ 0
$ 0
$ 0
$ 0
$ 65,000
Amir Sternhell
$ 0
$ 50,000
$ 0
$ 0
$ 0
$ 0
$ 50,000
(1) Directors were reimbursed for their reasonable out-of-pocket expenses incurred in connection with their
duties. Through December 31, 2023, on an annual basis, each independent director earned compensation in the form of shares of our Common
Stock with a fair market value equal to $50,000 as of the date of issuance and they will be reimbursed for their reasonable out-of-pocket
expenses incurred in connection with their duties. The Chairman of the Audit Committee received additional shares of Common Stock with
a fair market value equal to $15,000 as of the date of issuance.
(2) Beginning in 2024, all Directors will receive a fee equal to $10,000 per year, payable in four installments
of $2500 on January 1, April 1, July 1 and October 1 of each year.
58
Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of April
8, 2024, information regarding the beneficial ownership of each class of our voting securities by: (i) our officers and directors; (ii)
all of our officers and directors as a group; and (iii) each person known by us to beneficially own 5% or more of any class of our outstanding
voting securities. Generally, a person is deemed to be a “beneficial owner” of a security if that person has or shares the
power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of
which the person has the right to acquire beneficial ownership within 60 days.
The address of each holder listed below, except
as otherwise indicated, is c/o The OLB Group, Inc., 1120 Avenue of the Americas, 4 th Floor, New York, NY.
Name of Beneficial Owner
Shares of
Common
Stock
Beneficially
Owned**
Percent of
Common
Stock
Beneficially
Owned (1) **
Shares of
Series A
Preferred
Stock
Beneficially
Owned (2) **
Percent of
Series A
Preferred
Stock
Beneficially
Owned (2) **
Number
of Voting
Shares
Beneficially
Owned**
Percent of
Voting
Shares
Beneficially
Owned (4) **
5% Beneficial Owners
John Herzog (4)
1,044,740
5.74 %
—
—
1,044,740
6.5 %
Directors and Officers
Ronny Yakov
5,829,702 (5)
32.0 %
113,444
100 %
5,943,146 (5)
32.7 %
Rachel Boulds
834
*
—
—
834
*
Patrick Smith (6)
1,023,998
5.63 %
—
—
1,023,998
5.63 %
Alina Dulimof
52,131
*
—
—
52,122
*
Ehud Ernst
76,186
*
—
—
76,186
*
Amir Sternhell
60,455
*
—
—
60,455
*
All directors and executive officers as a group (6 persons)
7,043,297
38.69 %
113,444
100 %
7,156,741
39.31 %
* Less than 1%.
** Under SEC rules, beneficial ownership includes shares over
which the individual or entity has voting or investment power and any shares which the individual or entity has the right to acquire
within sixty days.
(1) Percentage
ownership of common stock is based on 18,092,883 shares of Common Stock
plus 113,443 shares of common stock underlying Series A Preferred Stock outstanding on the Record Date for which holders will exercise
voting power on an as-converted basis.
(2) The number of shares and percentage ownership of Series A
Preferred Stock is presented on an as-converted basis and is based on 1,021 shares of Series A Preferred Stock outstanding (which
such shares of Series A Preferred Stock are convertible into 113,443 shares of common stock accordance with the Certificate of Designations
(as hereinafter defined)). The holders of the Series A Preferred Stock have the right to vote their shares of Series A Preferred
Stock with the holders of common stock on an as-converted basis.
(3) Percentage
of voting stock is based on 18,092,883 shares of Common Stock and 1,021
shares of Series A Preferred Stock (convertible into 113,443 shares of common stock) outstanding on November 29, 2023.
(4) Includes (a) 925,516 shares held by John E. Herzog,
(b) 109,224 shares held by John E. Herzog Revocable Trust under an agreement dated February 7, 2014, for which John E. Herzog
is the sole Trustee, and (c) 10,000 shares held in an individual retirement account. As reported on Schedule 13G filed with
the SEC on June 21, 2023.
(5) Includes (i) 176,668 vested options, (ii) 113,444
shares of common stock underlying Series A Preferred Stock, and (iii) shares of common stock underlying 227,003 Series A
Warrants to purchase one share of common stock each at a purchase price of $9.00 per share and 56,751 Series B Warrants to purchase
one share of common stock each at a purchase price of $4.50 per share, which warrants are exercisable within 60 days of this Annual
Report.
(6) Consists of 312,318 vested options.
59
Item 13. Certain Relationships and Related
Transactions, and Director Independence
We are a party to certain related party transactions,
as described below.
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.
On December
14, 2022, Mr. Herzog converted 3,612 shares of Series A Preferred Stock together with $932,193 of accrued dividends into 504,910 shares
of common stock.
The Company
is obliged to issue shares worth of $165,000 to Directors for their service during the year ended December 31, 2022 – a provision
for this compensation has been accrued in the balance sheet as of December 31, 2022.
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 year ended December 31, 2023.
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 year ended December 31, 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 year ended December 31, 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 December 2023, Mr. Yakov made payments
on behalf of the company in the amount of $12,678. The amount is non-interest bearing and due on demand.
During the year ended December 31, 2023, the Company
accrued $124,222 for dividends on the Series A preferred stock held by Mr. Yakov. As of December 31, 2023 and 2022, total accrued dividends
on the Series A preferred stock due to Mr. Yakov is $418,606 and $294,384, respectively.
Statement of Policy
All future transactions between us and our officers,
directors or five percent stockholders, and respective affiliates will be on terms no less favorable than could be obtained from unaffiliated
third parties and will be approved by a majority of our independent directors who do not have an interest in the transactions and who
had access, at our expense, to our legal counsel or independent legal counsel.
To the best of our knowledge, during the past
three fiscal years, other than as set forth above, there were no material transactions, or series of similar transactions, or any currently
proposed transactions, or series of similar transactions, to which we were or are to be a party, in which the amount involved exceeds
$120,000, and in which any director or executive officer, or any security holder who is known by us to own of record or beneficially more
than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, has an interest (other
than compensation to our officers and directors in the ordinary course of business).
60
Item 14. Principal Accountant Fees and Services
The following table describes fees for professional
audit services rendered and billed by Mac Accounting Group & CPAs, LLP, our present independent registered public accounting
firm and principal accountant, for the review of our quarterly consolidated financial statements and for other services during fiscal
year 2023 and for professional audit services rendered and billed by Daszkal Bolton LLP for the audit of our consolidated financial statements
and for other services during fiscal year 2022.
Type of Fee – Billed by Mac Accounting Group & CPAs, LLP,
2023
2022
Audit Fees (1)
$ 58,219
$ —
Audit Related Fees (2)
$ 67,269
$ —
Total
$ 125,488
$ —
Type of Fee - Billed by Daszkal Bolton LLP
2023
2022
Audit Fees (1)
$
109,500
$
100,000
Audit Related Fees (2)
$
—
$
—
Total
$
109,500
$
100,000
(1) Audit fees for fiscal years 2022 and 2023 represent
fees billed for services rendered by Mac Accounting Group & CPAs, LLP, and Daszkal Bolton LLP in 2022 and 2023 for the audit
of our consolidated financial statements and review of our quarterly reports on Form 10-Q.
(2) Audit related fees for fiscal years 2023 represent fees
billed for services rendered by Mac Accounting Group & CPAs, LLP in connection with our DMint Registration Statements filed
during fiscal year 2023.
Our Audit Committee has determined that the services
provided by the Auditor are compatible with maintaining the independence of the Auditor as our independent registered public accounting
firm.
The Board has established pre-approval policies
and procedures pursuant to which the Board approved the foregoing audit, tax and non-audit services provided by the Auditor in 2022.
Consistent with the Audit Committee’s responsibility for engaging our independent auditors, all audit and permitted non-audit services
require pre-approval by the Audit Committee. Fee estimates for these services are approved by the Chairman of the Board based on
information provided by our management.
Audit Fees
Consist of fees billed for professional services
rendered for the audit of our financial statements and review of interim consolidated financial statements included in quarterly reports
and services that are normally provided by the principal accountants in connection with statutory and regulatory filings or engagements.
Audit Related Fees
Consist of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported
under “Audit Fees”.
Tax Fees
Consist of fees billed for professional services
for tax compliance, tax advice and tax planning. These services include preparation of federal and state income tax returns.
All Other Fees
Consist of fees for product and services other
than the services reported above.
Policy for Approval of Audit and Permitted
Non-Audit Services
The Audit Committee charter provides that the
Audit Committee will pre-approve audit services and non-audit services to be provided by our independent auditors before the accountant
is engaged to render these services. The Audit Committee may consult with management in the decision-making process, but may not delegate
this authority to management. The Audit Committee may delegate its authority to pre-approve services to one or more committee members,
provided that the designees present the pre-approvals to the full committee at the next committee meeting.
61
PART IV
Item 15. Exhibits
Exhibit Number
Description
2.1
Memorandum of Sale, dated as of April 9, 2018, by and among eVance, Inc., eVance Capital, Inc., Securus365, Inc. and GACP (1)
3.1
Certificate of Incorporation, as amended (18)
3.2
Amended and Restated Bylaws of the Company (13)
3.3
Certificate of Designations, Preferences and Rights of Series A Preferred Stock (13)
4.1
Warrant, dated April 9, 2018, issued by the Company to GACP (1)
4.2
Representative’s Warrant (13)
4.3
Series A Warrant Agency Agreement (including the terms of the Series A Warrant) (13)
4.4
Series B Warrant Agency Agreement (including the terms of the Series B Warrant) (13)
4.5
Description of Registered Securities (*)
10.1
Loan and Security Agreement, dated as of April 9, 2018, by and among GACP, the lenders from time to time party thereto, the Company, as parent guarantor, and the Borrowers (1)
10.2
Amendment No. 1 to Loan and Security Agreement, dated as of July 30, 2018, by and among GACP Finance Co., LLC, as administrative agent and collateral agent, the lenders party thereto, Securus365, Inc., eVance, Inc., eVance Capital, Inc., OMNISOFT, Inc., and CrowdPay.us, Inc., as borrowers, and the Company, as parent guarantor (3)
10.3
Amendment No. 3 to Loan and Security Agreement, dated as of February 5, 2019, by and among GACP Finance Co., LLC, as administrative agent and collateral agent, the lenders party thereto, Securus365, Inc., eVance, Inc., eVance Capital, Inc., OMNISOFT, Inc., and CrowdPay.us, Inc., as borrowers, and the Company, as parent guarantor (4)
10.4
Agreement Regarding Additional Warrants, dated April 9, 2018, by and between the Company and GACP (1)
10.5
Share Exchange Agreement, dated May 9, 2018, by and between The OLB Group, Inc. and the stockholders of CrowdPay.US, Inc. (2)
10.6
Share Exchange Agreement, dated May 9, 2018, by and between The OLB Group, Inc. and the stockholders of OmniSoft, Inc. (2)
10.7
Subordinated Promissory Note, dated July 30, 2018, by and between the Company and John Herzog (3)
10.8
Amendment No. 1 to Subordinated Promissory Note, dated as of November 14, 2019, by and between the Company and John Herzog (4)
10.9
Amendment No. 2 to Subordinated Promissory Note, dated June 25, 2019, by and between the Company and John Herzog (5)
10.10
Employment Agreement with Ronny Yakov (5)
10.11
Employment Agreement with Patrick Smith (5)
10.12
Commitment Letter from John Herzog dated December 10, 2019 (6)
10.13
Amendment No. 4 to Loan and Security Agreement, dated as of April 24, 2020, by and among GACP Finance Co., LLC, as administrative agent and collateral agent, the lenders party thereto, Securus365, Inc., eVance, Inc., eVance Capital, Inc., OMNISOFT, Inc., and CrowdPay.us, Inc., as borrowers, and the Company, as parent guarantor (7)
10.14
Debt Conversion Agreement, dated as of May 13, 2020 by and between the Company and. John Herzog (8)
10.15
Debt Conversion Agreement, dated as of May 13, 2020 by and between the Company and. Ronny Yakov (8)
10.16
First Amended and Restated Debt Conversion Agreement, dated as of July 24, 2020, by and between the Company and Ronny Yakov (11)
10.17
First Amended and Restated Debt Conversion Agreement, dated as of July 24, 2020, by and between the Company and John Herzog (11)
10.18
Form of 2020 Equity Incentive Plan (9)
10.19
Lease Agreement dated June 24, 2020 between Pergament Lodi, LLC and Evance, Inc. (10)
10.20
Underwriting Agreement with Aegis Capital Corp. dated August 6, 2020. (13)
10.24
Asset Purchase Agreement dated November 24, 2021 by and between the Company and FFS Data Corporation (14) .
10.25
Share Exchange Agreement dated January 3, 2022 between the Company and all of the shareholders of Crowd Ignition, Inc. (15)
10.26
Lease Agreement dated November 10, 2021 between The Bradford Regional Airport Authority and DMINT, Inc. related to “Cell 3” (4,000 square feet) (16) .
10.27
Lease Agreement dated November 10, 2021 between The Bradford Regional Airport Authority and DMINT, Inc. related to “Cell 4” (6,000 square feet) (16) .
10.28
Services Agreement between Executive Workspace LLC d/b/a Elevated NY and The OLB Group, Inc. (17)
10.29
Contract for Sale of Realty between Madison Haywood Developmental Services, Inc. and DMINT Real Estate Holdings, Inc. (17)
10.30
SURRENDER AND RELEASE AGREEMENT (this “Agreement”) dated as of March 29, 2023 (the “Effective Date”) is made by and between THE BRADFORD REGIONAL AIRPORT AUTHORITY and DMINT, Inc. (18)
62
10.31
Letter of Resignation dated March 13, 2023 from Daszkal Bolton LLP (18) .
10.32
Membership Interest Purchase Agreement dated June 15, 2023 by and between the Company and SDI Black 001, LLC. (19)
10.33
Amendment No. 1 to Employment Agreement dated April 4, 2024 by and between the Company and Ronny Yakov *
31.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)
31.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)
97.1*
Clawback Policy
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).
*
Filed herewith
(1)
Incorporated by reference to Current Report on Form 8-K filed April 13, 2018.
(2)
Incorporated by reference to Form 8-K filed May 15, 2018.
(3)
Incorporated by reference to Form 8-K filed August 3, 2018.
(4)
Incorporated by reference to Form 8-K filed March 12, 2019.
(5)
Previously filed with Form S-1 on June 26, 2019.
(6)
Previously filed with Form S-1 on January 17, 2020.
(7)
Previously filed with Form 10-K on April 29, 2020.
(8)
Previously filed with Form S-1 on May 20, 2020.
(9)
Previously filed with Form S-1 on June 8, 2020.
(10)
Incorporated by reference to Form 8-K filed July 2, 2020.
(11)
Previously filed with Form S-1 on July 27, 2020.
(12)
Previously filed with Form S-1 on July 31, 2020.
(13)
Previously file with Form 8-K filed August 12, 2020.
(14)
Incorporated by reference to Form 8-K filed November 30, 2021.
(15)
Incorporated by reference to Form 8-K filed January 5, 2022.
(16)
Incorporated by reference to Form 8-K filed January 11, 2022.
(17)
Incorporated by reference to Form 8-K filed August 16, 2022.
(18)
Previously filed with Form 10-K on March 30, 2023.
(19)
Incorporated by reference to Form 8-K filed June 21, 2023.
Item 16. Form 10-K Summary
None.
63
SIGNATURES
In accordance with Section
13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The OLB Group, Inc.
Date: April 15, 2024
BY:
/s/ Ronny Yakov
Ronny Yakov
Chief Executive Officer
BY:
/s/ Rachel Boulds
Rachel Boulds
Chief Financial Officer
In accordance with the Exchange
Act, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Ronny Yakov
Chief Executive Officer and Chairman
April 15, 2024
Ronny Yakov
/s/ Ehud Ernst
Director and Chairman of the Audit Committee
April 15, 2024
Ehud Ernst
/s/ Amir Sternhell
Director
April 15, 2024
Amir Sternhell
/s/ Alina Dulimof
Director
April 15, 2024
Alina Dulimof
64