OLB GROUP, INC. 10-Q

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward-looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, our actual results may differ significantly from management’s expectations. These risks and uncertainties include those factors described in greater detail in the risk factors disclosed in our Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those anticipated in these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents referred to or incorporated by reference, the date of those documents. The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. Company Overview and Description of Business Overview We are a FinTech company that focuses on a suite of products in the merchant services marketplace that seeks to provide integrated business solutions to merchants throughout the United States. We seek to accomplish this by providing merchants with a wide range of products and services through our various online platforms, including financial and transaction processing services. We also have products that provide support for crowdfunding and other capital raising initiatives. We supplement our online platforms with certain hardware solutions that are integrated with our online platforms. Our business functions primarily through three wholly-owned subsidiaries, eVance, Inc., a Delaware corporation (“eVance”), OmniSoft.io, Inc., a Delaware corporation (“OmniSoft”), and CrowdPay.Us, Inc., a New York corporation (“CrowdPay”), though substantially all of our revenue has been generated from our eVance business (we began generating revenue from our OmniSoft and CrowdPay businesses in the second half of 2019). We expect to build out our OmniSoft software business and to rely more on individualized merchant services offerings for revenue so that we are not dependent on our revenue from our eVance business but there is no guarantee that we will be able to do so. With respect to our eVance business, our merchants are currently processing over $100,000,000 in gross transactions monthly and average approximately 1,400,000 transactions a month. These transactions come from a variety of sources including direct accounts and ISO channels. The accounts consist of businesses across the United States with no concentration of industries or merchants. We have integrated all the applications for OmniSoft and the ShopFast Omnicommerce solution with the eVance mobile payment gateway, SecurePay.comTM. SecurePay.comTM, is currently used by approximately 3,000 merchants processing over 32,000 transactions and approximately $9,000,000 of monthly gross transactions (though our revenue from these transactions is limited). In July 2019, we launched a new merchant and ISO boarding system that will be able to onboard merchants instantly. This provides the merchant with an automated approval and ISOs will have the ability to see all their merchants and their residuals as they load to the system. 24 On May 22, 2020, the Company purchased certain assets from POSaBIT Inc. (“POSaBIT”), including its contracts and arrangements with the Doublebeam merchant payment processing platform (the “POSaBIT Asset Acquisition”). The assets included, but were not limited to, software source codes, customer lists, customer contracts, hardware and website domains. On May 14, 2021, the Company formed OLBit, Inc., a wholly owned subsidiary (“OLBit”). The purpose of OLBit is to hold the Company’s assets and operate its business related to its emerging money transmission and transactional business. OLBit was previously in the process of applying for money transmission licenses in all 50 states. In June 2023, it was decided to delay the process of applying for such licenses in order to have a greater focus of financial and management resources on the Company’s payment processing business and Bitcoin mining business. On July 23, 2021, we formed DMINT, Inc., a wholly owned subsidiary (“DMINT”) to operate in the Bitcoin mining industry, specifically the mining of Bitcoin. DMINT initiated the first phase of the Bitcoin mining operation by placing data centers and ASIC-based Antminer S19J Pro mining computers specifically configured to mine Bitcoin in Pennsylvania. As of December 31, 2022, DMINT had purchased 1,000 computers. DMint has a data center located in Selmer, Tennessee. In February 2023, DMINT redeployed its mining computers from its Pennsylvania location and focus the mining efforts at the Selmer, Tennessee location because of the lower cost of operations in the location. As of December 31, 2024, DMINT had 1,000 computers and had 400 computers online and mining for Bitcoin. At March 31, 2025, DMINT had mined 57.77 Bitcoin. On October 21, 2024, DMINT filed a Registration Statement on Form S-1 with the Securities and Exchange Commission (the “SEC”), relating to the proposed spinoff from the Company and resulting issuance of equity of DMINT to OLB shareholders. On August 16, 2022, DMINT Real Estate Holdings, Inc. (“DREH”), a wholly owned subsidiary of DMINT, purchased 4.73 acres of land and a building located at 565 Industrial Park Drive, Selmer, McNairy County, Tennessee for a purchase price of $408,000. DMINT established a Bitcoin mining data center powered on the local power grid. The location is expected to have capacity for up to 5,000 mining machines. The Company plans to complete the buildout of the building to be fully operational with 5,000 machines in 2025 following a spin-off of DMINT into a standalone entity, which is currently in process and has not yet been consummated. As stated above, we are currently in the process of spinning off DMINT into a stand-alone entity. Our planned DMINT spin-off distribution (the “Spin-Off Distribution”) will occur upon DMINT’s Form S-1 Registration Statement filing being declared effective by the Securities and Exchange Commission, and the approval by the Nasdaq Capital Market (“NASDAQ”) of the listing of DMINT’s common shares on the NASDAQ. Following the consummation of the Spin-Off Distribution, of which there is no guarantee, (i) DMINT will no longer be a wholly owned subsidiary of the Company and will be a stand-alone entity, (ii) all of DMINT’s outstanding shares of common stock will be owned by the existing stockholders of the Company, and (iii) DMINT Real Estate Holdings, Inc. (“DREH”) will remain a wholly owned subsidiary of DMINT CrowdPay.us™ operates a white label capital raising platform that targets small and midsized businesses seeking to raise capital and registered broker-dealers seeking to host capital raising campaigns for such businesses by integrating the platform onto such company’s or broker-dealer’s website. Our CrowdPay platform is tailored for companies seeking to raise money through a crowdfunding offering of between $1 million and $50 million pursuant to Regulation CF under Title III of the Jumpstart Our Business Startups (the “JOBS Act”), offerings pursuant to Rule 506(b) and Rule 506(c) under Regulation D of the Securities Act of 1933, as amended (the “Securities Act”), and offerings pursuant to Regulation A+ of the Securities Act. Our platform, which can be used for multiple offerings at once, provides companies and broker-dealers with an easy-to-use, turnkey solution to support company offerings, allowing companies and broker-dealers to easily present online to potential investors relevant marketing and offering materials and by aiding in the accreditation and background check processes to ensure investors meets the applicable requirements under the rules and regulations of the Securities Exchange Commission (the “SEC”). CrowdPay charges a fee to each company and broker-dealer for the use of its platform under a fee structure that is agreed to between CrowdPay and the Company and/or broker-dealer prior to the initiation of the offering. CrowdPay also generates revenues by providing ancillary services to the companies and broker-dealers utilizing our platform, including running background checks and providing anti-money laundering and know-your-customer compliance. CrowdPay is not a registered funding portal or a registered broker-dealer. 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 share exchange transaction closed on January 3, 2022. Prior to the closing of the share exchange transaction, Ronny Yakov, Chairman and CEO of the Company and John Herzog, a shareholder of the Company, owned 100% of the equity of Crowd Ignition. Crowd Ignition is a web-based crowdfunding software system. The software provides broker-dealer, merchant banks and law firms a platform to market crowdfunding offerings, collect payments and issue securities. The software has been developed in response to, and to comply with, recent changes in investment regulations including Regulation D 506(b) and 506(v), Regulation A+ and Title III of the Jobs Act (Regulation CF), including raising the crowdfunding limit from $1.07 million to $5.0 million. Crowd Ignition is one of only about 50 companies registered with the SEC to provide the services permitted under Regulation CF. 25 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 Moola Cloud, LLC, a Florida limited liability company (formerly Cuentas SDI, LLC, the “LLC”). The LLC will enable the Company to focus on marketing to the underbanked communities utilizing the LLC’s debit and calling card platform’s ability for users to reload cash to their account and provide instant access to digital products to their customers’ Mobile App and digital wallet into its electronic portal. The Company plans to market to the LLC’s merchant network, which currently has approximately 31,600 locations in the United States, the ability of having one POS system that will allow the retail customer to purchase products using OLB’s payment processing solutions along with the ability to reload payment cards and their mobile phone minutes. On May 20, 2024, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) dated as of May 20, 2024 with the minority member of the LLC whereby it acquired the remaining 19.99% of the membership interests of the LLC for a purchase price of $215,500. As a result, effective May 20, 2024, the Company owns 100% of the LLC. On August 14, 2024, the LLC changed its name to Moola Cloud, LLC. The Agreement contains a restrictive covenant whereby for a period of three (3) years from the closing, none of Seller, including its any of its principals, executives, officers, directors, managers, employees, salespersons, or entities in which such principal has any interest, will directly or indirectly (i) induce, attempt to induce, interfere with, disrupt or attempt to disrupt any past, present or prospective business relationship, solicit, market to, endeavor to obtain as a customer, or contract with any merchant in order to provide services to such Merchant in competition with the Company; or (ii) solicit or interfere with, disrupt or attempt to disrupt any past, present or prospective business relationship, contractual or otherwise any person or entity that is a party to any contract assigned to the Company to terminate its contractual or business relationship with the Company. On April 26, 2024, the Company filed with the Delaware Secretary of State a Certificate of Amendment to Certificate of Incorporation (the “Certificate of Amendment”) which became effective on April 26, 2024 to effect a one-for-ten (1:10) reverse stock split (the “Reverse Stock Split”) of the shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) The Reverse Stock Split was approved by the Company’s stockholders at a special meeting on April 26, 2024. As a result of the Reverse Stock Split, every ten (10) shares of issued and outstanding Common Stock was automatically combined into one (1) issued and outstanding share of Common Stock, without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split and any fractional shares resulting from the reverse stock split were rounded down to the nearest number of whole shares so that we will issue cash in lieu of any fractional shares that such stockholder would have received as a result of the Reverse Stock Split. Following the Reverse Stock Split, the number of shares of Common Stock outstanding was reduced from 18,103,462 shares to 1,810,346 shares. The shares of Common Stock underlying the Company’s outstanding stock options and warrants will be similarly adjusted along with corresponding adjustments to their exercise prices. The number of authorized shares of Common Stock under the Certificate of Incorporation will remain unchanged at 50,000,000 shares. Results of Operations Management’s discussion and analysis of financial condition and results of operations (“MD&A”) includes a discussion of the consolidated results from operations of The OLB Group, Inc. and its subsidiaries for the three months ended March 31, 2025 and 2024. Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024 For the three months ended March 31, 2025, we had total revenue of $2,321,536 compared to $3,496,182 of revenue for the three months ended March 31, 2024, a decrease of $1,174,646 or 33.6%. We earned $2,058,277 in transaction and processing fees, $12,124 in merchant equipment rental and sales, $72,637 in other revenue from monthly recurring subscriptions, $85,482 of revenue from the Cryptocurrency Mining segment and $93,016 of revenue from the sale of digital products. For the three months ended March 31, 2024, we earned $2,288,209 in transaction and processing fees, $20,183 in merchant equipment rental and sales, $108,868 in other revenue from monthly recurring subscriptions, $211,617 of revenue from the Bitcoin Mining segment and $867,305 of revenue from the sale of digital products. We had a decrease in revenue primarily due to a decrease in revenue related to Moola Cloud, LLC, as the Company transitions to new vendors to obtain better pricing and is working to acquire new vendors to replace others that have gone out of business. For the three months ended March 31, 2025, we had processing and servicing costs of $1,808,814 compared to $2,753,593 of processing and servicing costs for the three months ended March 31, 2024, a decrease of $944,779 or 34.3%. Processing and servicing costs decreased in conjunction with the decreased revenue. Amortization expense for the three months ended March 31, 2025 was $3,972 compared to $190,961 for the three months ended March 31, 2024, a decrease of $186,989 or 97.9%. We record amortization expense on our merchant portfolio, trademarks and natural gas purchase rights. The decrease in the current period is due to most of the assets being fully amortized in 2024. Depreciation expense for our Bitcoin Mining Segment was $258,349 for the three months ended March 31, 2025 compared to $749,520 for the three months ended March 31, 2024, a decrease of $491,171 or 65.5%. The decrease in the current period is due to assets being impaired in 2024. 26 Salary and wage expense for the three months ended March 31, 2025, was $531,356 compared to $1,016,338 for the three months ended March 31, 2024, a decrease of $484,982 or 47.7%. The decrease is due to a decrease in headcount and a $271,000 decrease for stock based compensation. Professional fees for the three months ended March 31, 2025, were $77,573 compared to $648,443 for the three months ended March 31, 2024, a decrease of $570,870 or 88%. Professional fees consist mainly of audit and legal fees. The decrease in the current period is due to a decrease in legal fees as the Company’s legal related activity was much less in the current period. General and administrative expenses for the three months ended March 31, 2025, was $490,151 compared to $1,024,892 for the three months ended March 31, 2024, a decrease of $534,741 or 52.2%. The decrease was mainly due to an approximately $212,000 decrease in Bank Fees, a decrease of $43,000 in Computer & Software Expenses, a $62,000 decrease in Utility Expense and a decrease of $76,000 in insurance expense. For the three months ended March 31, 2025, we had total other expense of $240,319 compared to total other income of $486,947 for the three months ended March 31, 2024. In the current period we incurred interest expense for a related party of $225,319 and other expense of $15,000. In the prior period we had unrealized gain on investment of $274,731, a $225,229 gain on the sale of bitcoin, and $13,013 of interest expense. Our net loss for the three months ended March 31, 2025, was $1,088,998 compared to $2,400,618 for the three months ended March 31, 2024. This was a decrease in our net loss of $1,311,620 for the reasons discussed above. Liquidity and Capital Resources Changes in Cash Flows Operating Activities For the three months ended March 31, 2025, we used $155,842 of cash in operating activities, which included our net loss of $1,088,998 offset by $262,073 for amortization and depreciation expense and $423 for lease expense and net changes in operating assets and liabilities of $636,785. For the three months ended March 31, 2024, we used $424,700 of cash in operating activities, which included our net loss of $2,400,618 offset by $940,481 for amortization and depreciation expense, $304,874 for stock-based compensation, $225,229 gain on sale of bitcoin, $274,731 gain on investment and net changes in operating assets and liabilities of $1,230,523. 27 Financing Activities For the three months ended March 31, 2025, we received net cash of $157,746 in financing activities as a result of receiving $18,881 from our CEO and $187,913 from the sale of common stock, and an increase in our cash overdraft of $28,671. We made repayments on our note payable of $38,838 and to our CEO of $38,881. For the three months ended March 31, 2024, we received net cash of $249,013 in financing activities as a result of receiving $182,150 from our CEO, $9,775 from the sale of common stock, $6,840 in proceeds from exercise of options by related parties, and an increase in our cash overdraft of $91,020. We made repayments on our note payable of $40,772. Liquidity and Capital Resources At March 31, 2025, the Company had cash of $29,340 and negative working capital of $9,277,512. On February 16, 2024, the Company entered into an Equity Distribution Agreement (the “Agreement”) with Maxim Group LLC (“Maxim”) to create an at-the-market equity program. Under the Agreement, the Company may offer and sell its common stock, par value $0.0001 per share, from time to time having an aggregate offering amount of up to $15,000,000 (the “Shares”) during the term of the Agreement through Maxim, as sales agent (the “ATM Offering”). The Company has agreed to pay Maxim a commission equal to 3.0% of the gross sales price from the sales of Shares pursuant to the Agreement. In addition, the Company has agreed to reimburse Maxim for its costs and out-of-pocket expenses incurred in connection with its services, including the fees and out-of-pocket expenses of its legal counsel. As of March 31, 2025, the ATM Offering has resulted in proceeds of $1,278,836. On August 12, 2024, the Company entered into an agreement with Yakov Holdings LLC, an entity controlled by Mr. Yakov (the “Yakov LLC”) whereby the Yakov LLC committed to loan to the Company up to Five Million Dollars ($5,000,000) (the “Yakov LLC Loan”). The Yakov LLC Loan is revolving in nature, allowing the Company to borrow, repay, and re-borrow amounts under the terms and conditions set forth herein, provided that the total outstanding amount shall not exceed Five Million Dollars ($5,000,000). The interest rate of the Yakov LLC Loan is twelve percent (12%) and it matures on June 18, 2025. In addition, the Yakov LLC Loan is secured by a first priority security interest for the benefit of the Yakov LLC over all of the assets of the Company. During the three months ended March 31, 2025, Mr. Yakov made payments on behalf of the Company in the amount of $18,881. As of March 31, 2025, the amount due to Yakov LLC is $1,183,960 and $225,319 of principal and interest, respectively. The Company has reviewed its cash flow activity during 2024 and the first three months ended March 31, 2025 and projected cash flow forecast for the remainder of 2025. At March 31, 2025, the Company had cash of approximately $29,000, accounts receivable of approximately $128,000, and other prepaids and receivables of approximately $682,000. The Company has performed an overall analysis of market trends to determine whether or not it has sufficient liquidity to continue as a going concern for a period of at least twelve months from the date of this Annual Report. 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. Without raising additional capital, either via additional advances made pursuant to the ATM, related party loan or from other sources, there is substantial doubt about the Company’s ability to continue as a going concern through March 31, 2026. The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of presentation contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. Critical Accounting Policies Refer to our Form 10-K for the year ended December 31, 2024, for a full discussion of our critical accounting policies. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item. 28