What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-04-16 compared with 2024-04-01 · 168 added, 50 removed, 108 unchanged (67% of the section changed)

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Unless the context otherwise requires, all references to “our Company,” “we,” “our” or “us” and other similar terms means Onfolio Holdings Inc., a Delaware corporation, and our wholly owned subsidiaries.

Revenue in 2023 was up 136% in 2023 compared to 2022, an increase of just over $3,000,000.

This growth was achieved through the acquisitions we made in Q4 2022, which we held for a full year in 2023, and the additional acquisition we made in Q1 2023.

Our gross profit margin in 2023 was 62%, up from 54% in 2022.

This improvement was achieved through an effort by management to reduce the operating costs of our online businesses, driving them to run more efficiently.

In 2023 we noticed a slowdown of lending and a rise in interest rates, and we acted to weather the more difficult capital raising environment through austerity measures, using our remaining cash to extend our working capital runway as long as possible.

Despite those challenges, we closed and obtained full control on one acquisition, RevenueZen, in January 2024, which historically generated $1.4M in revenue in 2023.

Towards the end of 2023, we focused more on targeting B2B agencies and productized services for acquisition.

Historically, our best performing assets have been B2B marketing agencies, and the acquisition opportunities are rich in this space.

In 2024, we will look for opportunities to use our growing stature and track record to raise capital on attractive terms — this is a large area of focus for management.

Due to our cash constraints and desire to avoid issuing additional shares of common stock, we intend to use a mixture of debt, including seller notes, and preferred shares to close acquisitions moving forward — such as can be seen with our recent RevenueZen acquisition.

We are looking to make more acquisitions over the coming months of a similar structure, allowing us to maximize our runway while reducing our burn with a mixture of accretive acquisitions, and continuous expense reduction and optimization efforts.

Organic growth is also a major area we are looking to improve, but inorganic growth through acquisitions will ultimately be necessary and will be the catalyst for our profitability.

In the course of our regular financial review and in compliance with ASC350, in September 2023 we conducted a reassessment of our portfolio of subsidiaries, their performance and recent market developments.

Based on this review, which considered factors such as the financial landscape, the evolving M&A dynamics in this landscape, and prevailing market conditions, we have determined that the carrying value of certain subsidiaries no longer reflects their recoverable amount.

We noted lower than expected operating results for ProofreadAnywhere, WP Folio, and SEO Butler and as such performed a discounted cash flow test to determine the amount of impairment necessary.

We used a higher discount rate than previous valuations due to the increased interest rates and reduced business performances.

We concluded based on the recoverability test performed for Proofread Anywhere, WP Folio, and SEO Butler, that impairment related to goodwill was needed in the amounts of $2,061,763, $580,284, and $420,532, respectively, which were recognized in the Q3 2023 Form 10Q.

As always, management is dedicated to continuous improvement, pursuit of growth, and commitment to our shareholders.

In 2024, we delivered meaningful progress toward sustained profitability.

Revenue increased 50% year-over-over to $7.8M, driven primarily through the successful acquisition of three new businesses, RevenueZen, DDSRank, and Eastern Standard.

Although our gross profit margin declined slightly to 58% in 2024 from 62% in 2023—largely due to the new acquisitions having lower margins than our existing portfolio—we significantly improved our operating loss, reducing it from $9.2M to $2.5M.

This improvement was driven by the profitable acquisitions, continued organic growth, continued disciplined expense management, and a reduction in impairment charges.

During 2024, we focused on reducing our losses and growing our revenues, and made strong progress to that end.

Crucially, in Q4 2024 we recorded a positive net income of $136K for the quarter, a significant step in moving us towards profitability.

When we started our Company in 2020, we held four core beliefs.

That there are a vast number of profitable online businesses that could be seen as undervalued and under optimized.

That by aggregating these businesses, we could reduce the significance of idiosyncratic risks of any one company as it became a smaller part of a more resilient portfolio.

That our existing operational expertise, combined with a commitment to continually improve it, would allow us to operate these businesses as or more effectively than their existing management.

That being a public company would give us access to capital at a lower cost than the returns generated by the acquired companies.

In short, we believed there were many overlooked and mispriced online businesses for sale, and we were developing the due diligence and operational expertise to acquire, and grow them.

Our goal has always been to become a world-class serial acquirer, using our unique operating and financial leverage on a diverse portfolio of online businesses, to deliver strong compounded returns to our shareholders.

Further, during 2024, we experienced success with the following:

Strategic Acquisitions

We acquired three new businesses with eight combined revenue streams, contributing a total of $6M in revenue.

In January 2024, we acquired RevenueZen , an SEO-led content marketing agency with $1.4M revenue and $227K in net profit.

The RevenueZen team brought with it the operational skillset and management discipline that enabled us to assign them the management of SEOButler, and towards the end of 2024, Contentellect.

This deal was funded using promissory notes, series A preferred shares, and seller notes—leading to the belief that we could close acquisitions with little out of pocket capital, a theme for 2024.

In July 2024, we acquired DDSRank, a smaller agency focused on SEO for dentists.

Despite its smaller size ($500K revenue, $200K net profit), we liked DDSRank for both its operational improvement opportunities, as discussed below, and for its ability to be “tucked-in” to the SEO portfolio.

We funded the deal using a combination of OA SPV capital ($200K), series A preferred shares ($200K), and a seller note ($200K).

Our only out-of-pocket expenses were legal, diligence, and finder’s fees.

In October 2024, we acquired Eastern Standard, our largest acquisition to date in terms of revenue ($4M), and second largest in terms of enterprise value ($2.4M) – Proofread Anywhere remains the largest with a $4.5M enterprise value.

Like DDSRank, the OA SPV provided the upfront capital in exchange for a minority stake, while we acquired a majority interest using series A preferred shares and a seller note.

Each of these acquisitions were both accretive and strategically valuable.

One of the pillars of our acquisition strategy and business model is that every acquisition we make adds profit to our bottom line.

The limiting factor is the upfront capital needed to acquire target companies.

Given that we started the year with a low cash balance and large losses, we needed to find a way to reduce those losses without deploying significant capital.

By developing creative, low- or no-cash acquisition structures, we were able to make accretive business purchases, grow our consolidated profits, and avoid deploying large sums of capital in the process, without diluting shareholders or raising equity at unattractive valuations.

Operational Improvements.

Alongside our acquisition activity, we made significant progress in building the operational capacity of our portfolio.

The reason many of the businesses we evaluate are considered “undervalued” is because of the very real risk that they do not perform well post-acquisition.

Our challenge is to make sure that we not only acquire strategic target companies, but also operate those companies profitably post-acquisition.

During fiscal years 2023 and 2024, we implemented a revised management and operational structure by (i) adding highly competent operators through our acquisitions, particularly from the RevenueZen and Eastern Standard teams, which has strengthened our capacity, and (ii) putting a high emphasis on portfolio synergies and efficient management.

As a holding company, we must build operational expertise that will assist us in targeting businesses that maintain and then grow their revenues and profits.

We believe we made significant progress in this area during 2024.

OA SPV Capital Model

In March 2024, we launched our OA SPV Capital Model to enable accredited retail investors to co-invest with our Company in acquisitions.

For us this was a game-changer.

The OA SPVs enabled us to close both the DDSRank and Eastern Standard acquisitions, and we expect the OA SPV Capital Model to assist us with making additional acquisitions in the future without the need to deploy any of our Company’s own cash reserves.

For the DDSRank acquisition, the OA SPV funded 33% of the transaction, and for the Eastern Standard acquisition, the OA SPV funded 30% of the transaction.

The OA SPV Capital Model provided us with the opportunity to use preferred shares and a seller note for the other 67% and 53% (as adjusted as described in “ Recent Developments” below) ownership respectively.

The OA SPV Capital Model has a high capital cost because we are required to give up significant portions of equity in the acquired businesses, but it serves as an essential tool for us at a time but when debt financing and other capital is unavailable to our Company on attractive terms.

This was the solution we found that still allowed us to acquire accretive, quality businesses.

Although we do not plan to continue to use OA SPVs in the long term due to the high cost of the capital, we believe the OA SPV Capital Model will be part of our acquisition strategy during 2025, along with series A preferred shares and seller notes.

Fundamentally, we believe the OA SPV Capital Model was a success since we are in the business of acquiring business with positive cashflow, and the OA SPV Capital Model allowed us to do so without using our own money.

Series A Preferred Shares on OTCQB

On October 30, 2024, we obtained an Assignment of an Over-the-Counter Quoting and Trading Symbol for our series A preferred shares.

Specifically, our series A preferred shares trade on the OTCQB, a public market tier in the US, under the symbol ONFOP.

Previously, we raised ~$1.5M in capital from the sale of our series A preferred shares to accredited investors and issued another ~$3M series A preferred shares to sellers of acquisition companies as part of the acquisition consideration.

Series A preferred shareholders are now free to quote their shares for sale on the OTCQB and any purchaser, whether accredited or not, can purchase such shares on the OTCQB in a brokerage transaction.

We believe that now that our series A preferred shares are quoted on the OTCQB, we will be able to continue to use these shares to raise additional capital and as acquisition consideration, which will enable us to be less reliant on our OA SPV Capital Model.

On the Path to Profitability

Throughout 2024, we have significantly reduced our losses and Q4 saw a positive net income of $136K.

We believe positive free-cashflow will occur in the near term.

Although we are nearing a point where we can continue operations without requiring additional fundraising or acquisitions to achieve profitability, we intend to continue to pursue both future fundraising and acquisition activities since we believe that both of these activities will continue to accelerate our growth and long-term value creation.

With this foundation, we expect to move into sustained profitability in the near term, and we will continue with the business plans we set forth and we will strive to make further gains in all areas of our business in 2025.

Our 2025 focus will be to continue to focus on these key areas and build on the Onfolio business model:

find profitable businesses, acquire them, improve their operations and grow them, use those earnings, plus additional capital, to acquire more and repeat.

Recent Developments

In January 2024, we acquired RevenueZen.com, an online service provider that works with B2B brands to grow their organic and referral traffic.

ReveueZen offers B2B marketing services such as search-engine optimization, Linkedin marketing and content marketing.

RevenueZen enjoys a strong reputation in its field, specializing in working with startups, healthcare, professional services, renewable energy, and financial services businesses, among others.

Our Company holds an 88% ownership stake in RevenueZen, while RevenueZen founders received a 12% roll-over equity interest and will serve in leadership roles in the Onfolio-owned RevenueZen team.

In October 2024, we acquired Eastern Standard, a premier digital agency specializing in brand strategy, website development, and digital marketing.

Eastern Standard provides tailored solutions across various industries, helping clients enhance their online presence through strategic branding, search engine optimization (SEO), and user-focused design.

Our Company holds a 70% ownership stake in Eastern Standard, while the OA SPVs maintain a 20% equity interest, and the Eastern Standard founders maintain a 10% roll-over equity interest and continue to serve in leadership roles on the Eastern Standard team.

On September 20, 2024, Eastern Standard LLC (“ Eastern Standard Delaware ”), a Delaware limited liability company and the Company’s majority owned subsidiary, entered into an Asset Purchase Agreement (“ Eastern Standard Asset Purchase Agreement ”) with Eastern Standard, LLC (“ Eastern Standard Pennsylvania ”), a Pennsylvania limited liability company, Mark Gisi, James Keller and Vincent Giordano.

Pursuant to the Eastern Standard Asset Purchase Agreement, Eastern Standard Delaware will purchase from Eastern Standard Pennsylvania all of Eastern Standard Pennsylvania’s assets utilized in the operation of its business of providing digital marketing services, including integrated branding, and digital customer experiences (the “ ES Business Assets ”).

Pursuant to the Eastern Standard Asset Purchase Agreement, and subject to the terms and conditions contained therein, at the closing, Eastern Standard Pennsylvania agreed to sell to Eastern Standard Delaware the ES Business Assets, all as more fully described in the Eastern Standard Asset Purchase Agreement.

The aggregate purchase price for the ES Business Assets was $2,160,000.

As of the closing, the Company owns 70% of Eastern Standard Delaware in exchange for $1,250,000 payable pursuant to two secured promissory notes which are guaranteed by the Company, and $410,000 of the Company’s series A preferred shares.

The entities comprising the Company’s special purpose vehicle funding program owns an aggregate of 20% of Eastern Standard Delaware in exchange for $500,000 payable in cash.

Eastern Standard Pennsylvania owns a 10% roll-over equity interest in Eastern Standard Delaware.

The acquisition closed on October 18, 2024.

The secured promissory notes consist of:

(i) a $400,000 promissory note made by Eastern Standard Delaware in favor of Eastern Standard Pennsylvania with an interest at 8% per annum providing for interest only payments with a balloon payment of principal and interest at the end of one hundred twenty (120) days (“ Short Term ES Promissory Note ”);

(ii) an $850,000 promissory note made by Eastern Standard Delaware in favor of Eastern Standard Pennsylvania with an interest rate at 8% per annum providing for interest only payments with a balloon payment of principal and interest at the end of two years (“ ES Promissory Note ”);

and (iii) a Guaranty Agreement made by the Company to secure the payment of Eastern Standard Delaware pursuant to the Short Term ES Promissory Note, the ES Promissory Note and the other obligations of the Company and Eastern Standard Delaware under the Eastern Standard Asset Purchase Agreement.

In February 2025, the cash payment required to satisfy the obligations under the Short Term ES Promissory Note was provided by the OA SPVs.

As a result, the ownership structure of Eastern Standard Delaware was adjusted, with the OA SPVs increasing its aggregate ownership percentage to 38%, while the Company’s ownership interest was adjusted to 53%.

The 10% roll-over equity interest held by Eastern Standard Pennsylvania founders remains unchanged.

Emerging Growth Company

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Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our initial public offering, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.07 billion or more, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our initial public offering, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.07 billion or more, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Principal Factors Affecting Our Financial Performance

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Components of Results of Operations

The Company reported a net loss of $8,144,821, which includes $5,291,055 in non-cash expenses, for the year ended December 31, 2023 compared to a net loss of $4,234,357, which includes $1,155,083 in non-cash expenses, for the year ended December 31, 2022.

The Company reported a net loss of $1,773,942, which includes $1,084,624 in non-cash expenses and a $368,464 non-cash gain, for the year ended December 31, 2024 compared to a net loss of $9,150,066, which includes $6,289,015 in non-cash expenses, for the year ended December 31, 2023.

The components of the increase in net loss for the current period are as follows:

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Revenue increased by $2,622,091, or 50% for the year ended December 31, 2024 compared to 2023.

The increase is primarily due to revenue from our three acquisitions completed during the fourth quarter of fiscal 2022, which increased revenue by approximately $2,500,000, including approximately $1,800,000 in digital product sales along with an increase of approximately $640,000 from Contentellect, acquired in the first quarter of fiscal 2023.

This increase was offset by a decline in product sales and advertising revenue from MightyDeals and other pre-IPO assets.

The increase is primarily due to revenue from our RevenueZen acquisition completed during the first quarter of fiscal 2024 which increased revenue by approximately $2,073,000, our DDS Rank acquisition completed at the end of the second quarter of fiscal 2024, which increased revenue by approximately $142,000, and our Eastern Standard acquisition completed during the fourth quarter of fiscal 2024, which increased revenue by approximately $974,000.

This increase was partially offset by a decline in website management revenue, and a decline in digital product sales within the Company’s Mighty Deals subsidiary and a decline in revenue from its SEO Butler subsidiary.

Cost of Revenue

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Total Cost of Revenue

Cost of revenue increased by $975,793, or 96%, due to the increase resulting from the Company’s recent acquisitions.

The Company’s gross profit margins increased in the current period compared to the prior period due to the Company’s efforts to streamline operations and create efficiencies, and due to the increased sales from digital product sales with higher margins in the new businesses.

Cost of revenue increased by $1,320,045, or 66%, due to the Company’s recent service agency acquisitions offset by the decrease in digital product sales within the Company’s Mighty Deals subsidiary.

The Company’s gross profit margins decreased slightly to 57% in the current period compared to 62% in the prior period.

The components most significant to the Company’s cost of revenue are the costs of labor for service fulfillment, content creation, website hosting and maintenance costs and the costs of acquiring new inventory products for physical product sales.

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Selling, General and Administrative

General and Administrative expenses increased by $1,768,823 or 41% during the year ended December 31, 2023 as compared to 2022.

The increase was primarily due to an increase in advertising and marketing costs of $1,200,000, which includes the impact of new businesses acquired in late 2022 and early 2023, an increase in amortization expense of $615,000 associated with the acquired intangible assets not present in the comparable period, a $90,000 increase in other general and administrative costs including stock-based compensation, travel, merchant fees, and increased costs related to being a public company of $279,000, offset by a decrease in payroll and contractor costs of $85,000

General and Administrative expenses decreased by $263,355 or 4% during the year ended December 31, 2024 as compared to 2023.

The decrease was primarily due to a decrease in advertising and marketing costs of $275,000, and a decrease in stock based compensation expense of $535,000, offset by an increase in amortization expense of $226,000 associated with the acquired intangible assets not present in the comparable period, an increase in payroll and contractor costs of $273,000, and a $110,000 increase in other general and administrative costs including 401k contributions and guaranteed payments, referral commissions, and costs related to being a public company.

Our general and administrative expenses consist primarily of consulting related expenses paid to contractors, stock-based compensation, advertising and marketing costs, and other expenses.

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Professional Fees and Acquisition Costs

Professional fees increased by $650,469, or 128% during the year ended December 31, 2023 compared to 2022 primarily due to increased due to increased legal and accounting costs associated with the Company’s compliance requirements as a public company.

The Company also incurred $326,899 during the year ended December 31, 2023 compared to $527,792 during the year ended December 31, 2022, including audit, legal and other professional fees related to acquisitions and potential acquisitions.

Professional fees decreased by $211,659, or 18% during the year ended December 31, 2024 compared to 2023 primarily due to decreased legal and accounting costs associated with the Company’s compliance requirements as a public company and the change in independent public accounting firm during 2024.

The Company also incurred $264,731 in acquisition costs during the year ended December 31, 2024 compared to $326,899 during the year ended December 31, 2023, including audit, legal and other professional fees related to acquisitions and potential acquisitions.

We expect acquisition costs to remain significant as we continue to grow based on acquisitions.

Impairment Loss

During the year ended December 31, 2024, the Company incurred an impairment loss of $121,000 related to Vital Reaction as a result of decreasing operating cash flows.

During the year ended December 31, 2023, after taking into account the lower than expected performances of the following businesses and the rising interest rates, the Company recognized impairment losses of $2,642,649 related to the BCP Media Acquisition, $580,284 related to the BWPS Acquisition, and $903,897 related to the SEO Butler Acquisition, $700,000 related to Mighty Deals website domains and $84,000 related to Pretty Neat Creative, operating under Onfolio Crafts LLC, and $105,937 related to various website domains operating under Onfolio Assets LLC for total aggregate impairment expense $5,016,764.

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Other Income and Expense

Total other income was $92,778 for the year ended December 31, 2023 compared to other expense of $123,212 for the year ended December 31, 2022.

The increase in other income was driven by higher interest income on the Company’s increased cash balances from funds raised in the Company’s initial public offering in the third quarter of 2022, and an impairment loss on sale of assets in 2022 not seen in 2023.

Total other income was $733,906 for the year ended December 31, 2024 compared to other income of $92,778 for the year ended December 31, 2023.

The increase in other income was driven by the change in fair value of the contingent consideration owed on the RevenueZen Acquisition, offset by higher interest expenses on the outstanding promissory notes.

Business Segment Results of Operations

We operate in two business segments:

Business to Business (“B2B”) and Business to Consumers (“B2C”).

We organize our business segments based on the nature of products and services offered, and the economic characteristics of each segment.

Following is a brief description of the activities of our business segments:

Selected Financial Data by Business Segment

Net sales and operating profit of the Company’s business segments exclude intersegment sales, cost of sales and profit as these activities are eliminated in consolidation and thus are not included in management’s evaluation of performance of each segment.

Sales, cost of sales and operating profit for each of our business segments were as follows:

Total revenue

Cost of Sales

Total Cost of Sales

Operating income (loss)

$ (1,033,590 )

Total business segment operating income (loss)

Unallocated items

Total consolidated operating income (loss)

$ (2,507,851 )

$ (9,242,843 )

Management evaluates performance on our contracts by focusing on net sales and operating profit and not by type or amount of operating expense.

Consequently, our discussion of business segment performance focuses on net sales and operating profit, consistent with our approach for managing the business.

This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on net sales and operating profit and monitors performance on our contracts in a similar manner through their completion.

Our B2B segment includes the results of operations of Eastern Standard, RevenueZen, DDS Rank, SEO Butler, Contentellect, DealPipe and Onfolio LLC.

These entities share similar characteristics such as customers being businesses, and being primarily service-related businesses.

B2B revenue increased by $2,996,664 or 218% during the year ended December 31, 2024 compared to the year ended December 31, 2023.

This increase was partially offset by a decline in website management revenue.

B2B total operating income increased by $1,038,452 or 100% during the year ended December 31, 2024 compared to the year ended December 31, 2023.

The increase was a result of the increased revenue and gross profit offset by the increase in intangible asset amortization for the newly acquired businesses in the year ended 2024.

Our B2C segment includes the results of operations of Proofread Anywhere, Mighty Deals, and Vital Reaction.

These entities share characteristics such as the end customers being individual consumers, and sales being more focused on product sales, including digital sales.

B2C revenue decreased by $374,573 or 10% during the year ended December 31, 2024 compared to the year ended December 31, 2023.

The decrease is primarily due to a decline in digital product sales within the Company’s Mighty Deals subsidiary.

B2C incurred total operating income of $482,100 during the year ended December 31, 2024 compared to an operating loss of $4,040,722 during the year ended December 31, 2023, primarily due to the Company’s B2C segment incurring an impairment loss of $4,112,870 compared to no impairment charge for the year ended December 31, 2024.

Liquidity and Capital Resources

As of December 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents of $982,261 which was mainly on account of raising capital from sale of common stock and warrants in our IPO of $12,255,470.

In addition, the Company has raised $600,000 during a private offering of Preferred stock and repaid $2,439,000 on its acquisition-related notes payable.

Our primary source of operating cash inflows are payments from portfolio companies.

In addition, the Company has raised $600,000 pursuant to a private offering of Series A preferred stock through December 31, 2023, and an additional $693,000 subsequent to December 31, 2024, $618,000 in notes payable and repaid $2,164,498 on its acquisition notes.

The Company’s recurring losses from operations and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern.

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Net cash used in operating activities was $1,168,363 and $2,751,838 for the years ended December 31, 2024 and 2023.

The slight decrease was primarily from Company’s efforts to streamline costs, partially offset by the increased general and administrative costs from the acquired businesses for a full year compared to partial periods in the year ended December 31, 2022.

The decrease was primarily from the increase in revenues and decreased general and administrative costs as the Company expanded its operations through its business acquisitions in the past year.

Investing Activities

Net cash used in investing activities was $850,000 and $4,283,219 for the years ended December 31, 2023 and 2022.

Net cash provided by investing activities was $451,000 for the years ended December 31, 2024 compared to cash used in investing activities of $850,000 for the year ended December 31, 2023.

For the year ended December 31, 2024 the cash provided was from the sale of our WP Folio subsidiary assets for $780,000 offset by cash used to purchase additional businesses and cost method investments.

For the year ended December 31, 2023, the Company used $850,000 to acquire a single business during the first quarter.

During 2022, the Company used $4,261,413 to acquire three businesses during the fourth quarter, $67,500 in additional investments in the JVs which, offset by $45,694 of proceeds from the sale of a website.

Financing Activities

Cash flows from financing activities was cash used of $2,156,650 and cash provided of $12,109,373 for the years ended December 31, 2023 and 2022.

During the year 2023, we raised $565,000 from the sales of preferred stock in a private exempted offering, which was offset by the repayment of the acquisition notes payable of $2,439,000, payments of preferred dividends of $213,691, and payments on note payables of $68,959 During the year 2022, we raised $12,104,667 in net proceeds from our initial public offering, $321,500 from sales of preferred stock in a private exempted offering, and $44,000 of proceeds from notes payable, which were partially offset by dividend payments of $142,239, payments on notes payable of $3,555 and payment of the contribution towards its investment in JV IV of $215,000.

Cash flows from financing activities was cash provided of $326,336 and cash used of $2,156,650 for the years ended December 31, 2024 and 2023.

During the year 2024, we received $881,650 in proceeds from notes payable and $200,000 in proceeds from notes payable related parties which was offset by the payments of $321,442 in dividends to preferred stockholders, payments made on notes payable totaling $386,339, payments of $1,000 on related party notes payable, payments on contingent consideration of $59,093, and distributions of $20,400 to the non-controlling interest holders of our majority owned subsidiaries.

Off-Balance Sheet Arrangements

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In such cases, our original investments are recorded at the cost to acquire the interest and any distributions received are recorded as income.

Our investments in OnFolio JV I, LLC (“ JV I ”), OnFolio JVII, LLC (“ JVII ”) and OnFolio JVIII, LLC (“ JVIII ”) are accounted for under the cost method.

All investments are subject to our impairment review policy.

The Company recognized the value of its investments in these joint ventures at carryover basis based on the amount paid by the CEO to the joint venture for Onfolio JV 1 LLC, and agreed to pay the joint venture the contribution for Onfolio JV II LLC and Onfolio JV III LLC at the carryover basis for the amount the interest was acquired for by the CEO.

The current investment in unconsolidated affiliates accounted for under the equity method consists of a 35.8% in interest in Onfolio JV IV, LLC (“ JV IV ”), which is involved in the acquisition, development and operation of online businesses to produce advertising revenue.

The initial value of an investment in an unconsolidated affiliate accounted for under the equity method is recorded at the fair value of the consideration paid.

Variable Interest Entities

Variable interest entities (“VIEs”) are consolidated when the investor is the primary beneficiary.

Variable interest entities (“ VIE s”) are consolidated when the investor is the primary beneficiary.

A primary beneficiary is the variable interest holder in a VIE with both the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and the obligation to absorb losses, or the right to receive benefits that could potentially be significant to the VIE.

The Company is not considered the primary beneficiary of any VIE’s as the joint ventures do not qualify as variable interest entities under the requirements of ASC 810, as the joint ventures 1) have sufficient equity to finance its activities; 2) have equity owners that as a group have the characteristics of a controlling financial interest in the business, through the ability to vote on a majority basis to change the managing member of the respective joint ventures, and 3) are structured with substantive voting rights.

Management concluded that the joint ventures do not qualify as variable interest entities under the requirements of ASC 810.

The Company accounts for its investments in the joint ventures under either the cost or equity method based on the equity ownership in each entity.

The Company, through its subsidiary Onfolio Management LLC, is the manager of Onfolio Agency SPV, LLC (“ OA SPV ”), and Onfolio Agency SPV 2, LLC (“ OA SPV 2 ”), collectively referred to as “OA SPVs”.

The Company does not hold any equity interest in OA SPVs, but will receive 10% of any cash distributions paid by OA SPV, and 20% of any cash distributions paid by OA SPV 2, to its members, when declared, as the management fee.

The Company can be removed as manager of OA SPVs through a unanimous vote of the members.

The Company determined that the fees it may receive for its role as manager do not constitute a variable interest in OA SPVs and will be accounted for as a revenue contract under ASC 606.

The Company, through its subsidiary RevenueZen, LLC, is the manager of CliAquire, LLC (“ CliAquire ”).

The Company holds a 5% members interest in CliAquire and will receive profit distributions based on its membership interest.

The Company can be removed as manager of CliAquire through a supermajority vote of the members.

The Company determined that the investment in CliAquire will be accounted for as a cost method investment.

Revenue Recognition

The Company follows the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (the “new revenue standard”) to all contracts using the modified retrospective method.

The Company primarily earns revenue through website management, digital services, advertising and content placement on its websites, product sales, and digital product sales.

Management services revenue is earned and recognized on a monthly basis as the services are provided.

Advertising and content revenue is earned and recognized once the content is presented on the Company's sites in accordance with the customer requirements.

Product sales are recognized at the time the product is shipped to the customer.

In certain circumstances, products are shipped directly by a supplier to the end customer at the Company's request.

The Company determined that it is the primary obligor in these contracts due to being responsible for fulfilling the customer contract, establishing pricing with the customer, and taking on credit risk from the customer.

The Company recognizes revenue from these contracts with customers on a gross basis.

Digital product sales represent electronic content that is transferred to the customer at time of purchase.

The Company also earns revenue from online course subscriptions that may have monthly or annual subscriptions.

In circumstances when a customer purchases an annual subscription upfront, the Company defers the revenue until the performance obligation has been satisfied.

Revenue is recognized based on the following five step model:

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Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company primarily earns revenue through website management, advertising and content placement on its online businesses, and product sales.

Management services revenue is earned and recognized on a monthly basis as the services are provided.

Advertising and content revenue is earned and recognized once the content is presented on the Company’s sites in accordance with the customer requirements.

Product sales are recognized at the time the product is shipped to the customer.

The Company amortizes acquired definite-lived intangible assets over their estimated useful lives.

Other indefinite-lived intangible assets are not amortized but subject to annual impairment tests.

Long-lived Assets

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If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.

Off-balance sheet arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Contractual commitments

The Company has entered into two asset purchase agreements which includes contingent earn-out payments based on specific performance criteria.

BWPS Business Acquisition:

The Company may be required to pay up to $60,000 to Hoang Huu Thinh, contingent upon the BWPS business meeting certain monthly gross revenue targets within three years from the closing date.

No earn-out payments have been made as of December 31, 2024.

(See Note 10 for further details.)

RevenueZen Acquisition:

The Company has determined the final amount obligated to pay to the sellers of RevenueZen, contingent upon the business achieving a specified gross profit threshold within one year to be $680,662.

As of December 31, 2024, no earn-out payments have been made.

(See Note 10 for further details.)

Also, see Note 15 – Subsequent Events for additional contractual commitments.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis