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May 16, 2022, 7:05 a.m. EDT


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(EDGAR Online via COMTEX) -- Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as "believes," "estimates," "could," "possibly," "probably," anticipates," "projects," "expects," "may," "will," or "should" or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management's current expectations and are inherently uncertain. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, our actual results may differ significantly from management's expectations. These risks and uncertainties include those factors described in greater detail in the risk factors disclosed in our Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those anticipated in these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents referred to or incorporated by reference, the date of those documents.

The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Company Overview and Description of Business


We are a FinTech company and PayFac that focuses on a suite of products in the merchant services and payment facilitator verticals that seeks to provide integrated business solutions to merchants throughout the United States. We seek to accomplish this by providing merchants with a wide range of products and services through our various online platforms, including financial and transaction processing services. We also have products that provide support for crowdfunding and other capital raising initiatives. We supplement our online platforms with certain hardware solutions that are integrated with our online platforms. Our business functions primarily through three wholly-owned subsidiaries, eVance, OmniSoft, and CrowdPay, though substantially all of our revenue has been generated from our eVance business (we began generating revenue from our OmniSoft and CrowdPay businesses in the second half of 2019). We expect to build out our OmniSoft software business and to rely more on our PayFac model for revenue so that we are not dependent on our revenue from our eVance business but there is no guarantee that we will be able to do so.

With respect to our eVance business, our merchants are currently processing over $100,000,000 in gross transactions monthly and average approximately 1,400,000 transactions a month. These transactions come from a variety of sources including direct accounts and ISO channels. The accounts consist of businesses across the United States with no concentration of industries or merchants.

We have integrated all the applications for OmniSoft and the ShopFast Omnicommerce solution with the eVance mobile payment gateway, SecurePay.comTM. SecurePay.comTM, is currently used by approximately 3,000 merchants processing over 32,000 transactions and approximately $9,000,000 of monthly gross transactions (though our revenue from these transactions is limited). In July 2019, we launched a new merchant and ISO boarding system that will be able to onboard merchants instantly. This provides the merchant with an automated approval and ISOs will have the ability to see all their merchants and their residuals as they load to the system.

On May 22, 2020, the Company purchased certain assets from POSaBIT Inc. ("POSaBIT"), including its contracts and arrangements with the Doublebeam merchant payment processing platform (the "POSaBIT Asset Acquisition"). The assets included, but were not limited to, software source codes, customer lists, customer contracts, hardware and website domains.

On May 14, 2021, the Company formed OLBit, Inc., a wholly owned subsidiary ("OLBit"). The purpose of OLBit is to hold the Company's assets and operate its business related to its emerging cryptocurrency-related lending and transactional business.

On July 23, 2021, we formed DMINT, Inc., a wholly owned subsidiary ("DMINT") to operate in the cryptocurrency mining industry. DMINT has initiated the first phase of the cryptocurrency mining operation by placing purchase orders for data centers and ASIC-based Antminer S19J Pro mining computers specifically configured to mine Bitcoin. The first lot of equipment is being used to establish a proof of concept before DMINT expands the number of computers in operation. As of March 31, 2022, DMint has purchased 1,000 computers, of which 650 computers have been delivered with 250 online and mining for Bitcoin, 400 computers are in process of being installed and 350 additional computers are scheduled for delivery in 2022. It has six data centers located in Pennsylvania where it has mined ten Bitcoin. It has entered into an exclusive agreement whereby it has rights to all of the natural gas produced by 15 mines in Bradford, Pennsylvania. The natural gas is taken directly from the well heads to generate electricity required to power the mining computers. As configured, it is expected that the computers purchased will have a combined computing power of approximately 100 petahash per second. If the initial mining operation results are as anticipated, DMINT plans to expand the number of mining computers every quarter, whereby it would aim to have the computing power of 500 petahash per second by the end of 2022.

On January 3, 2022, the Company entered into a share exchange agreement with all of the shareholders of Crowd Ignition, Inc. ("Crowd Ignition") whereby the Company purchased 100% of the equity of Crowd Ignition 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 shares were recorded at the nominal book value of the net assets acquired.

Crowd Ignition is a web-based crowdfunding software system. Ronny Yakov, Chairman and CEO of the Company and John Herzog, a shareholder of the Company, owned 100% of the equity of Crowd Ignition. The software provides broker-dealer, merchant banks and law firms a platform to market crowdfunding offerings, collect payments and issue securities. The software has been developed in response to, and to comply with, recent changes in investment regulations including Regulation D 506(b) and 506(v), Regulation A+ and Title III of the Jobs Act (Regulation CF), including raising the crowdfunding limit from $1.07 million to $5.0 million. Crowd Ignition is one of only about 50 companies registered with the SEC to provide the services permitted under Regulation CF.

Results of Operations

Management's discussion and analysis of financial condition and results of operations ("MD&A") includes a discussion of the consolidated results from operations of The OLB Group, Inc. and its subsidiaries for the three ended March 31, 2022 and 2021.

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

For the three months ended March 31, 2022, we had total revenue of $8,786,459 compared to $2,226,404 of revenue for the three months ended March 31, 2022, an increase of $6,560,055 or 294.6%. We earned $8,413,429 in transaction and processing fees, $17,168 in merchant equipment rental and sales, $91,522 in other revenue from monthly recurring subscriptions and $264,340 of other revenue from the Cryptocurrency Mining segment during the three months ended March 31, 2022, compared to $2,090,264 in transaction and processing fees, $18,507 in merchant equipment sales and $117,633 in other revenue during the three months March 31, 2021. The increase in revenue was a result of an increase in the amount of fees earned from merchant processing transactions primarily due to the revenue attributed to the merchant portfolio acquired in the fourth quarter ended December 31, 2021 and to revenue from cryptocurrency mining, which we did not have in the prior period. Processing and servicing costs increased by $4,710,863 or 304.4%

Amortization and depreciation expense for the three months ended March 31, 2022 was $998,590 compared to $215,904 for the three months ended March 31, 2021, an increase of $782,686 or 362.5%. We record amortization expense on our merchant portfolio, trademarks and natural gas purchase rights. Our amortization expense for the three months ended March 31, 2022, increased in the current year period due to the agreement with Cai Energy to purchase natural gas to operate the cryptocurrency mining computers used in the Cryptocurrency Mining segment. Depreciation expense for our cryptocurrency mining segment was $891,756 in the current period due to the acquisition of Cryptocurrency Mining equipment.

Salary and wage expense for the three months ended March 31, 2022 was $533,859 compared to $820,091 for the three months ended March 31, 2021 an decrease of $286,232 or 34.9%.

Professional fees for the three months ended March 31, 2022 were $324,407 compared to $226,944 for the three months ended March 31, 2021, an increase of $97,463 or 42.9%. Professional fees consist mainly of audit and legal fees. The increase in the current period is mainly due to an increase in legal expense.

General and administrative expenses ("G&A") for the three months ended March 31, 2022 was $1,235,317 compared to $399,325 for the three months ended March 31, 2021, an increase of $835,992 or 209.3%. Some of our larger G&A expenses included travel of $108,000, marketing and promotion of $125,000, contracted services of $259,000 and computer and internet expense of $145,000.

For the three months ended March 31, 2022, we incurred $0 of interest expense, compared to $116,736 for the three months ended March 31, 2022, a decrease of $116,736. The decrease in interest expense is due the conversion of all related party debt and the repayment of the Term Loan in March 2021.

Our net loss for the three months ended March 31, 2022 was $1,455,596 compared to $1,099,857 for the three months ended March 31, 2021. We had an increase in our net loss of $355,739 for the reasons discussed above.

Liquidity and Capital Resources

Trends and Uncertainties

The Company's financial condition and results of operations for the next fiscal year 2022 may be adversely affected by a further prolonging of the COVID-19 pandemic.

The New York and Atlanta areas, including the location of the Company's corporate headquarters and its operations business, continued to experience impacts of the COVID-19 pandemic in the U.S. The Company is currently following the recommendations of local health authorities to minimize exposure risk for its employees and visitors. However, the scale and duration of this pandemic remains unknown. If there was another increase in cases requiring quarantines or closures of businesses, the duration of the business disruption and related financial impact cannot be reasonably estimated at this time. While the Company is currently implementing specific business continuity plans to reduce the potential impact of COVID-19 during 2022 and believe that its business being principally operated using digital platforms, in the long-term, will suffer minimal ongoing negative impact, there is no guarantee that the Company's continuity plan will be successful, that the Company's merchants will meet the number of forecasted transactions due to a change in consumer activity around point of sale purchasing resulting from the temporary closure of businesses in the future.

In 2021 and the first three months of 2022, as a result of the continued transmission of COVID-19 cases requiring quarantines and convalescence of so many people, the Company experienced some disruptions to its business and disruptions for the Company's customers and merchants that had an impact on the number of transactions processed by the Company. The extent to which COVID-19 or any other health epidemic may impact the Company's results for 2022 and beyond will depend on future developments and impacts of variants of the virus, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the continuing economic impact of the response to the COVID-19 pandemic. Accordingly, COVID-19 could still have a material adverse effect on the Company's business, results of operations, financial condition and prospects during 2022 and beyond.

Changes in Cash Flows

For the three months ended March 31, 2022, $594,697 of cash was used by operating activities, which included our net loss, offset by $1,895,530 for amortization and depreciation expense, $70,833 for stock-based compensation $32,430 of operating lease expense and net changes in operating assets and liabilities of $1,137,894.

For the three months ended March 31, 2022, we received net cash of $762,162 in financing activities from a loan payable.

Liquidity and Capital Resources

At March 31, 2022, the Company had cash of $3,637,804 and working capital of $2,796,893. The Company has approximately $4.3 million of outstanding liabilities.

On March 2, 2021, the Company utilizing a portion of funds received upon the exercise of outstanding warrants, paid approximately $7.7 million to the pay off the entire outstanding amount of the Term Loan. In connection with the extinguishment of the obligations under the Term Loan, 40,000 warrants to purchase Common Stock were cancelled.

In addition, the Company has received a Paycheck Protection Program loan under the CARES Act for approximately $236,000 (the "PPP Loan"). On October 11, 2021, the Company obtained forgiveness of all amounts due under the PPP Loan.

On November 2, 2021, the Company entered into a series of securities purchase agreements with certain institutional accredited investors pursuant to which the Company issued and sold, in a private placement (i) 1,969,091 shares (the "Shares") of the Company's Common Stock (ii) pre-funded warrants exercisable for a total of 2,576,364 shares of Common Stock (the "Prefunded Warrant Shares") with an exercise price of $0.0001 per Prefunded Warrant Share, and (iii) warrants exercisable for a total of 4,545,455 shares of Common Stock (the "Common Warrant Shares" and together with the Prefunded Warrant Shares, the "Warrant Shares") with an exercise price of $6.50 per Common Warrant Share. The offering closed on November 5, 2021 and the Company received net proceeds of approximately $22.9 million, after deducting placement agent fees and other offering expenses. The Company intends to use the net proceeds from the offering to invest in or acquire companies or technologies that are synergistic with or complimentary to its business, to expand and market its current products and for working capital and general corporate purposes.

The Company has reviewed its cash flow for 2022, projected operating cash flows for 2022 and 2023 and performed an overall analysis of market trends to determine whether or not it has sufficient liquidity to continue as a going concern for a period of at least twelve months from the date of this Quarterly Report. As a result of (a) the improved transaction volume trends the Company experienced during 2021 and the first three months ended March 31, 2022, (b) the increase in the number of merchants after the acquisitions of several portfolios during 2021, and (c) the funds received from the capital raises and PPP Loan, as discussed above, the Company believes it has sufficient liquidity in order to sustain operations for at least the twelve months following the filing of this Quarterly Report.

Critical Accounting Policies

Refer to our Form 10-K for the year ended December 31, 2021, for a full discussion of our critical accounting policies.

May 16, 2022


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