Notes
to the Condensed Financial Statements
March
31, 2018
(Unaudited)
NOTE
1 - BACKGROUND
The
Company incorporated in the State of Delaware on November 18, 2004 for the purpose of merging with OLB.com (On-line Business),
Inc., a New York corporation incorporated in 1993 (“OLB.com”). The merger was done for the purpose of changing our
state of incorporation from New York to Delaware.
As
result of the merger, the Company acquired all of the assets of OLB.com, including its intellectual property assets. In connection
with the merger, each of the former common and preferred stockholders of OLB.com received five shares of our common stock in exchange
for each outstanding share of OLB.com
We
currently offer monthly subscription packages which includes a health benefits package. These arrangements are generally renewable
monthly and revenue is recognized over the renewal period.
We
also provide ecommerce development and consulting services on a project by project basis.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”). These unaudited financial statements should be read in conjunction
with the audited financial statements and footnotes for the year ended December 31, 2017 included on the Company’s Form
10-K. The results of the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the
full year ending December 31, 2018.
Going
Concern
The
accompanying financial statements have been prepared assuming the company will continue as a going concern. The company has limited
cash resources, recurring cash used in operations and an operating losses history. As shown in the accompanying financial statements,
as of March 31, 2018, the Company had a working capital deficiency of $200,983 and a net loss of $108,442 for the three months
ended March 31, 2018. The Company’s cash flow used in operating activities was $31,227, while $31,000 was provided by financing
from related parties. These factors among others, raise substantial doubt about the company’s ability to continue as a going
concern. The accompanying financial statements do not reflect any adjustments that might result if the company is unable to continue
as a going concern.
Subsequent to the quarter ending March
31, 2018, the Company consummated a business acquisition that may enable us to continue as a going concern. As discussed in Note
5, the Company has created three new subsidiaries, acquired certain assets, including cash, and revenue generating operations that
may enable the Company to alleviate the doubt about continuing as a going concern. The Company is currently in the process
of a capital raise of up to $5,000,000 that should enable it to make its first scheduled payments on the Loan and Security Agreement
(entered into on April 9, 2018) of $1,000,000 on July 15, 2018 and $2,000,000 on October 31, 2018. This, along with the additional
acquisitions of CrowdPay.US, Inc, and Omnisoft, Inc. should provide the company with the assets and operations it requires to continue
as a going concern. However, there are no assurances that we will be able to consummate the above capital raise.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Revenue
and cost recognition
The
Company recognizes revenue in accordance with FASB ASC 606,
Revenue From Contracts with Customers.
Revenue
is accounted for gross as a principal versus net as an agent. Revenue is recognized on a gross basis since our company has the
risks and rewards of ownership, latitude in selection of vendors and pricing, and bears all credit risk.
The
Company recognizes revenue on its Omni Commerce Solution licensing when persuasive evidence of an arrangement exists, services
have been rendered, the sales price is fixed or determinable, and collection is reasonably assured.
Costs
are recorded at the time the related revenue is recorded. Payment processing costs are recorded in the period the costs are incurred
and customer acquisition costs are comprised primarily of telemarketing costs and service costs and other additional benefit services.
Membership
Fees
The
Company recognizes revenues from membership fees for the sales of health-related discount benefit plans as earned as part of the
ShopFast program. These arrangements are generally renewable monthly and revenue is recognized over the renewal period. As
these products often include elements sold through contracts with third-party providers, the Company considers each contractual
arrangement in accordance with the Revenue Recognition topic of the FASB ASC 606. The Company’s current contracts meet these
requirements for reporting revenue on a gross basis. The Company records a reduction in revenue for refunds, chargeback’s
from credit card companies, and allowances based upon actual history and management’s evaluation of current facts and circumstances.
Reclassification
Certain
amounts for the three months ended March 31, 2017 financial statements have been reclassified to conform to the presentation used
in the three months ended March 31, 2018 Financial statements.
Recent
Accounting Pronouncements
The
Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company
does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
NOTE
3 - RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2018,
the Company received $30,000 from Mr. John Herzog. The advance was used for operating expenses, is unsecured, bears interest at
18% and is due on demand. Interest expense for the three months ended March 31, 2018, amounted to $296.
During
the three months ended March 31, 2018, the Company received an advance of $1,000 from CrowdPay, Inc. Ronny Yakov is also the CEO
of CrowdPay, Inc. The advance was used for operating expenses, is unsecured, non-interest bearing and due on demand.
NOTE
4 – COMMITMENT
On
October 20, 2017, the Company entered into a new employment agreement with its founder and president for 7 years effective January
1, 2018 through December 31, 2024. The agreement provides for an annual salary of $375,000, fringe benefits ($2,500 monthly automobile
allowance, any benefit plans of the Company and 4 weeks paid vacation), an incentive bonus of $200,000 based on the achievement
of certain performance criteria.
NOTE
5– SUBSEQUENT EVENTS
In
accordance with ASC 855-10,
Subsequent Events
¸ management has analyzed our operations from the balance sheet date
through the date the financial statements were available to be issued.
Memorandum
of Sale
On
April 9, 2018, Securus365, Inc., a Delaware corporation (“
Securus
”), eVance Capital, Inc., a Delaware corporation
(“
eVance Capital
”), and eVance Inc., a Delaware corporation (“
eVance
”, and collectively
with Securus and eVance Capital, the “
Purchasers
”), each of which Purchaser is a newly formed wholly-owned
subsidiary of The OLB Group, Inc., a Delaware corporation (the “
Company
”), entered into a Memorandum of Sale
(the “
Memorandum of Sale
”) by and among the Purchasers and GACP Finance Co., LLC, a Delaware limited liability
company (“
GACP
”), in its capacity as administrative agent and collateral agent to certain secured lenders of
the Debtors (as defined below), pursuant to which the Purchasers acquired substantially all of the assets of the Debtors (the
“
Asset Acquisition
”) through a foreclosure sale arranged by GACP under the Uniform Commercial Code of the State
of New York (“
UCC
”) of the collateral of Excel Corporation (“
Excel
”) and its subsidiaries
Payprotec Oregon, LLC, Excel Business Solutions, Inc. and eVance Processing, Inc. (Excel and such subsidiaries, collectively,
the “
Debtors
”) under the Loan and Security Agreement, dated as of November 2, 2016, by and among GACP, the
lenders thereunder and the Debtors and related loan documents, as amended (the “
Excel Loan and Security Agreement
”).
GACP
exercised its post-default remedies and realized on the collateral securing the Debtors’ obligations under the Excel Loan
and Security Agreement by conducting a public auction of certain assets of the Debtors on April 9, 2018 in accordance with the
UCC. The Purchasers submitted the Memorandum of Sale at such auction, which constituted the Purchasers’ bid for substantially
all of the assets of the Debtors (“
Acquired Assets
”), which bid was accepted by GACP on April 9, 2018 in connection
with the simultaneous signing and closing (the “
Closing
”) of the transactions contemplated under the Memorandum
of Sale and the Credit Agreement (defined below).
In
consideration for the sale and transfer of the Acquired Assets at the Closing, the Purchasers assumed certain post-Closing obligations
under assigned contracts and paid to GACP the sum of $12,500,000, through the deemed simultaneous financing of such purchase price
to the Purchasers under the Credit Agreement. Pursuant to the Memorandum of Sale, the Purchasers purchased from GACP and accepted
all of the Debtors’ right, title and interest in and to the Acquired Assets “as is”, “where is”
and “with all faults” and without any representations or warranties, express or implied, of any nature whatsoever.
Any representations made by the parties in the Memorandum of Sale did not survive the Closing, and there is no indemnification
rights for either party’s breach.
Credit
Agreement
In
order to finance the Asset Acquisition, GACP, as administrative agent and collateral agent (“
Agent
”), and as
the initial sole lender thereunder, provided a term loan of $12,500,000 (the “
Term Loan
”) to the Purchasers,
Omnisoft, Inc., a Delaware corporation (“
Omnisoft
”), and CrowdPay.us, Inc., a New York corporation (“
CrowdPay
”
and, collectively with the Purchasers and Omnisoft, the “
Borrowers
”), each of Omnisoft and Crowdpay being affiliates
of the Company’s majority stockholder, which obligations are guaranteed by the Company (collectively with the Borrowers,
the “
Loan Parties
”), under the Loan and Security Agreement (the “
Credit Agreement
”), dated
as of April 9, 2018, by and among the Loan Parties, the lenders from time to time party thereto as lenders (the “
Lenders
”)
and the Agent.
The
Term Loan matures in full on April 9, 2021, the third anniversary of the Closing. $1,000,000 of the principal amount under the
Term Loan must be repaid on or prior to July 15, 2018, and an additional $2,000,000 in principal due on or prior to October 31,
2018 (in each case subject to earlier repayment under certain circumstances, including if a Loan Party consummates an equity financing),
with the remaining principal due upon maturity. The Term Loan can be prepaid without penalty in part by the Loan Parties with
ten days’ prior written notice to the Agent, and in full with thirty days’ prior written notice. The Term Loan is
subject to an interest rate of 9.0% per annum, payable monthly in arrears.
The
obligations of the Loan Parties under the Credit Agreement are secured by all of their respective assets and the Loan Parties
pledged all of their assets as collateral for their obligations under the Credit Agreement. Additionally, the Company pledged
its ownership interests in the Purchasers and any of its other subsidiaries that it may form or acquire from time to time.
The
Credit Agreement includes customary representations, warranties and financial and other covenants of the Loan Parties for the
benefit of the Lenders and the Agent. The obligations of the Loan Parties under the Credit Agreement are subject to customary
events of default for a secured term loan. Each Loan Party is jointly and severally liable for the obligations under the Credit
Agreement.
Warrants
Pursuant
to and as additional consideration for the Term Loan under the Credit Agreement, on April 9, 2018 (the “
Issuance Date
”)
the Company issued to GACP a Warrant (the “
Warrant
”) to purchase 1,200,000 shares of common stock of the Company
(“
Warrant Shares
”) at an exercise price of $0.25 per share, subject to adjustment as set forth in the Warrant.
The Warrant is exercisable by GACP at any time from the Issuance Date until the later of (i) the third (3
rd
) anniversary
of the Issuance Date and (ii) the date on which all obligations under the Credit Agreement have been satisfied in full. The Warrant
may be redeemed for $0.0001 per Warrant Share, at the sole discretion of the Company, at any time after the six (6) month anniversary
of the Issuance Date if the closing sales price of the Company’s common stock equals or exceeds $5.00 per share on each
of the 20 trading days within any 30 day trading day period ending on the third (3
rd
) trading day prior to the date
on which the Company provides a notice of redemption. GACP has certain piggy-back registration rights as set forth in the Warrant
with respect to the Warrant Shares to be issued upon exercise of the Warrant. After the six (6) month anniversary of the Issuance
Date, GACP can exercise the Warrant using a “cashless exercise” feature to the extent that GACP exercises the Warrant
for a number of Warrant Shares in excess of the number Warrant Shares that have been registered for resale under U.S. securities
laws.
As
additional consideration for the Term Loan under the Credit Agreement, on April 9, 2018 the Company also entered into a letter
agreement (the “
Additional Warrants Agreement
”) with GACP, pursuant to which the Company agreed that if the
Company at any time after the Closing and prior to the satisfaction of all outstanding obligations under the Credit Agreement
requests for GACP to provide debt financing for the acquisition of a company or operating business by the Company or its subsidiaries,
and GACP or its affiliates provide all of the debt financing for such acquisition, the Company will issue to GACP a warrant to
purchase 200,000 shares of the Company’s common stock (an “
Additional Warrant
”) upon the closing of such
debt-financing, with such Additional Warrant in substantially the same form as the Warrant, up to a total of four (4) Additional
Warrants for four debt-financed acquisitions under the Additional Warrants Agreement. The exercise price of the Additional Warrants,
if issued, will be $0.30 per share for the first Additional Warrant, $0.35 per share for the second Additional Warrant, $0.40
per share for the third Additional Warrant and $0.45 per share for the fourth Additional Warrant, with the number of shares and
exercise price subject to adjustment as set forth in the Additional Warrants Agreement and the Additional Warrant.
Effective
May 9, 2018, the Company entered into a share exchange agreement with Crowdpay.US, Inc., a New York corporation (“Crowdpay”),
for which the Company will issue 87,500,000 shares of common stock for all of the authorized stock of Crowdpay. Crowdpay will
become a wholly owned subsidiary of OLB. As of the date of this filing the shares have not yet been issued.
Effective
May 9, 2018, the Company entered into a share exchange agreement with OMNISOFT, Inc., a Delaware corporation (“OMNISOFT”),
for which the Company will issue 55,000,000 shares of common stock for all of the authorized stock of OMNISOFT. OMNISOFT will
become a wholly owned subsidiary of OLB. As of the date of this filing the shares have not yet been issued.
Subsequent
to March 31, 2018, the Company approved the issuance of 25,000 shares of common stock for services rendered. As of the date of
this filing the shares have yet been issued.
Forward-Looking
Statements
The
information in this report contains forward-looking statements. All statements other than statements of historical fact made in
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. Our actual results may
differ significantly from management’s expectations.
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.