OLB GROUP, INC. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed on August 3, 2018, regarding events occurring on July 30, 2018. The OLB Group, Inc. (the "Company") is a Delaware corporation reporting the entry into a material definitive agreement and the creation of a direct financial obligation to address existing defaults under its credit facilities.
Key Financial Metrics and Obligations
- Debt Obligation: The Company issued a subordinated promissory note with a principal amount of $1,000,000.
- Interest Rate: The note bears interest at 12% per annum, compounding annually.
- Maturity Date: March 31, 2019 (with a right to prepay in whole or in part).
- Collateral: The note is secured by shares of common stock of a publicly traded company held by the Company ("Note Collateral Shares").
- Liquidity Action: Proceeds from the note were used immediately to make a $1,000,000 initial payment under the Company's Credit Agreement.
Material Changes and Agreements
On July 30, 2018, the Company entered into Amendment No. 1 to its Loan and Security Agreement (originally dated April 9, 2018). Key changes include:
- Waiver of Defaults: Lenders waived existing defaults related to the failure to make the $1,000,000 initial payment by July 15, 2018, and the failure to deliver unaudited monthly financial statements and compliance certificates.
- Extension of Deadlines: The deadline for the initial payment was extended to July 30, 2018. The deadline for providing audited financial statements for fiscal years ended December 31, 2016, and 2017, was also extended.
- Subordination: The new promissory note is subordinated to the Credit Agreement, except for the specific Note Collateral Shares which were carved out from the Credit Agreement's collateral.
- Repayment Terms: The note may be repaid from the sale of the Note Collateral Shares or at any time after the second payment under the Credit Agreement, provided no event of default exists.
Outlook, Risks, and Management Commentary
The filing indicates the Company was in default of its credit agreement prior to July 30, 2018, necessitating this amendment and new financing to cure the default. The Company utilized a significant stockholder, John Herzog, as the lender for the subordinated note to facilitate the required payment. The filing does not provide specific forward-looking guidance, revenue projections, or management commentary beyond the mechanics of the debt restructuring. The primary risk highlighted is the Company's recent failure to meet payment and reporting covenants under its primary credit facility.
Investor Verification Checklist
- Verify the status of the audited financial statements for fiscal years 2016 and 2017, which were previously overdue.
- Confirm the current market value and ownership status of the "Note Collateral Shares" pledged to secure the $1,000,000 note.
- Review the terms of the second payment under the Credit Agreement to understand the timeline for the next potential default event.
- Assess the Company's ability to service the 12% interest on the new note alongside existing debt obligations.
- Check for any subsequent filings regarding the delivery of the unaudited monthly financial statements mentioned in the waiver.