OLB Group, Inc. — Q3 2023 Form 10-Q Summary
Business context and reporting period
Unaudited results cover the three and nine months ended September 30, 2023, compared with the same 2022 periods. OLB operates Fintech Services and cryptocurrency mining businesses. Fintech includes merchant payment processing and digital products. In June 2023, OLB acquired an 80.01% interest in Cuentas SDI, LLC, whose platform serves a reported network of more than 31,000 convenience stores.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $9.69 million | $6.25 million | $24.66 million | $23.41 million |
| Operating loss | $1.86 million | $1.70 million | $4.89 million | $4.99 million |
| Net loss | $1.88 million | $1.71 million | $5.09 million | $4.61 million |
| Net loss attributable to OLB | $1.80 million | $1.71 million | $5.01 million | $4.61 million |
| Basic and diluted loss per share | $0.12 | $0.13 | $0.34 | $0.34 |
- Q3 revenue increased about 55% year over year, including $1.10 million of digital product revenue that was absent in Q3 2022. Nine-month revenue increased about 5%.
- Operating expenses were $11.55 million in Q3 and $29.55 million for the first nine months. Professional fees and general and administrative costs increased notably; management cited legal and DMINT spin-off preparation costs, insurance, contracted services, and other operating costs.
- Operating loss was about 19% of revenue in both the quarter and nine-month period. No gross margin figure is clearly presented.
- Nine-month cash from operations was $1.96 million, versus cash used of $1.03 million in 2022. The 2023 inflow included significant noncash depreciation and amortization and favorable working-capital movements, including increased accounts payable.
- Cash was $87,783 at September 30, down from $434,026 at year-end. Current assets were $3.58 million and current liabilities $5.91 million, a $2.33 million working-capital deficit. Total liabilities were $5.95 million. The balance sheet included $2.0 million due under a merchant portfolio purchase installment obligation and approximately $334,000 of note payable.
- Total assets were $35.94 million, including $17.61 million of net intangible assets and $8.14 million of goodwill. Stockholders’ equity was $29.99 million. OLB reported 4.36 bitcoin with a stated fair value of approximately $117,585; the balance sheet classifies cryptocurrency within other current assets.
Material changes and notable items
- Cuentas SDI contributed $1.46 million in revenue and $1.87 million in expenses from acquisition through September 30, for a reported net loss of $408,980. The purchase accounting remains provisional; $1.28 million of goodwill was recorded.
- Cryptocurrency mining revenue declined to $95,667 in Q3 from $161,249 and to $399,957 for nine months from $633,555. OLB said 250 of its 1,000 mining computers were online at quarter-end.
- Q3 professional fees rose to $707,900 from $174,472, and general and administrative expenses rose to $1.90 million from $753,944. Management attributed the increases primarily to legal, audit, spin-off, insurance, contracted-services, and other costs.
- Nine-month other expense was $196,025, versus other income of $383,190 in 2022. The current period included a $279,242 loss on sale of cryptocurrency and a $31,437 unrealized investment loss; the prior period included a $383,190 gain from reversal of a prior legal liability.
- Series A preferred stock carries a 12% annual dividend. Accrued dividends payable to a related party totaled $387,295 at September 30.
Outlook, risks, and contingencies
- Management said it expects available resources to fund planned expenditures for at least 12 months, citing improving transaction volumes, positive Q3 operating cash flow, and Cuentas SDI revenue. It also acknowledged additional capital may be needed and gave no assurance it can be raised on acceptable terms. No quantified revenue or earnings guidance was provided.
- Disclosure controls and procedures were assessed as ineffective at quarter-end. Management reported no material changes in internal control over financial reporting during the quarter.
- OLB has a disputed $2.0 million merchant-portfolio installment obligation. The company alleges breaches by the seller and seeks a reduction or cancellation of the final payment; the seller has counterclaimed. The filing describes the matter as in discovery and says no hearing date was set. This disclosure contrasts with the Part II statement that no legal proceedings are pending.
- The company reported no material subsequent events. Forward-looking statements are subject to risks, and management cautioned that actual results may differ.
Important facts for investors to verify
- Reconcile the MD&A’s stated revenue growth figures with the financial statements: the MD&A gives Q3 growth of $2.35 million (39.3%) and nine-month growth of $230,329 (1%), while the reported revenue totals imply different increases.
- Confirm the reported processing-cost figures: the financial statements show Q3 costs of $6,446,563, while the MD&A cites $6,449,563 in one passage.
- Assess liquidity, cash conversion, and the timing and funding of current obligations, including the $2.0 million merchant-portfolio payment and preferred dividends.
- Track the merchant-portfolio dispute, Cuentas SDI’s operating performance and final purchase accounting, and the status and costs of any DMINT spin-off plans.
- Evaluate remediation of ineffective disclosure controls and the company’s ability to sustain or improve mining economics and operating results.