Business Context and Reporting Period
This Form 8-K filing by The OLB Group, Inc. (the "Company") reports on events occurring on April 9, 2018, with the report filed on April 13, 2018. The Company, through its newly formed wholly-owned subsidiaries (Securus365, Inc., eVance Capital, Inc., and eVance Inc.), completed an asset acquisition via a foreclosure sale under the Uniform Commercial Code of New York. The acquisition involved substantially all assets of Excel Corporation and its subsidiaries (collectively, the "Debtors"), including Payprotec Oregon, LLC, Excel Business Solutions, Inc., and eVance Processing, Inc.
Key Financial Metrics and Transaction Details
- Acquisition Price: $12,500,000 paid to GACP Finance Co., LLC (administrative agent for secured lenders).
- Financing Structure: The purchase price was funded via a new Term Loan of $12,500,000 provided by GACP.
- Debt Terms:
- Interest Rate: 9.0% per annum, payable monthly in arrears.
- Maturity Date: April 9, 2021.
- Repayment Schedule: $1,000,000 due by July 15, 2018; $2,000,000 due by October 31, 2018; remaining balance due at maturity.
- Collateral: Secured by all assets of the Borrowers and the Company's ownership interests in its subsidiaries.
- Equity Consideration (Warrants):
- Initial Warrant: Issued to GACP for 1,200,000 shares at an exercise price of $0.25 per share.
- Additional Warrants: Agreement to issue up to four additional warrants (200,000 shares each) if GACP finances future acquisitions. Exercise prices range from $0.30 to $0.45 per share.
Material Changes and Transaction Nature
The Company entered into a Material Definitive Agreement (Memorandum of Sale) and completed the acquisition of assets from the Debtors. The assets were purchased "as is," "where is," and "with all faults," with no representations, warranties, or indemnification rights provided by the seller. The transaction was executed following a default by the Debtors, where GACP exercised post-default remedies to realize on collateral.
Outlook, Risks, and Contingencies
- Financial Covenants: The Credit Agreement includes customary financial and other covenants. Failure to meet these could trigger events of default.
- Prepayment Conditions: The Term Loan may be prepaid without penalty with 10 days' notice (partial) or 30 days' notice (full). Certain principal payments are subject to earlier repayment if the Company consummates an equity financing.
- Warrant Redemption: The Company may redeem the initial warrant for $0.0001 per share after six months if the stock price exceeds $5.00 per share for 20 trading days within a 30-day period.
- Unregistered Securities: The warrants were issued unregistered under Section 4(a)(2) of the Securities Act to an accredited investor.
Key Facts for Investor Verification
- Verify the specific assets acquired from the Debtors and their current operational status, given the "as is" nature of the purchase.
- Confirm the Company's ability to meet the near-term debt service obligations ($1M by July 2018 and $2M by October 2018).
- Assess the dilution impact of the 1,200,000 warrant shares at $0.25 and potential future warrants.
- Review the full text of the Credit Agreement (Exhibit 10.1) for specific financial covenants and default triggers.
- Monitor the Company's stock price relative to the $5.00 threshold for warrant redemption.