Business Context and Reporting Period
Company: The OLB Group, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: October 9, 2018
Reporting Period: The filing discloses risk factors related to recent corporate actions, specifically the acquisition of Excel Corporation assets (April 9, 2018) and share exchanges with Omnisoft, Inc. and CrowdPay.us, Inc. (May 9, 2018). These transactions have formed a new business platform requiring integration.
Key Financial Metrics
The filing does not provide current revenue, profit, or cash flow figures for the period ending October 2018. However, it discloses the following historical and debt-related metrics:
- Debt Obligations: A Term Loan of $12,500,000 was secured from GACP Finance Co., LLC on April 9, 2018, to finance the Excel Acquisition. The loan bears interest at 9.0% per annum and matures on April 9, 2021.
- Payment Status: The Company missed an initial principal payment of $1,000,000 due on July 15, 2018. This default was waived by the lender under Amendment No. 1, with the payment subsequently made by a significant stockholder via a subordinated promissory note.
- Upcoming Obligations: An additional $2,000,000 in principal is due on or prior to October 31, 2018.
- Historical Liquidity (as of Dec 31, 2017): Working capital deficiency of $92,541; Net loss of $398,738; Operating cash flow used of $54,080.
- Equity: As of September 1, 2018, 1,200,000 warrants were outstanding with an exercise price of $0.25 per share.
Material Changes and Events
- Acquisitions and Share Exchanges: The Company acquired substantially all assets of Excel Corporation and completed share exchanges with Omnisoft and CrowdPay, creating a consolidated platform with limited operating history.
- Debt Restructuring: Entered into Amendment No. 1 (July 30, 2018) to waive a default on the Term Loan and Amendment No. 2 (August 23, 2018) to extend the delivery date of annual financial statements.
- Ownership Concentration: As of September 1, 2018, two principal stockholders (Ronny Yakov and John Herzog) owned or controlled approximately 98.0% of the outstanding common stock.
Outlook, Risks, and Contingencies
Going Concern: The filing explicitly states that substantial doubt exists regarding the Company's ability to continue as a going concern due to limited cash resources, recurring operating losses, and the need for additional financing.
Material Risks:
- Default Risk: Failure to raise sufficient funds to meet the $2,000,000 payment due October 31, 2018, or future obligations, could result in a default, acceleration of the full loan, and foreclosure on assets.
- Integration Risk: The new business platform faces risks related to integrating operations, retaining key personnel, and managing undisclosed liabilities from the Excel acquisition.
- Regulatory and Compliance: Significant risks exist regarding compliance with evolving regulations for crowdfunding (CrowdPay), payment processing (eVance), and data privacy. The Company is not currently registered as a funding portal or broker-dealer but faces potential regulatory changes.
- Operational Risks: Dependence on third-party vendors for technology and escrow services, cybersecurity threats, and the potential for system disruptions.
- Market Risks: The stock is subject to "penny stock" regulations, which may restrict trading liquidity. The Company faces intense competition in the financial services and SaaS sectors.
Investor Verification Checklist
- Verify the Company's ability to secure financing to meet the $2,000,000 principal payment due October 31, 2018, to avoid default on the GACP Term Loan.
- Confirm the status of the subordinated promissory note issued to the significant stockholder for the missed July 2018 payment.
- Review the integration progress of the Excel, Omnisoft, and CrowdPay assets to assess operational synergies and potential undisclosed liabilities.
- Monitor regulatory developments regarding CrowdPay's status as a funding portal and potential requirements to register as a broker-dealer.
- Assess the liquidity impact of the 98% ownership concentration by two principal stockholders and the potential dilution from the 1,200,000 outstanding warrants.