The OLB Group, Inc. (OLB) Q4 2023 Earnings Report, Transcript and Summary

Hello, everyone, and thank you for taking the time to listen to our earnings call. We are discussing the 2023 result of OLB. Please post questions if you have any on the -- either on the chat or in investors.olb.com. Thank you. Now I'm going to bring the safe harbor [Audio Gap] Patrick Smith is our VP of Finance, and he's going to discuss the revenues.

Thanks, Ronny. Yes, let's go and right now I'm going to discuss the results for the 2023 fiscal year. For this year, revenues were $30 million -- $30.6 million as compared to $30.4 million for 2022. So there was a little bit of growth there. It was close to flat, but there was a 0.7 increase in revenue. Operating expense did increase. It increased to $54 million versus $39 million for the year. That number actually includes a $13 million -- $12.9 million, $13 million impairment. The net loss for the year is $23.3 million versus $8.2 million compared to 2022. The net loss per share is $0.65 -- $0.65 versus $0.56 for last year. But again, the revenue was basically flat year-over-year. There was a 0.7 increase. So it's not too far off from the previous year. On some of the expenses, let me just kind of walk through those. Legal expenses increased by $1.3 million this year. Those expenses are mainly related to the case we have going on with FFS and Clear Fork Bank. SG&A increased mainly due to the bank fees related to the FFS portfolio when we took everything over last year, there was more bank fees that were incurred. Salaries did increase this year. The main reason of that increase is we actually did bring on more employees whenever we purchase the Black011, the company we acquired in June of 2023. So -- and then just to also kind of break down some more of the expenses. Amortization expense was 18% of the loss. Depreciation expense was 11% of the loss. The legal fees were 6% of the loss and the impairment that we had to write off was close to 60% of the loss. So if you put all that together, you can see where we were hit by most of the expenses. Only impairment, let me just kind of explain, in the first quarter of 2024, the FFS portfolio that we acquired in the fourth quarter of 2021 was shut down, and we had to turn it off. So there was no more revenue being produced by the portfolio. So we had to impair it. Since that happened, and we knew about it, we had to write it off in the 2023 year. That's where the $12.9 million and $13 million write off you'll see on the books. That has to do with the litigation we're in, too, which we'll discuss later. Ronny?

Yes. Also some positive note, we increased our baseball teams with a [indiscernible] technology that we have in place, and we increased another 3 teams in place. It's not only baseball, but it's baseball and entertainment. We started building our sales team in-house about the bodega distributions. Today, we do around 1,800 distribution out of the 32,000. And the company still has 0 debt, and we still have $19 million in assets. The spin-off DMINT is still active. We just finished the year-end financials for DMINT as a stand-alone company, and we [indiscernible] plan to file it as early as this week. We anticipate to have before or by the second quarter pretty much a dividend distribution with calling on a record date on those things. So Patrick, do you want to talk about the discovery of FFS?

Yes. Basically, some of the legal issues that we have right now. The -- we do -- we're still in an ongoing case with FFS for the breach of contract case. In that, right now, we're still -- we're finishing up the discovery, and we're doing deposition. So that should be finished up within the next week or so. The trial is expected to probably -- we're expecting to be in trial by the end of 2024 or the spring of 2025. Another thing we've also done, we've actually filed a counterclaim against Clear Fork Bank, so that's also in process.

So I mean, during this discovery, we found out things that initially when we purchased the portfolio has not been disclosed. And that's pretty much because of all those things. It has been illegal activity as boarding merchants illegally, not in accordance with the Visa, MasterCard rules, and we pretty much terminated [indiscernible]. On both of them -- on Clear Fork Bank,is similar claims as far as compliance and activities. On the reverse split, basically, we're doing the reverse split on April '26, we have a shareholder vote on that. And the reverse split itself, we need to do because to keep the NASDAQ requirements that is above total for that -- Patrick, you want to elaborate on any other things?

No. I think we can go to Q&A in just a second. But I mean, I think one of the things we need to discuss, I mean, is management, it was -- we felt like we were actually in a good rate through the first 3 quarters of last year. We did the fourth quarter when things started kind of winding down with the FFS portfolio, I mean it was frustrating to us, too. So I mean, that's the thing we're not happy with where the year ended up. It's where we are. We're doing our best to actually get us out of where we're at. We think we can get the company stabilized in Q1 of this year. But again, it's -- we're just as frustrated as the shareholders since we actually are also shareholders.

Yes, we believe in the company. And so as we get clear to buy more shares, we are planning to buy more shares as insiders as of the company.

Maybe we want to go to the Q&A, Ronny?

Yes.

Okay. If anybody has any questions, you can type them into the chat. But I think we might have a couple. Ronny, do you want to read them or do you want me to?

Yes. So first question is you gave guidance around the mid spin-off third quarter or fourth quarter of last year. Yes. And that's when we started the process. Process is a lengthy process. We are already on the second round of comments from the SEC. At the same time, we completed the audit financials for '21, '22 and '23 to be filed in this case. We are running 300 mining grains, and we're planning to bring more before the second quarter if it allows and then obviously, when it spun off, we're going to give to the shareholders -- are going to basically -- going to get a dividend that is a pro rata. So on -- if you have certain percentage of shares at the company at OLB, you're going to get [indiscernible]. I mean I believe, realistically, that's going to happen around before the filings of the second quarter results. Does the company plan to raise more capital, whether the reverse split occurs? We are trying not to raise more capital until we split off everything, so at least we'll maintain the share value. We're planning to buy shares just to increase the value of the shares. Why as -- we -- yes, we have 700 rigs that have not been utilized. We plan to utilize them as soon as we complete the electrical work of the power. Correct. And I would encourage anyone that has questions at any time, you guys can go to investors.olb.com and will basically post the question there. So this way, everybody gets several answers to everyone.

So one of the questions we also have right here was the [indiscernible], why did the fourth quarter revenue declined so much versus Q4 of 2022? That's part of the actually the portfolio we're talking about we turned off in the first quarter. It was -- majority of it was turned off in the first quarter, I think in January of this year, but there was kind of a wind down. We had to turn off some large merchants. We had to kind of wind it down. So the fourth quarter was almost like the wind down of that portfolio. That's why you see the decrease.

Right. So on the Bodegas, we are pretty much doing pretty well, and we believe it's going to be organic increase in revenues. And that's going to be due to adding more locations to be active locations. We are adding more services. Part of the acquisition was the Black Wireless and Mango Mobile, those services, we are providing new service now that is the eSIM. So pretty much, you can download this eSIM from putting your credit card and downloading it. We are planning to add additional services by end of this year, like prepaid cards in locations that are kind of point of banking locations as well. I mean, I see the question that you have that -- you have a long time invested in how you proceed the future? We were very excited when we purchased the portfolio. It tends to be a total scam and bad actors. And we are recovering from that. We definitely are finding all the legal actions to recoup the investment that we did. So we are positive, extremely positive. We are positive about the spin off, and we are very positive about the bodega locations as well.

One of the things on that note, too, I'd like to say I do think there we're going to have -- or we are actually looking to have good growth on the payment side of the business, not just related to the unbanked sector, but I think we're also looking to grow just the normal, what I would call the normal payment piece. As Ronny mentioned, we're bringing on the baseball stadiums, which are also entertainment venues. So we're bringing those on. But we're also just in the process of getting more sale then through sales reps through their current ISO channel. So we actually have turned more toward that way to just bring in more organic sales. And we do feel that we're going to do a pretty good job with it this year.

On the ATM, we have an open ATM with not using the ATM because the price is so low. We don't want to devote anyone that is on the call here, including ourselves. So it's kind of an open ATM, so we can use it when we need it. At the moment, we're not using it. Who is running DMINT? We have employees that are allocated for the subsidiary and they're running it. They're experienced employees certified employees [indiscernible]. We're planning to go into conferences. Yes, absolutely. We've been engaged for the last few months, majority of the time dealing with this litigation that and pretty much putting a lot of effort still, as you can see, the legal expenses rise a lot because of that. And it's a process that will take [indiscernible]. Yes.

I think, too, the reason we haven't done any conferences in the first quarter is we had this normal 10-K. We're working on the spin off S-1 with DMINT. And we're just doing -- based almost like an audit on DMINT. So it's been a very busy quarter in the first quarter just to get everything done.

Okay. How is it possible that we do $30 million? And yes, I mean, we are definitely undervalued in a way we have independent valuation report that at some point, we're going to publish about DMINT and DMINT is valued as a stand-alone business, $29 million. So it's definitely absurd that one of the subsidiaries is value more than the company itself. How much is the counter claim with FFS? Well, I mean, we claim it for a full recession that we paid them $16 million. They're claiming $4 million, that the $4 million, that is the 2 last payments that we intentionally stopped because we found it was a breach of contract and fraudulent transactions being done. So that's the current claim. The same thing with the bank. We filed against the bank, and that's kind of things that we found over discovery and the positions that this bank was not capable even running. I mean, it looks like a micky mouse bank basically. Breakdown of mining costs. Patrick, do you want to address that?

The breakdown of mining costs?

Yes.

The breakdown the mining costs are basically -- I mean, it's like anything else, is the majority of -- or almost all the expenses related to the electricity cost you use to do the machines. And that's -- all the machines are paid for, so we really don't have any expense there. The building is paid for. We have an employee cost, but the breakdown of the mining cost, it's -- like anything else, I guess, if you're asking how much does it cost for us to actually [indiscernible] 1 Bitcoin. Now that the network hash rate is higher and everything it's -- our cost is probably close to $20,000 to $21,000 to [indiscernible] 1 Bitcoin while the price is around $65,000.

So how many Bodegas are selling the products and services? We have close to 1,800 locations. So with the operation post the issues that we have with the litigation, main focus would be in-house sales with the Bodegas. We have kind of a golden egg in our hands that we just have to execute on it. So we plan to execute not only the current services but add additional services that are in our core business that basically will be able to service them from the point-of-sale system and up to anything that is related to money transmissions. What do you expect it's going to happen after the reverse split? Well, we hope typically in reversed splits, price drops. I think we are at the bottom. So I hope nothing will drop beyond that. So the good thing about the Bitcoin, I mean, finally, the price of Bitcoin is decent and that would definitely spun off and increased spun off DMINT would get additional value to the shareholders.

Yes. I think the other question I said is Bitcoin is getting noticed again, how has [indiscernible] affected? I think right now, people still have a tough time separating the company. There's the financial technology piece we have, and then there's a Bitcoin piece, and I think people still get them kind of wrapped up and don't really know how sometimes [indiscernible] the company. I think DMINT will be highly -- a lot more valued once it's split off on its own, like the person asked, said, Bitcoin is being noticed again. At that point, DMINT will be noticed by itself. And I think at that point also where they're breaking apart, the [indiscernible] will be noted by -- noticed by itself, which will help the company -- both companies grow.

Right. So a question that is related to the record date announced by August. Yes, again, as everybody knows, we are at the mercy of Security and Exchange when they clear us. So far, we got pretty much all this is wrapped up that we're finding this week. And once that's done, basically, I think we're going to have maybe another round or 2 of comments that should be much lighter. We address majority the heavy lifting questions that we answer from them. So believe it or not, I'm looking forward also to this record date as well. And also, we are pretty much -- will give some heads up because also, at this point, we're going to release the S-1 to the public and not just keep it as a confidential filing. Again, if anyone has any questions, I'm happy to set up in the next few weeks another call and elaborate more things or communicate through the website that you guys have the ability of posting questions. On the near future, I'm excited about the spin-off and the potential of the Bodegas, that's the 2 things and we've been pretty much [indiscernible]. Well, if there's no more questions, thank you very much for taking the time. Again, we are extremely undervalued in the stock. And I would encourage everybody to give us a trust.

Yes, I appreciate everybody's time. Thanks, everybody, to come to the call today. And like I said, as management, we are as frustrated too how the 2023 turned out. We feel confident that we can get everything turned around this year. We're going to work hard to do it. And that's what we're in the process of doing. So again, thanks for your time.