Earnings Call Transcript - OLB Q4 2023

Ronny Yakov, CEO

Hello, everyone, and thank you for taking the time to listen to our earnings call. We are discussing the 2023 results of OLB. Please post questions if you have any in the chat or at investors.olb.com. Thank you.

Patrick Smith, VP of Finance

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 $30.6 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 $12.9 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 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 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 were more bank fees that were incurred. Salaries did increase this year. The main reason for that increase is we actually did bring on more employees whenever we purchased Black011, the company we acquired in June of 2023. So, and then just to also 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 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. 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 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 Yakov, CEO

Yes. Also on a positive note, we increased our baseball teams with a new technology that we have in place, and we increased another 3 teams. 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 distributions out of the 32,000. 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 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.

Patrick Smith, VP of Finance

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

Ronny Yakov, CEO

During this discovery, we found out things that initially when we purchased the portfolio were not disclosed. And that's pretty much because of all those things. It has been illegal activity including onboarding merchants in violation of Visa and MasterCard rules, and we pretty much terminated our relationship with them. On the Clear Fork Bank, there are 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. We need to do the reverse split to keep the NASDAQ requirements above the total.

Patrick Smith, VP of Finance

No. I think we can go to Q&A in just a second. But one of the things we need to discuss is management felt like we were in a good rate through the first 3 quarters of last year. By the fourth quarter, when things started winding down with the FFS portfolio, it was frustrating for us, too. So 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, we're just as frustrated as the shareholders since we also are shareholders.

Ronny Yakov, CEO

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

Patrick Smith, VP of Finance

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

Ronny Yakov, CEO

Yes.

Patrick Smith, VP of Finance

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?

Ronny Yakov, CEO

Yes. So the first question is you gave guidance around the mid spin-off for the third quarter or fourth quarter of last year. Yes, and that's when we started the process. The process is lengthy. 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 rigs, and we're planning to bring more before the second quarter if it allows, and then obviously, when it spins off, our shareholders will receive a pro-rata dividend. I believe realistically, that's going to happen around before the filings of the second quarter results.

Patrick Smith, VP of Finance

Does the company plan to raise more capital, whether the reverse split occurs?

Ronny Yakov, CEO

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.

Patrick Smith, VP of Finance

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.

Ronny Yakov, CEO

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. This way, everybody gets several answers.

Patrick Smith, VP of Finance

So one of the questions we have here was, why did the fourth quarter revenue decline so much versus Q4 of 2022? That's part of the portfolio we discussed, which we turned off in the first quarter. It was primarily turned off 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.

Ronny Yakov, CEO

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

Patrick Smith, VP of Finance

On that note, I think we're going to experience good growth on the payment side of the business—not just related to the unbanked sector, but we're also looking to grow just 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 sales through sales reps through our current ISO channel. We feel that we're going to do a pretty good job with it this year.

Ronny Yakov, CEO

On the ATM, we have an open ATM and are not using it because the price is so low. We don't want to devote resources right now. So it's an open ATM that we can use when needed. 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 and certified employees. We're planning to go into conferences. Yes, absolutely. We've been engaged for the last few months, spending most of the time dealing with the ongoing litigation, which has led to rising legal expenses. This process will take time.

Patrick Smith, VP of Finance

The reason we haven't done any conferences in the first quarter is we have our normal 10-K. We're working on the spin-off S-1 with DMINT, and we're just conducting an audit on DMINT. So it's been a very busy quarter in the first quarter just to get everything done.

Ronny Yakov, CEO

Okay. How is it possible that we do $30 million? Yes, we are definitely undervalued. We have an independent valuation report that we are going to publish about DMINT, which is valued as a stand-alone business at $29 million. It’s definitely absurd that one of the subsidiaries is valued more than the company itself.

Patrick Smith, VP of Finance

How much is the counterclaim with FFS?

Ronny Yakov, CEO

We claim a full recession that we paid them $16 million. They're claiming $4 million, which are the last two payments that we intentionally stopped because we found breaches of contract and fraudulent transactions. The same thing with the bank. We filed against the bank, and those are the things that we found over discovery and the positions that this bank was incapable of even running. It looks like a Mickey Mouse bank, basically. The breakdown of mining costs? The majority of the expenses related to mining are the electricity costs for the machines, and all machines are paid for, so we don't have expenses there. Our building is paid for, and there are employee costs. In terms of expenses to mine one Bitcoin, with the network hash rate increasing, our costs are probably close to $20,000 to $21,000 while the price is around $65,000. So how many Bodegas are selling the products and services? We have close to 1,800 locations. With the operations post-issues we faced with litigation, our main focus would be in-house sales with the Bodegas. We have a golden opportunity and we just have to execute on it. We plan to not only execute the current services but also add additional services related to our core business that will allow us to service them from the point-of-sale system and beyond, including anything related to money transmissions. What do you expect to happen after the reverse split? Typically, in reverse splits, prices drop. I think we are at the bottom; I hope nothing will drop beyond that. The good thing about Bitcoin is its price is decent now, and this will contribute to the spun-off DMINT getting additional value for shareholders.

Patrick Smith, VP of Finance

Yes. I think the other question is about Bitcoin getting noticed again—how has that affected us? I think right now, people still have a tough time separating the company. There is the financial technology aspect and then there's the Bitcoin aspect, and people don't always understand how to view the company clearly. I think DMINT will be highly valued once it's split off on its own. Bitcoin being noticed again will help both companies grow.

Ronny Yakov, CEO

Yes, again, as everybody knows, we are at the mercy of the Security and Exchange commission when they clear us. So far, we have wrapped up most of what we needed. Once that's done, we believe we will only have another round or two of comments that should be lighter. We have addressed the majority of the heavy lifting questions from them. So, believe it or not, I'm looking forward to this record date. Once that's done, we will be notifying the public and not just keeping it as a confidential filing. If anyone has any questions, I'm happy to set up another call in the next few weeks to elaborate more or communicate through the website where you can post questions. In the near future, I'm excited about the spin-off and the potential of the Bodegas—that's our main focus. If there are no more questions, thank you very much for taking the time. Again, we are extremely undervalued in the stock. I would encourage everyone to trust us.

Patrick Smith, VP of Finance

Yes, I appreciate everybody's time. Thanks to everyone for joining the call today. As management, we are frustrated with how 2023 turned out. We feel confident that we can turn everything around this year. We're going to work hard to do it. So again, thanks for your time.