The following discussion and analysis of our consolidated financial condition and results of operations for years ended December 31, 2022 and 2021 should be read in conjunction with the consolidated financial statements and notes related thereto included elsewhere in this report.





Overview

We are a FinTech company that focuses on a suite of products in the merchant services marketplace that seeks to provide integrated business solutions to merchants throughout the United States. We seek to accomplish this by providing merchants with a wide range of products and services through our various online platforms, including financial and transaction processing services. We also have products that provide support for crowdfunding and other capital raising initiatives. We supplement our online platforms with certain hardware solutions that are integrated with our online platforms. Our business functions primarily through three wholly-owned subsidiaries, eVance, OmniSoft, and CrowdPay, though substantially all of our revenue has been generated from our eVance business (we began generating revenue from our OmniSoft and CrowdPay businesses in the second half of 2019). We expect to build out our OmniSoft software business and to rely more on individualized merchant services offerings for revenue so that we are not dependent on our revenue from our eVance business but there is no guarantee that we will be able to do so.

With respect to our eVance business, our merchants are currently processing over $100,000,000 in gross transactions monthly and average approximately 1,400,000 transactions a month. These transactions come from a variety of sources including direct accounts and ISO channels. The accounts consist of businesses across the United States with no concentration of industries or merchants.

We have integrated all the applications for OmniSoft and the ShopFast Omnicommerce solution with the eVance mobile payment gateway, SecurePay.comTM. SecurePay.comTM, is currently used by approximately 3,000 merchants processing over 32,000 transactions and approximately $9,000,000 of monthly gross transactions (though our revenue from these transactions is limited). In July 2019, we launched a new merchant and ISO boarding system that will be able to onboard merchants instantly. This provides the merchant with an automated approval and ISOs will have the ability to see all their merchants and their residuals as they load to the system.

On May 22, 2020, the Company purchased certain assets from POSaBIT Inc. ("POSaBIT"), including its contracts and arrangements with the Doublebeam merchant payment processing platform (the "POSaBIT Asset Acquisition"). The assets included, but were not limited to, software source codes, customer lists, customer contracts, hardware and website domains.





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On May 14, 2021, the Company formed OLBit, Inc., a wholly owned subsidiary ("OLBit"). The purpose of OLBit is to hold the Company's assets and operate its business related to its emerging money transmission and transactional business.

On July 23, 2021, we formed DMINT, Inc., a wholly owned subsidiary ("DMINT") to operate in the cryptocurrency mining industry, specifically the mining of Bitcoin. DMINT initiated the first phase of the Bitcoin mining operation by placing data centers and ASIC-based Antminer S19J Pro mining computers specifically configured to mine Bitcoin in Pennsylvania. As of December 31, 2022, DMINT has purchased 1,000 computers. In February 2023, it re-deployed all of the computers to its Selmer, Tennessee location. At December 31, 2022, DMINT had mined 31.06 Bitcoin.

On January 3, 2022, the Company entered into a share exchange agreement with all of the shareholders of Crowd Ignition, Inc. ("Crowd Ignition") whereby the Company would purchase 100% of the equity of Crowd Ignition in exchange for 1,318,408 shares of the common stock, par value $0.0001 of the Company (the "CI Issued Shares"). The value of the CI Issued Shares was, for purposes of the Agreement, based on the closing trading price of the Company on October 1, 2021 (the date on which a third-party fairness opinion was issued), resulting in an aggregate purchase price for Crowd Ignition of $5.3 million.

Crowd Ignition is a web-based crowdfunding software system. Ronny Yakov, Chairman and CEO of the Company and John Herzog, a significant shareholder of the Company, own 100% of the equity of Crowd Ignition. The software provides broker-dealer, merchant banks and law firms a platform to market crowdfunding offerings, collect payments and issue securities. The software has been developed in response to, and to comply with, recent changes in investment regulations including Regulation D 506(b) and 506(v), Regulation A+ and Title III of the Jobs Act (Regulation CF), including raising the crowdfunding limit from $1.07 million to $5.0 million. Crowd Ignition is one of only about 50 companies registered with the SEC to provide the services permitted under Regulation CF.





Results of Operations

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

For the year ended December 31, 2022, we had total revenue of $30,368,979 compared to $16,710,759 of revenue for the year ended December 31, 2021, an increase of $13,140,159 or 83.1%. We earned $28,950,785 in transaction and processing fees, $64,900 in merchant equipment sales, $627,115 in other revenue from monthly recurring subscriptions and $726,179 of other revenue from the Cryptocurrency Mining segment, compared to $15,810,626 in transaction and processing fees, $131,802 in merchant equipment sales, $464,327 in other revenue from monthly recurring subscriptions and $304,004 of other revenue from the Cryptocurrency Mining Segment. The increase in revenue was a result of an increase in the amount of fees earned from merchant processing transactions primarily due to the revenue attributed to the merchant portfolio acquired in the fourth quarter ended December 31, 2021 and to increased revenue from Bitcoin mining.

For the year ended December 31, 2022, we had processing and servicing costs of $23,152,397 compared to $13,480,212 of processing and servicing costs for the year ended December 31, 2021, an increase of $9,672,185 or 71.8%. Processing and servicing costs increased in conjunction with the increased revenue.

Amortization and depreciation expense for the year ended December 31, 2022 was $3,664,488 compared to $1,703,401 for the year ended December 31, 2021, an increase of $1,961,087 or 115.1%. We record amortization expense on our merchant portfolio, trademarks and natural gas purchase rights. Our amortization expense for the year ended December 31, 2022, increased due to the agreement with Cai Energy to purchase natural gas to operate the Bitcoin mining computers used in the Cryptocurrency Mining segment.

Depreciation expense for our Cryptocurrency Mining Segment was $3,193,683 for the year ended December 31, 2022 compared to $187,498 for the year ended December 31, 2021.

Salary and wage expense for the year ended December 31, 2022 was $3,073,598 compared to $2,126,451 for the year ended December 31, 2021, an increase of $947,147 or 44.5%. The increase is due to both new hires and salary increases to existing employees and management.





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Professional fees for the year ended December 31, 2022 were $964,541 compared to $1,590,520 for the year ended December 31, 2021, a decrease of $625,979 or 39.4%. Professional fees consist mainly of audit and legal fees. The decrease in the current period is due to a decrease in legal fees of approximately $575,000 and auditor expenses of approximately $51,500, compared with the prior period in which the Company completed an offering of its common stock and warrants.

General and Administrative ("G&A") expense for the year ended December 31, 2022, was $4,490,731 compared to $2,387,416 for the year ended December 31, 2021, an increase of $2,103,315 or 88.1%. Some of our larger G&A expenses include insurance policy expense of $319,500 from $234,000 in the prior year. Insurance expense has increased as a result of the cost to insure the Bitcoin mining machines and the increase in the size of the Company's business. We also had travel expense $336,300 from $250,000 in the prior year, marketing and promotion of $210,000 from $180,000 in the prior year, contracted services of $656,000 from $511,000 in the prior year, utilities of $565,000 from $406,000 in the prior year and computer and internet expense of $730,000 from $515,000 in the prior year. We also had an increase in stock-based compensation of $328,641 for stock option expense.

For the year ended December 31, 2022, we incurred $0 of interest expense, compared to $116,737 for the year ended December 31, 2021. The decrease in interest expense is due the conversion of all related party debt and the repayment of the Term Loan in March 2021. In the prior year we also recognized a gain on the forgiveness of debt of $236,231 for our PPP loan and a $333,158 expense for litigation liability.

Our net loss for year ended December 31, 2022, was $7,787,269 compared to $4,978,358 for year ended December 31, 2021. We had an increase in our net loss of $2,808,911 for the reasons discussed above.





Trends and Uncertainties

The Company's financial condition and results of operations for the next fiscal year 2022 may be adversely affected by a further prolonging of the COVID-19 pandemic.

The New York and Atlanta areas, including the location of the Company's corporate headquarters and its operations business, continued to experience impacts of the COVID-19 pandemic in the U.S. The Company is currently following the recommendations of local health authorities to minimize exposure risk for its employees and visitors. However, the scale and duration of this pandemic remains unknown. If there was another increase in cases requiring quarantines or closures of businesses, the duration of the business disruption and related financial impact cannot be reasonably estimated at this time. While the Company is currently implementing specific business continuity plans to reduce the potential impact of COVID-19 during 2022 and believe that its business being principally operated using digital platforms, in the long-term, will suffer minimal ongoing negative impact, there is no guarantee that the Company's continuity plan will be successful, that the Company's merchants will meet the number of forecasted transactions due to a change in consumer activity around point of sale purchasing resulting from the temporary closure of businesses in the future.

In 2021, as a result of the continued high transmission of COVID-19 cases requiring quarantines and convalescence of so many people, the Company experienced some disruptions to its business and disruptions for the Company's customers and merchants that had an impact on the number of transactions processed by the Company. The extent to which COVID-19 or any other health epidemic may impact the Company's results for 2022 and beyond will depend on future developments and impacts of variants of the virus, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the continuing economic impact of the response to the COVID-19 pandemic. Accordingly, COVID-19 could still have a material adverse effect on the Company's business, results of operations, financial condition and prospects during 2022 and beyond.

Liquidity and Capital Resources





Changes in Cash Flows

For the year ended December 31, 2022, we used $1,921,318 of cash in operating activities, which included our net loss offset by $6,858,171 for amortization and depreciation expense, $624,683 for stock-based compensation, stock to be issued for services of $164,999 and net changes in operating assets and liabilities of ($1,781,965).

For the year ended December 31, 2021, we used $3,508,082 of cash in operating activities, which included our net loss offset by $1,890,899 for amortization and depreciation expense, $461,051 for stock-based compensation, a gain on forgiveness of debt of $236,231 and net changes in operating assets and liabilities of ($648,117).

For the year ended December 31, 2022, we used $1,562,361 of cash used for investing activities. We used $409,000 for plant and machinery, $1,062,000 for office equipment and $96,000 for leasehold improvements.





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For the year ended December 31, 2021, we used $25,661,600 of cash used for investing activities. We purchased $186,600 of office equipment and $9,410,000 of mining equipment for our DMINT subsidiary.

For the year ended December 31, 2022, we received net cash of $447,429 from financing activities. We received a loan payable of $875,000, of which we repaid $317,571.

For the year ended December 31, 2021, we received net cash of $28,815,530 from financing activities. We received a total of $8,090,709 from the exercise of warrants issued in the offerings, $16 from the exercise of options and we netted $28,379,650 from the sale of common stock and warrants. In addition, $7,654,845 was repaid on our loan to GACP.

Liquidity and Capital Resources

At December 31, 2022, the Company had cash of $434,026 and negative working capital of $64,503.

On August 11, 2020, the Company closed an offering of its securities (the "Offering") for gross proceeds of $6.45 million. The Company sold 700,000 units consisting of (a) one share of our common stock; (b) two Series A Warrants, and (c) one-half of one Series B warrant. In addition, the underwriter fully exercised its option to purchase 210,000 Series A warrants and 52,500 Series B warrants. While 20% of the net proceeds of $5.5 million was used to repay a portion of our outstanding Term Loan, immediately following the Offering, the Company had cash of $5.6 million on hand. As such, the Company believes it will be able fund future liquidity and capital requirements through cash flows generated from its operating activities for a period of at least twelve months from the date its condensed consolidated financial statements are issued.

On March 2, 2021, the Company, utilizing a portion of funds received from the exercise of outstanding warrants, paid approximately $7.7 million to the pay off the entire outstanding amount of the Term Loan. In connection with the extinguishment of the obligations under the Term Loan, 40,000 warrants to purchase Common Stock were cancelled.

In addition, the Company has received a Paycheck Protection Program loan under the CARES Act for approximately $236,000 (the "PPP Loan"). On October 11, 2021, the Company obtained forgiveness of all amounts due under the PPP Loan.

On November 2, 2021, the Company entered into a series of securities purchase agreements with certain institutional accredited investors pursuant to which the Company issued and sold, in a private placement (i) 1,969,091 shares (the "Shares") of the Company's Common Stock (ii) pre-funded warrants exercisable for a total of 2,576,364 shares of Common Stock (the "Prefunded Warrant Shares") with an exercise price of $0.0001 per Prefunded Warrant Share, and (iii) warrants exercisable for a total of 4,545,455 shares of Common Stock (the "Common Warrant Shares" and together with the Prefunded Warrant Shares, the "Warrant Shares") with an exercise price of $6.50 per Common Warrant Share. The offering closed on November 5, 2021 and the Company received net proceeds of approximately $22.9 million, after deducting placement agent fees and other offering expenses. The Company intends to use the net proceeds from the offering to invest in or acquire companies or technologies that are synergistic with or complimentary to its business, to expand and market its current products and for working capital and general corporate purposes.

The Company has reviewed its cash flow activity during 2022 and projected cash flow forecast for 2023 and performed an overall analysis of market trends to determine whether or not it has sufficient liquidity to continue as a going concern for a period of at least twelve months from the date of this Annual Report. As a result of (a) the improved transaction volume trends the Company experienced during 2021 and 2022, (b) the increase in the number of merchants after the acquisitions of several portfolios during 2021, and (c) the funds received from the capital raises and PPP Loan, as discussed above, the Company believes it has sufficient liquidity in order to sustain operations for at least the twelve months following the filing of this Annual Report.





Critical Accounting Policies

Refer to Note 2 of our financial statements contained elsewhere in this Form 10-K for a summary of our critical accounting policies and recently adopting and issued accounting standards.

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